FALCO

Bankruptcy and receivership sales in Tennessee

When a bankruptcy trustee, a debtor in possession or a court-appointed receiver sells assets, the court is watching every step: who runs the sale, how creditors are told, and what price is accepted. Here is how those sales work in Tennessee, for trustees and receivers who need a sale that holds up, and for debtors who want to know what to expect.

Short answer

In a bankruptcy, the trustee or debtor sells property outside the ordinary course only after notice to creditors and court approval, and any auctioneer must be approved by the court, which also sets the auctioneer's pay. A Tennessee receiver selling commercial real estate also needs court approval, but the sale does not have to be an auction.

Licensed Tennessee auctioneerUpdated November 2026

The basic idea

In a Chapter 7 case, a trustee is appointed to collect the property of the estate, turn it into money, and close the estate as quickly as is compatible with the best interests of the people involved.[1] Selling property outside the ordinary course of business requires notice and a hearing, and the court can approve a sale free and clear of liens when certain conditions are met.[2]

Chapter 11 and Chapter 13 debtors can sell property too. A Chapter 11 debtor in possession generally has a trustee's powers, and a Chapter 13 debtor has the trustee's power to sell under the same section of the Code, with the same notice and approval requirements.[6][7]

A bankruptcy sale has two audiences: the buyers, who set the price, and the court and creditors, who need to see that the price was fair. Open, well-documented bidding serves both.

For debtors: what gets sold and what you keep

Filing Chapter 7 does not mean everything you own is auctioned. Exempt property stays with you, and the trustee can abandon property that is burdensome or of inconsequential value to the estate, often because the liens and exemptions would leave nothing for creditors.[3]

Tennessee exemptions
Tennessee has opted out of the federal exemption list, so Tennessee debtors use the state's exemptions.[4] The homestead exemption for a principal residence is $35,000 for an individual, or $52,500 combined for joint owners who both use it as their principal residence.[5] Your bankruptcy attorney will apply the full list of exemptions to your property.

If the trustee does sell something of yours, you will receive notice of the proposed sale along with creditors, and you can raise concerns through your attorney. When the trustee is deciding whether a vehicle or piece of equipment is worth selling, an honest auction estimate helps everyone see the real numbers.

How a bankruptcy sale is noticed and reported

Notice to creditors
Creditors generally receive at least 21 days' notice of a proposed sale of property outside the ordinary course of business, unless the court shortens the time.[8] Objections are generally due no later than seven days before the sale.[9]
Public auction or private sale
The rules allow either. After a sale, an itemized statement of the property sold, the buyers and the prices is filed, by the auctioneer if one ran the sale, and a copy goes to the U.S. Trustee.[9]
Protections for buyers and the estate
A buyer who purchases in good faith keeps the property even if the approval is later reversed on appeal, unless the sale was stayed. And a trustee can void a sale where bidders agreed among themselves to control the price.[2] Those rules are part of why buyers are willing to bid seriously at a properly run bankruptcy auction.

Employing an auctioneer: court approval comes first

A trustee may employ an auctioneer only with the court's approval, and the auctioneer must be a disinterested person.[10] The application to employ discloses the auctioneer's connections with the debtor, creditors and the U.S. Trustee, supported by the auctioneer's verified statement.[13]

Compensation is set by the court
The order approving an auctioneer's employment must fix the amount or rate of compensation.[14] The court can approve terms such as a percentage fee in advance, and awards compensation after notice and a hearing.[11][12] Compensation awarded in a case generally cannot be shared with anyone outside the professional's own firm.[22]

Tennessee's three bankruptcy districts

Tennessee has three federal bankruptcy districts, and each has its own local rules on top of the federal ones. Check the current local rules for your district before filing anything.

Eastern District (Knoxville, Chattanooga, Greeneville, Winchester)
The local rules require a sale notice to identify the buyer, any connections the buyer has to the case, and the price, and require a report of sale after closing.[15]
Middle District (Nashville, Columbia, Cookeville)
The local rules require an application to employ an auctioneer to describe the auctioneer's qualifications and licenses, and set default limits on auctioneer commissions: 10% of gross proceeds for real estate and for vehicles and equipment, and for other personal property 25% of the first $40,000 and 15% after that, unless the court approves more. Commission can be paid from the proceeds or charged to buyers as a premium, and the report of sale has required contents.[16]
Western District (Memphis, Jackson)
The current local rules, effective September 24, 2026, do not add a separate rule on sales or auctioneers, so the federal rules above govern.[17]

Receivership sales under Tennessee law

A receiver is a neutral person a court appoints to take charge of property, often during a dispute between a commercial lender and a borrower. Tennessee has adopted the Uniform Commercial Real Estate Receivership Act.[18] It covers receiverships of commercial real property and related personal property, and generally does not cover one-to-four unit homes unless they are used commercially or rented.[19]

How a receiver sells
With court approval, a receiver may sell receivership property outside the ordinary course of business. Unless the sale agreement says otherwise, the sale is free of the appointing creditor's lien and junior liens but subject to senior liens, and liens the sale removes attach to the proceeds. The sale does not have to be a public auction, and a creditor with a valid lien can buy by offsetting its secured claim against the price.[20]

Receiverships outside that act, for example over a business or personal property, are governed by Tennessee's rule on receivers and the court's orders in the case.[21] In every receivership, the order appointing the receiver is the first document to read: it sets what the receiver can sell and how.

Where FALCO fits

Bankruptcy estates and receiverships rarely hold just one kind of asset. A trucking company case can include tractors, trailers, shop equipment, a yard and a building, and no single auction firm sells all of them best. FALCO helps trustees, receivers and their counsel identify the licensed Tennessee auction firm best suited to each group of assets. That firm applies to be employed and is compensated only as the court approves.

Real estate in an estate or receivership is sold by a licensed real estate firm. For estates and business closings outside of court, see our guides to selling estate property and liquidating a closing business.

Questions

Common questions

Does a bankruptcy trustee need court approval to hire an auctioneer?

Yes. Under the Bankruptcy Code, a trustee may employ an auctioneer only with the court's approval, and the auctioneer must be disinterested. The application discloses the auctioneer's connections to the debtor, creditors and the U.S. Trustee, and the order approving the employment must set the amount or rate of the auctioneer's compensation.

How much notice do creditors get before a bankruptcy sale?

Under the Federal Rules of Bankruptcy Procedure, creditors generally get at least 21 days' notice of a proposed sale of property outside the ordinary course of business, unless the court shortens the time. Objections are generally due no later than seven days before the sale.

Will the trustee sell my house in a Tennessee Chapter 7?

It depends on the equity. The trustee's job is to turn non-exempt property into money for creditors, but property with little value to the estate, for example because the mortgage and the debtor's exemptions would eat up the proceeds, can be abandoned back to the debtor. Tennessee's basic homestead exemption is $35,000 for an individual, or $52,500 combined for joint owners who both live there. Talk to your bankruptcy attorney about your numbers.

Does a bankruptcy sale have to be an auction?

No. The Bankruptcy Rules allow sales by public auction or private sale, as long as the required notice is given and, for sales outside the ordinary course, the court approves after notice and a hearing. Auctions are common because they show the court and creditors that the price was tested by open competition.

What is a receivership sale in Tennessee?

A receiver is a neutral person appointed by a court to take charge of property, often commercial real estate in a lender dispute. Under Tennessee's Uniform Commercial Real Estate Receivership Act, a receiver can sell receivership property outside the ordinary course only with court approval. The sale does not have to be a public auction, and liens that the sale removes attach to the proceeds.

What does it cost the estate?

Nothing up front. In a bankruptcy or receivership case, the court approves the auctioneer's employment and compensation, including any buyer's premium, before anything sells.

Sources

  1. [1]11 U.S.C. § 704 (duties of a Chapter 7 trustee)
  2. [2]11 U.S.C. § 363 (use, sale or lease of property)
  3. [3]11 U.S.C. § 554 (abandonment of property)
  4. [4]Tenn. Code Ann. § 26-2-112 (Tennessee opts out of federal exemptions)
  5. [5]Tenn. Code Ann. § 26-2-301 (homestead exemption)
  6. [6]11 U.S.C. § 1107 (rights and powers of a debtor in possession)
  7. [7]11 U.S.C. § 1303 (rights and powers of a Chapter 13 debtor)
  8. [8]Fed. R. Bankr. P. 2002 (notices, including 21 days' notice of a proposed sale)
  9. [9]Fed. R. Bankr. P. 6004 (use, sale or lease of property; report of sale)
  10. [10]11 U.S.C. § 327 (employment of professional persons)
  11. [11]11 U.S.C. § 328 (limitation on compensation of professional persons)
  12. [12]11 U.S.C. § 330 (compensation of officers and professionals)
  13. [13]Fed. R. Bankr. P. 2014 (application to employ professionals)
  14. [14]Fed. R. Bankr. P. 6005 (appraisers and auctioneers)
  15. [15]U.S. Bankruptcy Court, Eastern District of Tennessee, Local Rules
  16. [16]U.S. Bankruptcy Court, Middle District of Tennessee, Local Bankruptcy Rules (2025)
  17. [17]U.S. Bankruptcy Court, Western District of Tennessee, Local Rules (effective September 24, 2026)
  18. [18]Tenn. Code Ann. § 29-40-101 (Uniform Commercial Real Estate Receivership Act)
  19. [19]Tenn. Code Ann. § 29-40-104 (scope of the receivership act)
  20. [20]Tenn. Code Ann. § 29-40-116 (receiver's sale of receivership property)
  21. [21]Tenn. R. Civ. P. 66 (receivers)
  22. [22]11 U.S.C. § 504 (sharing of compensation)

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Within one business day we come back with what is worth auctioning, which licensed Tennessee firm sells it best, and what it would likely clear. Nothing up front. In a bankruptcy or receivership case, the court approves the auctioneer's employment and compensation, including any buyer's premium, before anything sells.

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This page is general information about Tennessee and federal law, not legal, tax, or financial advice, and not a promise about any outcome. Laws change and every situation is different. For advice about your circumstances, consult a licensed Tennessee attorney, CPA, or other licensed professional. FALCO is not a law firm, a government agency, or a court, and is not affiliated with any of them. FALCO does not buy, list, broker, or sell anything itself. Licensed Tennessee auction firms, and licensed real estate firms where real estate is involved, run every sale.