Knowledgeable Tennessee Lawyer Answers Bankruptcy FAQs
At William E. Maddox, Jr. LLC, Attorney at Law in Knoxville, I advise Tennessee residents on matters relating to Chapter 7 and Chapter 13 bankruptcy. I often hear the following questions from people considering bankruptcy:
- What should I do if a creditor demands payment of a debt after I file my bankruptcy case?
- What documents do I need to file for bankruptcy?
- Do all debts get discharged through bankruptcy?
- What is the difference between Chapter 7 and Chapter 13?
- What must I do to prevent foreclosure and repossession?
- Does a bankruptcy case automatically remove liens against my property?
- Will bankruptcy affect my employment in any way?
When you file for bankruptcy, an automatic stay goes into place to prevent creditors from trying to collect on the debt you owe. However, creditors and debt collectors are not always aware of the stay. If a creditor demands payment while the stay is in place, notify your attorney, who will remind the creditor that collection communications violate the law and that further contacts could trigger legal consequences.
To file for bankruptcy, you will need to provide thorough evidence of your income, assets, debts and household size, along with necessary bankruptcy forms and proof that you completed credit counseling. Tax returns, pay stubs, property appraisals, overdue bills and letters from creditors are among the types of paperwork you may submit.
Not all debts can be discharged through Chapter 7 bankruptcy. During any bankruptcy proceeding, priority debts are addressed first with funds the debtor pays to the trustee. Debts that remain at the conclusion of bankruptcy proceedings can be discharged unless they are nondischargeable. Tax debt, student loan debt, child support arrearages and alimony arrearages are nondischargeable.
Chapter 7 bankruptcy is for people who do not earn enough income to cover their necessary expenses and repay their debts, even if a reasonable adjustment of debt terms can be secured. In Chapter 7, the debtor’s nonexempt assets are sold, and proceeds are used to pay off debts.
Chapter 13 bankruptcy is for people who are in substantial debt but earn enough income to repay the debt according to a repayment schedule lasting three to five years. The debtor has the option of choosing to stay in their home and hold onto their other property while they gradually repay their debt.
The debt resolution plan best for preventing foreclosure or repossession will depend on the amount of debt and your ability to repay it. You may be able to negotiate an agreement with a lender that gives you extra time to make owed payments. If the foreclosure or repossession process has not yet begun, filing for bankruptcy prevents a lender from initiating either process.
Filing for bankruptcy does not automatically remove liens against your property. If you file for Chapter 7 and the debt for which the lien exists remains unpaid, the creditor with the lien may seek to enforce it.
If you file for Chapter 13, you can request to have junior liens, such as second mortgages, eliminated from your home or other real estate. The process of removing the junior lien is called “lien stripping.”
A current employer cannot fire you for filing for bankruptcy, nor may the employer make any other employment-related decisions based on your bankruptcy filing. However, a private employer is not banned from considering your bankruptcy when assessing your candidacy for a new job.