In 2020, Tennessee bankruptcy filings totaled 21,717 — surprisingly down during the pandemic from 2019, which saw 33,766 filings. Despite this decrease, over a 20-year period ending in 2020, the state average of filings per 1,000 people was 94% higher than the national average, according to statistics compiled by the American Bankruptcy Institute.
Bankruptcy carries a stigma with it. Most people fear even having their names associated with the word. To make things worse, people also fear that bankruptcy means losing everything and having to start over from scratch. Not so. You don’t have to lose everything. Bankruptcy in Tennessee allows for exemptions so you can often keep your home, your household furnishings, your clothes, your car, and other possessions, along with retirement savings and other benefits.
When your debt load becomes completely unmanageable for whatever reason — loss of your job, unexpected medical or other emergency expenses, or any other reason — and the bill collectors start hounding you for what seems like day and night, then bankruptcy truly is an option that can get your debt under control or even eliminate it — in part or in whole.
If you find yourself struggling with a heavy debt load and you’re juggling or missing payments, you should seek advice on your bankruptcy options. Your best option in or around Kingsport, Tennessee, or nearby in Church Hill, Johnson City, Bristol, or elsewhere in Northeastern Tennessee, is to contact me — Steven C. Frazier, Attorney at Law. For more than 30 years, I’ve been helping clients like you manage their finances through the fresh start offered by bankruptcy.
The federal bankruptcy code offers individuals and families two major routes to resolving onerous debt issues. One is called Chapter 7, a liquidation plan to get rid of most or all of your debt. Liquidation may sound frightening, but as mentioned briefly above, Tennessee law allows for exemptions so you can retain the essentials of your lifestyle. The other option is Chapter 13 and involves a restructuring of your debts, which you then pay off at a manageable pace. To qualify for bankruptcy, you must first complete an authorized credit counseling course.
In order to file for Chapter 7, you must pass an income means test. If you make too much money, you will have to file for Chapter 13. In Tennessee, Chapter 7 requires that you and your household earn below the state median income, or have no disposable income after paying certain pre-approved expenses, or have no income at all. Beginning May 1, 2021, the annual income for a single person is capped at $50,801, and for a family of four, it is $86,983 a year.
As mentioned, Chapter 7 is a liquidation plan, so the trustee assigned to you can sell off some of your non-exempt assets to pay creditors. Tennessee does allow exemptions to help you preserve your basic standard of living. You can exempt up to $5,000 of equity in your home, or $7,500 for joint owners filing for bankruptcy, and $25,000 if a minor child resides with you. If you are 62 years of age or older, the exemption rises to $12,500, $20,000 if you are married, and $25,000 if your spouse is also 62 years of age or older.
Clothing and furnishings are largely exempt. Though vehicles are not specifically exempted, Tennessee offers a $10,000 blanket exemption you can use for anything. Most pensions and retirement plans are exempted, as are public benefits like Social Security, veterans’ benefits, workers’ compensation, public assistance, aid for the blind, and more.
At the end of the Chapter 7 proceedings, you will be discharged from bankruptcy, usually within a matter of months. You will be free from most of your debt, but certain obligations like child or spousal support, unpaid taxes, and student loans cannot be discharged.
When you qualify and file for Chapter 13, all your debts are subject to consolidation into one usually reduced sum that is paid monthly for three to five years, at which time you are discharged from bankruptcy. Under this plan, you generally get to keep all of your assets. If you are behind on payments for your house or car, the amount that is in arrears can be factored into the consolidated debt obligation. Meanwhile, you will also have to make regular monthly payments on your mortgage or vehicle, which you may be able to renegotiate.
The trustee assigned to you by the bankruptcy court will compute your disposable income and devise a payment plan around that to honor all your obligations, even if it means reducing your debts by 25-50% or more. The bankruptcy court, however, will have to approve any new debt you attempt to take on during your repayment period, so you won’t truly be on your own until your consolidated obligations have been satisfied and you are discharged from bankruptcy.
Once you file for either Chapter 7 or Chapter 13, you get what is called an “automatic stay” on bill collection efforts and even foreclosure proceedings. Your creditors can no longer contact you and must work through the trustee for their claims. Note, however, that the trustee will hold a meeting of creditors, which you as the filer must attend. Though foreclosures and repossessions may be temporarily stayed, the credit holders can petition the court to proceed with seizure if you don’t work out another arrangement with them.
Bankruptcy laws can be complex and hard to navigate, and the paperwork can be detailed and arduous depending on your assets and liabilities. Filing for bankruptcy is not something you want to do alone. Ensure your process goes smoothly by choosing a skilled bankruptcy attorney for representation from beginning to end.
In addition to my three decades of helping clients with their bankruptcy filings, I am also a member of the National Association of Consumer Bankruptcy Attorneys. You can get the help you need through the bankruptcy process. Contact me — Steven C. Frazier, Attorney at Law. I serve clients in Kingsport, Bristol, Church Hill, Johnson City, and throughout Northeastern Tennessee.