Filing for Bankruptcy as a Homeowner in Tennessee

Filing for bankruptcy can be a daunting process, especially for homeowners in Tennessee. Understanding the nuances of bankruptcy law in your state is essential for making informed decisions about your financial future. This article will guide you through the essential aspects of filing for bankruptcy as a homeowner in Tennessee.

Types of Bankruptcy

In the United States, individuals primarily file for two types of bankruptcy: Chapter 7 and Chapter 13. Each option has unique implications, especially for homeowners.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy, commonly referred to as "liquidation bankruptcy," can eliminate most unsecured debts like credit card debt and medical bills. However, it may involve the liquidation of some assets. In Tennessee, if you have equity in your home exceeding the state’s homestead exemption limits, you may be at risk of losing your home. Tennessee allows a homestead exemption of up to $25,000 for an individual and $50,000 for married couples filing jointly.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy, on the other hand, enables you to reorganize your debts and keep your home. This option involves creating a repayment plan that spans three to five years, during which you make monthly payments to a bankruptcy trustee who disburses them to your creditors. Homeowners often choose Chapter 13 to catch up on mortgage arrears and prevent foreclosure.

The Implications for Homeowners

Before filing for bankruptcy, homeowners need to consider the implications for their mortgage. In Tennessee, upon filing for bankruptcy, an automatic stay is imposed, halting all collection activities and foreclosure proceedings. However, this stay is temporary, especially in Chapter 7 cases.

In Chapter 13 bankruptcy, you may have a better chance of keeping your home as long as you adhere to the repayment plan. It’s crucial to remain current on your mortgage payments after filing, as failing to do so could lead to losing your home.

Steps to Filing for Bankruptcy

1. Consult a Bankruptcy Attorney: The bankruptcy process can be complex, and an experienced attorney can help explain your options and guide you through the paperwork.

2. Complete Credit Counseling: Tennessee requires that you complete a credit counseling course before filing for bankruptcy. This course can help you understand your financial situation and explore alternatives to bankruptcy.

3. Prepare Your Documents: Gather necessary documentation, including income statements, tax returns, and information about your debts and assets.

4. File Your Petition: The actual process begins by submitting your bankruptcy petition to the U.S. Bankruptcy Court for the Middle District or Eastern District of Tennessee, depending on where you live.

5. Attend the Meeting of Creditors: After filing, a meeting with your creditors will be scheduled, allowing them to ask questions about your financial situation.

Conclusion

Filing for bankruptcy as a homeowner in Tennessee can be a viable solution for regaining control of your finances. By understanding the types of bankruptcy available and the specific laws in Tennessee, you can make informed choices that align with your financial goals. Always seek advice from a qualified bankruptcy attorney to navigate the process successfully and protect your home during challenging financial times.