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Don’t File for Bankruptcy Until You Read This Blog!

Don’t File for Bankruptcy Until You Read This Blog!

The decision to file bankruptcy is, without a doubt, one of the most stressful and difficult decision a person or family can make. Once that decision is made, many of our clients come to us incredibly overwhelmed because of the daunting process of filing bankruptcy. Filing in Tennessee can be extremely complicated for those who are not familiar with the process, the forms required, the exemptions, and so on.  Hiring an experienced bankruptcy attorney can make the entire process easier to manage.  Most importantly, an attorney who is familiar with the Tennessee bankruptcy system may be able to help you keep some of your property. For those thinking about filing on their own, I urge you to read this blog and see what is involved with the process before making the decision to do it alone.

Before you can even file for bankruptcy in Tennessee, you will have to undergo credit counseling within six months of filing for bankruptcy.  You will need to find an approved agency and obtain proof you completed counseling.  Then, after you file, and before you can be granted a discharge, you will need to take an approved debtor education course.

The next crucial step is choosing what kind of bankruptcy you will file, a Chapter 7 or Chapter 13.  Simply put, a Chapter 13 bankruptcy is a reorganization of your debts without the loss of your assets whereas a Chapter 7 bankruptcy is a liquidation of your assets to repay your debts. Under a Chapter 13 bankruptcy, you will propose a repayment plan (typically between 3 to 5 years) to repay all or part of your debts.  After the end of that plan, the remainder of your approved debts are discharged. To be approved for a Chapter 13, you will need to have income and a means to make monthly payments.  A Chapter 7, on the other hand, does not require monthly payments and eliminates certain debts. In a Chapter 7, there will be a trustee that will collect and sell all non-exempt assets in order to pay your creditors, then the rest of your debt will be discharged.

After deciding which type of bankruptcy to file, you will need to complete a bankruptcy petition and the appropriate forms and file the petition in the proper federal court.  The forms vary depending on the type of bankruptcy you are filing, but you will be required to disclose all your assets as well as all your creditors.  There will also be a form that requires extensive information about your finances.  If you are wanting to file a Chapter 7, one of those forms will most likely be a form to determine whether you are eligible to file a Chapter 7.  In Tennessee, there are income thresholds one must meet to file a Chapter 7, which is determined by your income and family size.  This could also determine the length of your payment plan if you qualify for a Chapter 7.

Once you are eligible to file (by taking the counseling course), have decided which type of bankruptcy you qualify for, and have all the proper forms to fill out, you will need to determine your exemptions. Choosing the correct exemptions is critical. If you are filing a Chapter 7, choosing the right exemptions could mean being able to keep your home, your car, and other assets.  In Tennessee, you are only able to use state exemptions, not federal exemptions, so it is important that you understand exactly which exemptions you need, such as the Tennessee Homestead Exemption and the Motor Vehicle Exemption.  In a Chapter 13 bankruptcy, exemptions help determine how much you will have to pay creditors, which will determine your monthly repayment plan.

A misstep or wrong turn at any point in the process could result in serious consequences. Hiring an experienced bankruptcy attorney early on could help lower your monthly payments (for Chapter 13), help you stay in your home (for Chapter 7), help you take the proper required courses at the correct time to expedite your bankruptcy, assist you in completing the complex forms, and choose the best exemptions for your situation.