From January to the end of June 2021, 7,888 individuals and businesses in Tennessee sought protection under the bankruptcy code, according to the American Bankruptcy Institute (ABI). More than half (55 percent) chose to liquidate everything, while the rest sought a form of reorganization to reduce their debt load and retain their possessions.
Bankruptcy can be a scary word. Some equate it with loss of everything, along with a permanent stigma. However, when overwhelmed by debt that you can’t pay under current conditions, bankruptcy offers a fresh start, and in many cases, allows you to keep most of your essential belongings, including your car and home.
If your phone is ringing off the hook with creditors calling, or you’re juggling payments – missing some, paying the minimum on others – you can clean the slate and start over by filing for bankruptcy protection. It can be a tough decision, but one that may need to be made.
If you’re considering bankruptcy in or around Kingsport, Tennessee, or nearby in Church Hill, Johnson City, Bristol, or anywhere in Northeastern Tennessee, contact Steven C. Frazier, Attorney at Law, to discuss your options and begin the process of obtaining a fresh start.
How You Can Prepare for Bankruptcy
No matter which chapter of the bankruptcy code you plan to use – a Chapter 13 reorganization plan or a Chapter 7 liquidation plan – there are certain obligations you cannot discharge. First and foremost, child/spousal support payments, domestic support obligations as they are called, must be paid. They, along with obligations incurred as a result of driving under the influence, are not discharged in bankruptcy. Taxes and student loans are very difficult to discharge and payments will need to be made until they’re settled satisfactorily. If you wish to keep your home and car, you must continue to make those payments as well.
If you have other debts that are unsecured, such as credit card balances or personal loans not tied to any collateral, you can and should stop paying those as you prepare for bankruptcy. They will either be discharged or lowered to a manageable repayment plan once you file.
Also, if any of your monthly payments are in automatic withdrawal mode from your bank account, stop the automatic payment. Further, if you owe money to the bank or credit union where you have your checking or savings account, you should close those accounts and open new accounts at another bank or credit union.
Most importantly, keep accurate records of everything — your bills, any notices received, anything related to your financial obligations that you might need to present along with your bankruptcy petition.
What Not to Do When Filing for Bankruptcy
With debts that can be discharged or lowered under bankruptcy, you may be tempted to tap into your retirement account to make payments, if for no other reason than to get the phone calls, emails, and text messages demanding payment to stop. Don’t do it. Your retirement funds will be protected under the bankruptcy code. Your creditors cannot touch your retirement.
Also, don’t pay some creditors and not others. You need to treat them equally. In the same vein, do not accept new credit card offers or apply for new credit. Leave everything as it is, credit-wise.
Don’t use your credit cards for any purchases that are not for essential items like food or medical necessities. The bankruptcy court will look back at least 90 days to see what if any activity you’ve had on your cards. Some transactions may be disallowed. Best bet: Quit using them.
Don’t attempt to hide assets by transferring them to others. For instance, if you have a luxury car, you may think by selling it to your brother at a reduced price, or simply transferring title to him, you can then get it back after bankruptcy is over, but the trustee and bankruptcy court will sniff this one out in no time. They could simply seize the asset, or in the worst case, dismiss your filing and charge you with fraud.
Finally, don’t wait until someone sues you before you file. Though the lawsuit will likely be dismissed during bankruptcy, it will only complicate matters and should be a sign to quit hesitating. It will also be another mark on your credit history.
When You Do File...
Remember, once you file, the bankruptcy court will issue what is called an “automatic stay,” which stops all bill collection efforts and puts a hold, at least temporarily, on all repossession and foreclosure efforts. If you’re filing for Chapter 13, your remaining unsecured debts will be combined into one monthly payment that you can afford (meaning the interest rate and dollar totals will likely be reduced). After three to five years of making payments, you will be discharged from bankruptcy.
If you file for liquidation under Chapter 7, your unsecured debts will be discharged in a matter of months, but your personal property, such as your home or car, may be subject to sale to help cover your debts. Usually, you can keep these assets under certain exemptions allowed by the state of Tennessee, but you will need to work closely with a bankruptcy attorney to determine this.
How an Experienced
Bankruptcy Attorney Can Help
Just choosing which chapter to file for under the bankruptcy code can be taxing. You may want the instant clean slate option of Chapter 7, but you don’t want to lose personal possessions, even your car or home if your equity in them is too great.
You may alternately like the option of reducing your payments while retaining almost everything but balk at the idea of being under bankruptcy court control for three to five years. It can be a tough choice, and for both options, you must pass an income means test. In the end, you may have no choice but to pick one over the other.
When considering bankruptcy, it’s essential to discuss everything down to the smallest detail with an experienced bankruptcy attorney. The filing requirements are detailed, and if you miss a debt on your listing, you may end up on the hook for it when all is said and done. Let an attorney prepare everything for you, and then guide and advise you through the process of working with the appointed bankruptcy trustee.
If you’re in Kingsport or anywhere in Northeastern Tennessee and you’re considering bankruptcy, contact Steven C. Frazier, Attorney at Law. With his four decades of experience in helping others like you navigate the bankruptcy system, he will work with you every step of the way and help you assert your rights to a fresh start.