Couples considering bankruptcy in Tennessee have a powerful weapon to protect their personal property from creditors. Tenancy by the entirety, a form of joint ownership of real property, is one of the most valuable ways for debtors to retain personal property in bankruptcy. If one spouse files bankruptcy, jointly held property can be protected and retained by the parties.
Under section 522(b) of the U.S. Bankruptcy code, entireties property that would be exempt from collection under state law can only be transferred or sold by both spouses acting together. This means that only joint creditors of both spouses can attach to their entirety property to satisfy their debts. With that said, a bankruptcy trustee can only sell it to satisfy joint debts, not debts of just one spouse. So if there are no joint unsecured debts, the entireties property is exempt from the bankruptcy estate and protected from the trustee.
Tenancy by the entirety property is protected because both spouses are entitled to enjoy the entire property, not just their respective (marital) half. In the event that only one spouse files bankruptcy and property is held in both names, then the ability to presently possess the property is 100% protected.
Under Tennessee law, both real property and personal property can be held in this manner. The parties must have been married at the time the property was purchased or deeded to them. Property can also be held by the entireties by having specific phrases in contracts alluding to this such as "held as tenants by the entireties with common law rights of survivorship"
This article is intended as an overview of how tenancy by the entirety can be used to protect property from being sold and distributed to satisfy creditors in a bankruptcy, however it should not be used as a substitute for legal advice from an experienced Nashville bankruptcy lawyer.
The law surrounding tenancy by the entireties is complex. If you are exploring bankruptcy to get relief from debt, you should speak with a Tennessee bankruptcy attorney, who can review your individual situation with you and discuss your options for protecting your property.
