One of my most common phrases on this site is “Tennessee is a creditor friendly state.” Another is “Always file a Judgment Lien against real property.”
Well, that may change very soon. The Tennessee Legislature is considering a very debtor-friendly increase to the homestead exemption that will make Tennessee, literally, one of the most generous states in the country for debtors.
I’m specifically talking about House Bill 0236 and Senate Bill 0399, which would increase Tennessee’s homestead exemption to as high as $750,000. Except for those states that have an “unlimited” exemption, this would make Tennessee’s homestead the highest in the nation.
The Legislature considered a similar increase in 2012, which I wrote about back then, which didn’t pass.
“Exemptions” allow a debtor to protect certain property from the reach of creditors. Exemptions are designed so that a judgment creditor can’t take everything, so household goods, retirement accounts, and other necessities can be exempted, so that a downfallen debtor can keep the shirt on his back and rebuild his life.
Or, if this new law passes, the downfallen debtor can keep 100% of the equity in his $750,000 house entirely out of the reach of creditors.
Wait a second. Is this law designed to protect downtrodden debtors seeking a fresh start in life (who very probably do not have high value real property at all) or, maybe, is it designed to protect high income individuals whose businesses fail?
Because that’s all this proposed law does. It grants fairly absolute protection to the high value real property owned by judgment debtors in Tennessee, and all the garnishments, levies, liens, and bankruptcies will never touch a penny of that equity.