Chapter 7 Bankruptcy Tennessee: 3 Things You Need to Know

If you are struggling financially and thinking about filing for bankruptcy in Tennessee, specifically Chapter 7 bankruptcy, you should consider a few essential things before moving forward.
Information in this article does not constitute legal advice, it is for informational purposes only, and may not constitute the most up-to-date information. Readers should contact their attorney for advice on any particular legal matter.
  1. First, you must determine if you qualify for Chapter 7 bankruptcy and how much it will cost you to file in Tennessee.
  2. Next, it's worth exploring alternatives to Chapter 7 bankruptcy. It's always good to weigh your options before making a decision.
  3. Lastly, you'll want to know all the specifics of Chapter 7 bankruptcy.

Chapter 7 bankruptcy is standard in the United States, even in Tennessee. Below, you can use the Tennessee Chapter 7 Calculator to estimate your qualification and cost.

Let's dive in and explore why Chapter 7 is such a popular choice regarding debt relief.

1) How Does Chapter 7 Bankruptcy Work?

There are two primary questions to keep in mind when looking into a Chapter 7 bankruptcy:

  1. How quickly will it discharge the debt?
  2. How much is it going to cost?

When comparing different ways to get out of debt, Chapter 7 bankruptcy is usually the cheapest and fastest option compared to Chapter 13 bankruptcy, debt negotiation, debt management, and debt payoff planning.

How Fast Do You Get Relief in A Chapter 7 Bankruptcy?

In Tennessee, you can usually get a Chapter 7 bankruptcy discharge in as little as 120 days or four months.

When filing a Chapter 7, you may hear the term "no-asset" in the Chapter 7 case. You may not have a house or other valuable assets exceeding Tennessee's bankruptcy exemptions. So, if you don't own anything, this can be beneficial in Chapter 7, making it less complex. Remember that every case is unique, so you'll want to consult with an attorney if you are considering filing.

Look at the benefits and challenges of a Chapter 7 bankruptcy discharge in Tennessee.

How Much Does It Cost To File?

Generally, a Chapter 7 bankruptcy costs between $500 and $3000 nationwide. However, the cost can vary depending on where you file. For example, if you're in Knoxville, it may be around $1,170 for the attorney fee, but if you're in Memphis, that fee might be about $1,200.

In some cases, you might be eligible for a filing fee waiver, which means the cost to file bankruptcy could be reduced. If you want to learn more about the waiver, look at the information provided on the Tennessee filing fee waiver page.

How Do I Qualify For Chapter 7 Bankruptcy?

Chapter 7 bankruptcy is designed for those who cannot repay some debts. However, before you can file, you must go through an income evaluation to see if you qualify for a Chapter 7 bankruptcy. This evaluation is called a means test.

Unsecured debts are debts that don't have any collateral attached to them. So, if you file a Chapter 7 bankruptcy, you can discharge medical bills, personal loans, particular old income tax debts, ancient utility bills, credit card debts, and most personal judgments. A Chapter 7 bankruptcy is, essentially, a fresh start.

What happens to secured debts?

If you're looking to wipe out secured debts, such as car loans and mortgages, Chapter 7 might be able to help. However, you'll have to give up the asset to your creditor, and they will have to consider it payment in full for what you owe.

Now, look deeper into the qualification for a Chapter 7 bankruptcy.

IMPORTANT: Chapter 7 Qualification via Tennessee Means Test

The Bankruptcy Means Test calculates your average monthly and annual income. It's a way to see how your income compares to the median income of other households in Tennessee.

If your average annual or median income is lower than the Tennessee median income, you might qualify for a Chapter 7 bankruptcy. To understand whether you are eligible for Chapter 7 bankruptcy, you can use the free Tennessee Chapter 7 Bankruptcy Means Test Calculator below.

What if My Income Exceeds The Chapter 7 Means Test?

If your income is higher than your state's average income, explore the second part of the means test. This test isn't a simple pass-or-fail situation. Even if you don't meet the requirements in the first section, you still have a chance to qualify for Chapter 7 bankruptcy by meeting the criteria in the second section.

Chapter 7 Bankruptcy Tennessee Income Limits

The Tennessee median income figures for the Means Test are adjusted occasionally based on data from the IRS and the Census Bureau.

# of PeopleAnnual Income
1$56,717
2$72,442
3$85,423
4$95,748
5$105,648
6$115,548
7$125,448
8$135,348
9$145,248

You should be able to add $9,000 to the annual income requirement for each additional family member beyond nine.

Always check the U.S. Trustees website for the most up-to-date figures to know the Tennessee median income figures for the Means Test.

Understand Tennessee Bankruptcy Exemptions

Understanding the bankruptcy exemptions and how they can protect your property is essential. These exemptions can protect the equity in your assets and ensure that certain items won't be sold off in a Chapter 7 liquidation case, where non-exempt property can be fair game.

In Chapter 13 cases, having non-exempt equity in your property might even increase your bankruptcy plan payment.

Tennessee has something called the homestead exemption that can provide protection. However, the exemption varies depending on your age and marital status. So, let's break it down:

  • If you're single and under 65 years old, the exemption is $7,500
  • For single people 65 years or older, the exemption is $12,500
  • For married and under 65 years old, the exemption is $20,000
  • If you're married and 65 or older, the exception is $25,000

It's essential to review all the other Tennessee bankruptcy exemptions available and choose the ones that best protect your assets.

If you're curious about the federal bankruptcy exemptions, you can find them in the 11 U.S. Code §522 or the National Consumer Law Center. Keep in mind that Tennessee doesn't allow you to use federal exemptions. Make sure you're using the most up-to-date information when analyzing bankruptcy exemptions.

Chapter 7 Bankruptcy Pros and Cons

A Chapter 7 bankruptcy is a way to start fresh since it will wipe out most of your unsecured debts, such as credit card bills and medical expenses. It's also typically a quicker process compared to other types of bankruptcy. You could be on your way to a debt-free future in as little as a few months.

One downside of Chapter 7 bankruptcy is that it can hurt your credit score. But, with time and responsible financial habits, you can rebuild your credit and bounce back more vital than ever. Also, it's important to note that not all debts can be wiped away with Chapter 7 bankruptcy. Specific obligations, like student loans and child support payments, are generally not dischargeable. So, if those are a big part of your financial burden, you may need to explore other options.

Pros

  1. Affordable debt relief solution
  2. You can receive a discharge in about 120 days.
  3. Fresh start that allows you to discharge the debt.
  4. You may be able to keep your home and belongings due to exemptions.
  5. It can put a stop to debt collection lawsuits. No more constant phone calls, threatening letters, or fear of legal action.
  6. No more deficiency. This is when you owe more on a loan than what your collateral is worth, and the difference is called a deficiency, but a Chapter 7 can wipe it away.
  7. Provides relief for unaffordable, unsecured debts.

Cons

  1. You need to meet income requirements for qualifications.
  2. You may lose your home and other belongings if your assets exceed the exemption limit.
  3. It will hurt credit reports for ten years.
  4. It may hurt credit scores.
  5. If you have non-dischargeable debt, it may not be able to be wiped away. These are debts such as student loans and taxes that may not be able to be included.
  6. Difficult to prevent foreclosure

It's important to consider all the benefits and downsides of Chapter 7 so you can make the best decision for you. With the proper guidance and support, you can file a Chapter 7 and feel financially free. Now that we've looked at the pros and cons of Chapter 7 bankruptcy let's explore the alternatives.

2) Alternatives to Chapter 7 Bankruptcy

Sometimes, people don't qualify for Chapter 7 bankruptcy, have too many assets, or don't want to go down that road. But don't worry because other options are available, such as Chapter 13, debt settlement, debt management, and debt payoff planning. Let's take a closer look at these alternatives.

a) Chapter 13 Bankruptcy

A Chapter 13 bankruptcy allows you to restructure your debts into a manageable monthly payment plan. This means you can potentially keep your home and vehicles, it gives legal protection, and it may discharge some or all of the debt depending on some factors.

There are many benefits of Chapter 13 bankruptcy in Tennessee. First off, it can put a stop to foreclosures, repossessions, and even wage garnishments. Through the bankruptcy plan, you can also catch up on mortgage payments, past-due car payments, and tax debt over three to five years. Chapter 13 bankruptcy might also allow you to reduce unpaid child support and alimony. However, it's important to note that you must continue making regular domestic support payments to stay in Chapter 13. In a Chapter 13 plan, some people may be able to lower their car loan payments and potentially get rid of second mortgages as long as they meet specific requirements.

A Chapter 13 bankruptcy allows you to restructure your debts, protect your assets, and get back on track toward financial stability. It's an option worth considering!

Can you afford Chapter 13 bankruptcy?

A Chapter 13 repayment plan can be complex, so you may want to ask an attorney about it. There are the attorney fees and a repayment plan that looks at non-exempt equity and disposable income to determine how much, if any, of the debt you may pay back.

b) Debt Relief

If you're considering going the debt settlement route, you should keep a few things in mind. First off, consider the impact it might have on your credit score.

When you partner with a debt settlement firm, they will make you fall behind on the accounts you choose to include by about six months. They will then negotiate with your creditors on a lower overall amount you pay back over 2-4 years. This may hurt your credit score since you have to fall behind.

Ultimately, it is up to your creditors if they want to agree or deny negotiations, so there is quite a bit of risk involved. If they agree, you can pay the lower amount through an escrow account, which is a particular bank account, but they will expect you to keep up with all the payments. If the creditors disagree, they may try to sue you, which is why this may be a higher-risk option. However, you can choose which accounts to include in the program. There may also be potential taxes on the forgiven debt, but consult with the firm to understand more about the process.

c) Debt Management

Debt management companies focus on negotiating lower interest rates, and the program usually lasts about 3 to 5 years. Debt management is generally a more expensive option compared to the others. Some creditors, like some personal loan lenders, may not want to work with a debt management company, plus your credit score has a potential impact.

Debt management can be a good option for folks with a bunch of high-interest credit card debt, so the firm will work to lower those so you can pay the principal significantly.

d) Debt Payoff Planning

Debt payoff planning involves cutting down on expenses and putting any cash flow you have toward your debts to avoid interest charges. Remember that this may not work for everyone, especially if you're dealing with a significant financial setback, so it might not be feasible. Payoff planning means you are paying the total amount back, so it's helpful if you can afford your debt but want to pay it off more efficiently.

An app called the Savvy debt payoff planner will help you prioritize your debts by combining efficient methods to create a plan to pay things off as quickly as possible. On average, it saves folks around $2,000 in interest.

3) Specific Chapter 7 Bankruptcy Information:

If you are considering filing a Chapter 7 bankruptcy, there are many things to consider. One major pro of Chapter 7 bankruptcy is that it can give you a fresh start, relieve the burden of overwhelming debt, and allow you to rebuild. But there are also challenges to consider. Filing for Chapter 7 bankruptcy will hurt your credit score; however, you can rebuild your credit later, but it may take some time. It will also stay on your credit report for ten years. It's a big decision, but with the correct information and guidance, you can make the best choice for your financial future.

There are also some courses you must complete for the filing process, so let's look at those.

Credit Counseling and Debtor Education Courses

When you're going through the bankruptcy process, there are a couple of courses you need to take which are required if you want a discharge. The first course you need to bring is a credit counseling course. This has to be done before you file your bankruptcy case. It's designed to guide and help you better understand your financial situation.

The second course is called a debtor education course. It's meant to educate you on financial management and give you the tools you need to make better financial decisions in the future and get back on your feet after the bankruptcy.

The United States Trustee's Office has approved certain companies in Tennessee that offer these bankruptcy courses. You can find a list of these companies on the UST website, and these courses can be completed online. A small fee is involved, but they're designed to help you navigate the bankruptcy process and improve your financial future.

Tennessee Bankruptcy Court Locations

When filing for bankruptcy, you must attend the 341 creditors' meetings. Many of these meetings have been happening over the phone or through Zoom; however, if you have a meeting that needs to happen in person, it's essential to know where the courthouse is.

Here are the court locations for filing bankruptcy in Tennessee, based on the bankruptcy district.

Eastern District

  1. 220 West Depot Street, Suite 200 in Greeneville, Tennessee 37743

Middle

  1. 801 Broadway, Room 800, Nashville, TN 37203
  2. 815 South Garden Street, Columbia, TN 38401

Western

  1. 167 N. Main Street, Room 242, Memphis, TN 38103
  2. 111 South Highland Avenue, Room 262, Jackson, TN 38301

Now you know where to find them!

Chapter 7 Bankruptcy Trustees Tennessee

Below is a breakdown of Tennessee's Chapter 7 bankruptcy trustees, organized by bankruptcy district.

DistrictNamePhone
EasternElisabeth B. Donnovin(423) 266-2300
EasternD. Stephen Duncan(423) 926-1357
EasternTrudy M. Edwards(931) 967-4303
EasternJerry D. Farinash(423) 805-3100
EasternWilliam M. Foster(423) 877-4250
EasternMargaret B. Fugate(423) 928-6561
EasternTerry D. Gregory(931) 455-5407
EasternAndrea D. Hayduk(423) 424-0887
EasternDouglas R. Johnson(423) 266-2300
EasternDavid H. Jones(865) 546-7311
EasternF. Scott Milligan(865) 522-3311
EasternAnn Reilly Mostoller(865) 482-4466
EasternJohn P. Newton, Jr.(865) 588-5111
EasternDouglas L. Payne(423) 639-2220
EasternW. Grey Steed, III(865) 671-1457
EasternRobert J. Wilkinson(423) 424-3116
MiddleJeanne Ann Burton(615) 678-6960
MiddleThomas Larry Edmondson(615) 254-2072
MiddleMichael Gigandet(615) 746-4950
MiddleErica R. Johnson(615) 347-5869
MiddleEva M. Lemeh(615) 876-4862
MiddleJohn C. McLemore(615) 383-9495
MiddleTimothy G. Niarhos(615) 320-1101
MiddleDavid G. Rogers(615) 472-8570
MiddleRobert H. Waldschmidt(615) 468-1020
WesternBettye S. Bedwell(901) 577-0009
WesternEdward L. Montedonico, Jr.(901) 683-7003
WesternMichael T. Tabor(731) 424-3074
WesternLynda F. Teems(901) 526-5555
WesternMarianna G. Williams(731) 285-5074

These trustees support you and help you navigate the bankruptcy process. Just contact them, and they'll provide the guidance you need.

Review the Tennessee local bankruptcy rules before you dive into filing your bankruptcy case. These rules might have a few variations compared to the Federal Bankruptcy Rules, so it's essential to be aware of any differences.

Conclusion

Hopefully, you understand how Chapter 7 bankruptcy works in Tennessee better, so if you're curious about whether you qualify and how much it might cost, you can try out the Chapter 7 bankruptcy means test calculator below. It'll give you an estimate of your eligibility and expenses.

Now, most people tend to hire a bankruptcy attorney when wanting to file a Chapter 7 or Chapter 13 bankruptcy. But you also have the option to file without one; remember that it may be more complex. Check out this resource here to learn more about filing bankruptcy without an attorney. It'll give you all the details you need.

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