Bankruptcy basics: Filing for Chapter 7 in Tennessee
Understanding the basics of filing for Chapter 7 bankruptcy in Tennessee may help those struggling with debt determine if it is the right option for them.
Nasdaq reports that the total average debt is $139,500 per U.S. household. While many carry debt and keep up with their repayment obligations, there are situations that may put a significant financial strain on people in Tennessee, and their families. In such cases, they may consider options, such as filing for Chapter 7 bankruptcy, to regain control of their finances and achieve a fresh financial start. Understanding what Chapter 7 bankruptcy entails may help them determine whether it is appropriate for their situations and needs.
Sometimes referred to as a liquidation bankruptcy, Chapter 7 does not require people to make regular payments toward paying back their liabilities. Rather, trustees are assigned by the court and take over their estates. The trustees liquidate filers’ property that is free and clear of liens, distributing the proceeds to the appropriate unsecured creditors. The types of assets that may be subject to liquidation include vacation homes or second properties, alternate vehicles, financial accounts and investments, heirlooms and antiques, and collections of value. The funds earned through the sale of people’s estates are disbursed in accordance with the classes of claims as established in the federal bankruptcy code.
While all of people’s nonexempt assets may be subject to liquidation, bankruptcy law does provide protection for certain property. This may include people’s primary residences, primary vehicles, personal belongings, household items and other such items.
Upon completion of their cases, individual people and couples who file for Chapter 7 bankruptcy may have their remaining debts discharged. Through this action, they may be relieved of their obligations to pay back certain debts, such as credit card charges, medical bills, past due rent and utility bills, and some unpaid taxes and tax penalties. Once discharged, creditors cannot make further collection efforts against people for those liabilities.
There are some debts that are not dischargeable. These include most student loans, child support and alimony obligations, and debts resulting from drunk driving accident judgements or settlements, among others.
Not everyone who is struggling with debt is eligible to file for Chapter 7 bankruptcy. In order to qualify for this type of protection, people’s current monthly income cannot exceed the state median, or they must qualify under the means test. Additionally, those pursuing this type of bankruptcy must have completed credit counseling through an approved agency within 180 days of their filings. Under most circumstances, those who have had previous petitions dismissed within the preceding 180 days for willfully failing to comply with court order or appear are ineligible for Chapter 7.
Working with a legal representative
Navigating the complexities of Chapter 7 bankruptcy on their own may be a challenge for people in Tennessee and elsewhere. Thus, those who are struggling with overwhelming debt may find it helpful to seek legal counsel. An attorney may explain their options and obligations under each, as well as guide them through the legal process.