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Property exemptions can make a big difference

Many Tennessee residents feel overwhelmed by their mortgage, credit card balance, medical bills and other forms of debt, but they are reluctant to seek out the quickest, most effective way of returning to financial health. They fear that filing for protection under Chapter 7 of the U.S. Bankruptcy Code will mean losing everything they own. That is a misconception.

In fact, Tennessee law provides many types of property are exempt from personal bankruptcy laws. Before we explain further, let's begin with a little background information.

When a qualifying person files for Chapter 7 bankruptcy protection, the court puts an immediate stop to efforts to collect debt from the filer. The court then works with the filer and the debtors to work out a solution. If all goes according to plan, the court will waive most types of debt and the filer will get a new start within three to five months.

In order to pay off creditors, the filer must sell some assets. This is why Chapter 7 is sometimes known as liquidation bankruptcy. When businesses file for Chapter 7, they are usually shutting down operations and selling everything. For individuals who are filing for Chapter 7, it's a different story. Tennessee allows filers to claim many types of property as exempt from the liquidation requirements.

For example, most people can claim tax exempt retirement accounts and pensions, annuities, spousal life insurance, veterans' benefits, relocation assistance payments, clothing, family pictures and other types of property with no coverage limit. Some other types of property are exempted only up to a certain amounts. For example, filers can claim up to $1,900 for tools of their trade. Filers can claim up to $4,000 for education plans and trusts.

The process can be complicated and mistakes can be costly. A skilled debt relief attorney can advise clients on their options and act as a steady guide and forceful advocate as they work through the process and come out the other side in better financial shape.

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