Filing Bankruptcy as a Freelancer in Tennessee

Filing for bankruptcy can be a daunting process, particularly for freelancers in Tennessee who often face unique challenges due to the nature of their work. Understanding the ins and outs of bankruptcy law is crucial for freelancers looking to regain financial stability.

In Tennessee, freelancers typically operate as sole proprietors or independent contractors, which can complicate financial matters. If you find yourself unable to manage your debt, bankruptcy could be a viable option. The two primary types of bankruptcy that freelancers might consider are Chapter 7 and Chapter 13.

Understanding Chapter 7 Bankruptcy

Chapter 7 bankruptcy, often referred to as liquidation bankruptcy, allows individuals to discharge most of their unsecured debts, such as credit card debt and personal loans. For freelancers, this can be particularly beneficial as it offers a fresh start without the burden of overwhelming financial obligations.

However, not all debts can be discharged. You should know that student loans, certain taxes, and child support typically cannot be eliminated through Chapter 7 bankruptcy. To qualify, you must pass the means test, which assesses your income against the median income in Tennessee.

What to Expect During Chapter 7 Filing

The Chapter 7 process generally involves the following steps:

Credit Counseling: Before filing, you are required to complete a credit counseling course from an approved agency.
Filing Your Petition: You will submit a bankruptcy petition along with schedules detailing your debts, assets, and income to the Bankruptcy Court.
Meeting of Creditors: Approximately 30 days after filing, you must attend a meeting where creditors can ask you questions about your financial situation.
Discharge: If there are no objections, your debts will be discharged within a few months.

Understanding Chapter 13 Bankruptcy

Chapter 13 bankruptcy, or reorganization bankruptcy, is another option that allows freelancers to set up a repayment plan while keeping their assets. This type of bankruptcy is suitable if you have a regular income and want to catch up on overdue payments while keeping your business afloat.

With Chapter 13, you propose a repayment plan that lasts three to five years, during which you will pay off a portion of your debts. Similar to Chapter 7, certain debts, such as child support and alimony, cannot be discharged.

Advantages of Filing Bankruptcy

Filing for bankruptcy as a freelancer in Tennessee can offer several advantages:

Debt Relief: Bankruptcy can relieve you from the overwhelming burden of debt, allowing you to focus on rebuilding your finances.
Asset Protection: Especially in Chapter 13, you can protect your business and maintain your essential assets.
Stop Collections: Once you file, creditors are prohibited from contacting you or pursuing collections, providing you a sense of relief.

Disadvantages of Filing Bankruptcy

While bankruptcy has its benefits, it also comes with disadvantages:

Credit Impact: A bankruptcy filing will adversely affect your credit score for several years, making it challenging to secure new credit.
Public Record: Bankruptcy filings are public records, meaning your financial struggles may become known.
Limited Access to Credit: Obtaining loans or lines of credit can be difficult immediately following your discharge.

Next Steps

Before deciding to file for bankruptcy, consider consulting with a bankruptcy attorney who specializes in the needs of freelancers. They can guide you through the process, help you understand your options, and ensure you comply with all legal requirements.

Filing for bankruptcy is a significant decision that requires careful thought. However, for many freelancers in Tennessee facing insurmountable debt, it can offer a pathway to financial recovery and peace of mind.