2019 Tennessee Legislature is considering a new homestead that would eliminate a creditor’s ability to collect against residential real property

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.

General Contractors, Subcontractors, Subs, and All Those Other Terms

Old habits die hard.

Growing up in Memphis, I knew our local college as “Memphis State.” Then, in 1994, the name changed to “University of Memphis.” But, guess what everybody still calls it? Memphis State.

In 2007, Tennessee’s mechanic’s lien statutes were drastically overhauled. Lots of things changed, but one of the most noticeable was in terminology.

Before 2007, everybody made distinctions between “general contractors” (i.e. those contractors who have a direct contractual relationship with the owner of the real property) and “subcontractors” (those contractors who do not have a direct contract with the owner).

After 2007, those terms changed. Now, the terms are “prime contractor” and “remote contractor.” Tenn. Code Ann. § 66-11-101 (12) and (14) provide those definitions.

The difference in rights is significant.

A prime contractor has a lien that lasts a one year after the work is finished or materials are furnished and  that lien doesn’t require any special demand or lien to be recorded in order to preserve those rights (warning: this is a drastic oversimplification).

A remote contractor has more hoops to jump through and limitations on its lien rights. Tenn. Code Ann. § 66-11-115 describes those “hoops,” which include a requirement to serve a notice of non-payment to all parties (See Tenn. Code Ann. § 66-11-145) and to record a Notice of Lien (See Tenn. Code Ann. § 66-11-112).

So, in the end, just because everybody talks about general contractors and their subs, don’t  think that the change in the laws was purely cosmetic.