Filing Bankruptcy in Tennessee: What You Need to Know

Filing Bankruptcy in Tennessee: What You Need to Know

Filing for bankruptcy can be a daunting process, especially if you are unfamiliar with the laws and regulations specific to your state. If you are considering filing bankruptcy in Tennessee, understanding the requirements, types of bankruptcy, and other essential details is vital for making an informed decision. This article will guide you through the process and provide you with the knowledge you need.

Types of Bankruptcy in Tennessee

In Tennessee, individuals typically file for bankruptcy under Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code.

Chapter 7 Bankruptcy

Chapter 7 is often referred to as "liquidation bankruptcy." It allows individuals to eliminate most of their unsecured debts, such as credit card bills and medical debts. However, it requires the debtor to pass a means test to prove that their income is low enough to be eligible for this type of bankruptcy. If you qualify, the court may sell non-exempt assets to pay off creditors, but many filers find they can keep their essential property.

Chapter 13 Bankruptcy

Chapter 13 is also known as "reorganization bankruptcy." This option is suitable for individuals who have a regular income and want to keep their assets while repaying their debts over 3 to 5 years. Under this plan, you propose a repayment schedule to the court, which must be approved. This type of bankruptcy allows you to catch up on missed mortgage payments and avoid foreclosure.

Eligibility Requirements

To be eligible for Chapter 7 bankruptcy in Tennessee, you must pass the means test, which compares your income to the median income for a household of your size in Tennessee. If your income is below the median, you qualify for Chapter 7. On the other hand, Chapter 13 eligibility is based on your debt limits; unsecured debt must be less than $465,275, and secured debt must be less than $1,395,875 (as of 2023).

The Bankruptcy Filing Process in Tennessee

Filing for bankruptcy in Tennessee involves several steps:

  1. Credit Counseling: Before you file, you must complete a credit counseling course from a certified agency.
  2. Filing the Petition: You will file a bankruptcy petition with the U.S. Bankruptcy Court for your district. This includes schedules listing your assets, debts, income, and expenses.
  3. Automatic Stay: Once you file, an automatic stay goes into effect, temporarily halting collections, foreclosures, and repossessions.
  4. 341 Meeting: Approximately 4 to 6 weeks after filing, you will attend a meeting of creditors (341 meeting) where creditors can question you about your financial situation.
  5. Discharge: If all goes smoothly, you will receive a discharge of your debts, meaning you are no longer legally obligated to pay them.

Important Considerations

Before you decide to file for bankruptcy, consider the following:

  • Impact on Credit Score: A bankruptcy will negatively impact your credit score, potentially limiting your financial options for years.
  • Property Exemptions: Familiarize yourself with Tennessee's bankruptcy exemptions to understand what property you can keep. Tennessee allows certain exemptions, including homestead, personal property, and retirement accounts.
  • Legal Assistance: Consult with a bankruptcy attorney to navigate the complexities of the process and ensure that you meet all requirements.

Conclusion

Filing bankruptcy in Tennessee can be a fresh start for those facing overwhelming debt. Whether you choose Chapter 7 or Chapter 13, it’s essential to understand the process, eligibility requirements, and potential consequences. Take the time to research, seek professional advice, and make a plan that suits your financial future.