423-874-6628Chattanooga Chapter 7 Bankruptcy Lawyers
Representing Clients Seeking Debt Relief Through Chapter 7 Bankruptcy Filings
If you’re constantly stressed out and overwhelmed with your financial situation or you’re worried about losing your house or other assets, you’re not alone. Thousands of people throughout the United States and right here in Chattanooga, TN, are struggling with their finances. Whether it’s due to unpaid credit cards or outstanding medical bills, the consequences of excessive debt can make life miserable. Interest and monthly fees can pile up fast. Creditors may harass you and leave you feeling overwhelmed.
If you’re struggling with debt, it’s important to know you have options. Chapter 7 bankruptcy presents you with a legal pathway to wipe your financial slate clean by discharging your unsecured debt and stopping all debt collection activities.
The attorneys at Tom Bible Law can provide you with experienced legal advice regarding bankruptcy law and help you take the necessary steps to get back on the right financial track. With three offices spread out across Tennessee, our law firm offers Chapter 7 filing services to clients throughout Tennessee and North Georgia, and we’re here to ensure you don’t have to go through this process alone.
Contact us online or call 423-874-6628 to schedule a free consultation with one of our Chattanooga Chapter 7 bankruptcy attorneys.
What Is Chapter 7 Bankruptcy?
Many people think of Chapter 7 bankruptcy only as a form of debt liquidation because the basic process involves selling off any assets of value so that the bankruptcy trustee can pay off the debtor’s creditors. However, this understanding is somewhat misleading.
Most people who file for Chapter 7 are drowning in unsecured debt. Unsecured debt is a type of debt that is not backed by anything. This lack of backing means that if you don’t pay it, the creditor cannot take assets from you to sell and pay what you owe. Unsecured debts are things like credit card balances, payday loans, and medical debt.
However, if most of the person’s debt is unsecured, it likely means that they have few qualifying assets to seize (and sometimes none). Therefore, they have little to lose in bankruptcy resolution. It’s also important to understand that there are specific state exemptions as well, which allow you to keep and protect some of your assets from the bankruptcy.
The main goal of filing for Chapter 7 bankruptcy is to liquidate anything of value so that you can get out from under your debt and enjoy a fresh financial start. Many people find that they are able to enjoy life again and have better mental health when they’re no longer spending every waking minute worrying about how they’re going to pay their bills or dealing with constant debt collection calls.
What Are the Eligibility Requirements for Chapter 7 Bankruptcy?
Each bankruptcy chapter has its own eligibility requirements, which means that not everyone can qualify for Chapter 7 bankruptcy. To be eligible, you must first pass a means test, which ensures you do not have the income necessary to reasonably pay your debts. The means test is a feature of the 2005 changes to the U.S. Bankruptcy Code, implemented to prevent people with the ability to pay their debts from getting them discharged (the Bankruptcy Abuse Prevention and Consumer Protection Act).
The means test is a way to compare the debtor’s income to their debt total to see if they could reasonably pay off their debts without needing to resort to bankruptcy. The bankruptcy court uses the person’s income over the preceding 6 months. The first part of the test is to compare the person’s average income over the last 6 months to the average income in the state. If the person’s average income is lower than the monthly average income in Tennessee, the person automatically qualifies to file Chapter 7 bankruptcy.
If the person’s income is higher than the median, there is a second part of the means test that can be used to qualify. In this step, the person must show how much money they are spending on essential living expenses, which are things like housing, food, and clothing. Some bills may also qualify, such as utilities. Anything that is not considered an essential living expense is called discretionary income.
If the person’s discretionary income is low enough that they cannot reasonably afford to pay off creditors, the bankruptcy can proceed. Otherwise, the petition is rejected. For those who do not qualify for Chapter 7, Chapter 13 bankruptcy is an alternative.
What Are the Benefits of Chapter 7 Bankruptcy?
The credit implications for bankruptcy and how long it stays on your credit score are some of the most commonly talked about aspects, but not everyone knows about the benefits of filing for Chapter 7 bankruptcy for individuals and small-business owners. Exploring these benefits when you are struggling with debt can help you make the decision that best matches your financial circumstances. Finding out how Chapter 7 bankruptcy works can also help.
Chapter 7 bankruptcy works by turning all financial assets owned by individuals and small businesses into money that can be divided up amongst creditors. The creditors accept this money as a replacement for the debts that were owed to them. If there is any remaining debt, it is discharged, which means it’s forgiven.
This process is referred to as the liquidation of all property and other financial assets into full debt repayment. Small businesses often file for Chapter 7 bankruptcy when they are unable to gain access to profits under Chapter 11 bankruptcy. Businesses who file for Chapter 7 bankruptcy must close down and aren’t able to continue operations. Everything that can be liquidated is sold, and the bankruptcy trustee takes over to ensure creditors are paid.
Chapter 7 bankruptcy can also provide a fresh start for individuals struggling with overwhelming debt. If you are facing creditor harassment, wage garnishment, or repossession, filing for Chapter 7 bankruptcy may be a viable solution to regain financial stability.
Benefits of Chapter 7 bankruptcy include:
- No repossession
- Discharge of unsecured debts, such as credit card debt and medical bills
- Protection from creditor actions, including lawsuits and collection calls
- Potential to keep certain assets through exemptions
- Opportunity for a clean financial slate and a fresh start
- Faster processing
- Lower fees than some other bankruptcy options
One major benefit of filing for Chapter 7 bankruptcy is escaping debt without having to worry about facing legal problems from creditors. Chapter 7 bankruptcy blocks creditors from taking legal actions like repossessing property or collecting money from your account through a process called an automatic stay. As soon as you file your bankruptcy petition, the courts put an automatic stay on all adverse creditor actions. This stay includes repossessions and wage garnishments, as well as debt collection calls.
Certain types of property you own are also exempt from being collected. This exemption can ensure you’re able to keep necessary living items, sentimental items, and certain assets. A bankruptcy attorney can go over which assets are exempt from bankruptcy in Tennessee so you know what you’ll automatically be able to keep.
Another benefit of Chapter 7 bankruptcy is that it can be much faster than other options, such as Chapter 13. Chapter 7 bankruptcy takes about 4 to 6 months to get from the petition to the discharge as long as you cooperate with the process. In contrast, a Chapter 13 bankruptcy filing takes an average of 3 to 5 years because you have to spend those months making payments to creditors before the bankruptcy can be discharged. There are also lower fees for Chapter 7 bankruptcy, which generally range from $15 to $245 depending on different factors of your case.
Our experienced Chattanooga Chapter 7 bankruptcy lawyers can assess your financial situation and determine if Chapter 7 bankruptcy is the right option for you. Contact us to schedule a consultation and take the first step toward a debt-free future.
How Does Someone File for Chapter 7 Bankruptcy?
The first step in the bankruptcy process is to talk with an attorney at Tom Bible Law. Over the last 20 years, our firm has become the Chattanooga area’s largest bankruptcy filer, so our lawyers have seen everything. We will assess your situation with your assistance, provide guidance, and help determine what type of bankruptcy is the right choice for your situation.
Once the assessment is done, we help you file the appropriate paperwork. Then, you go into what is referred to as a “meeting of creditors.” You are appointed a trustee by the court. The trustee is sort of like an attorney who represents your unsecured creditors. This role is the part many people have questions about:
- Is this person going to judge me?
- Is this person going to humiliate me and my family?
- Is this person going to grill me for hours on end?
Rest assured that none of these things will happen to you. The court simply doesn’t want you to just get a free pass and not get your filing vetted by anybody, so the trustee is really just the court-appointed gatekeeper.
The trustee is going to be helping you look for undervalued assets or assets you might have inadvertently left off of your petition. In some cases, people do try to hide assets against legal advice, and it’s important for the trustee to uncover this to ensure the integrity and accuracy of the bankruptcy process.
Sometimes, our clients have situations that they just didn’t know about, such as the potential to sue over some debt you’ve accrued or an inheritance. The trustee will merely ask questions and talk about your patterns of behavior. For example, discussing what happened to create all of the debt can help them discover potential solutions you may not have thought of. Usually, these meetings with the trustee are less than an hour and are easy and stress-free — it’s just a matter of routine questions they have to ask.
Once the meeting with the creditors is over and the trustee has asked all of their questions, the process moves on to selling all of the non-exempt assets and paying the creditors. You’ll also need to complete a credit counseling course before your debts can be discharged. The last step is to receive your notice of discharge, which ends the bankruptcy process and means you can start moving forward again with a fresh start.
What Are the Chapter 7 Bankruptcy Exemptions?
Now, what you might not know is that there are some Tennessee bankruptcy exemptions. Exemptions are assets — or sometimes a portion of an asset’s value — that is exempt from the bankruptcy proceedings. This means you can keep it, and it doesn’t have to be sold to pay creditors.
When you file Chapter 7 bankruptcy in Tennessee, you can protect up to $10,000 of personal property. This protection includes things like clothes, jewelry, furniture, and personal care items. There are also certain real property exemptions. These vary by age and how many people own the property, but the range is anywhere from $5,000 to $25,000. Keep in mind that you can often double the exemptions when you file as a married couple.
Usually, the most common interaction with the trustee is over your house value. If they add up the mortgage, and add the exemption — assume 6% cost of sale — add all 3 up — if the value of the house is more than that, then the trustee can negotiate with them. So, going a little deeper, if you had a $100,000 tax-appraised house with a $50,000 mortgage, the exemption is $10,000 — 6% cost of sale — you’re at $66,000. There’s a $44,000 “swing” that the trustee wants to try and get. This interaction can all be negotiated, and that’s where an experienced bankruptcy attorney like the team at Tom Bible Law comes in.
It’s important to understand that trustees get paid on commission if they can find assets that go above their exemptions. This commission is why they have a vested interest in thoroughly understanding your financial state. It’s just as important for you to have knowledgeable representation looking out for your interests to ensure that you come out of the bankruptcy having protected as much of your assets as possible.
Is Chapter 7 Bankruptcy Right for You?
It’s clear that there are some real benefits of filing for Chapter 7 bankruptcy, but it’s not the right choice for everyone. When deciding whether this is an option you want to pursue, it’s important to also consider the potential pitfalls of filing for bankruptcy and how the bankruptcy laws apply to your case.
The first consideration is how the bankruptcy may impact your credit. While it’s true that a bankruptcy filing can lower your credit score significantly, many people find that the impact is less than they thought — primarily because their credit score is already poor. Bankruptcy is generally a last resort for most people, which means they’ve tried everything before filing. This option usually results in multiple late payments, delinquent accounts, or even a repossession. All of these have probably already done enough damage to your credit score that the hit from the bankruptcy won’t make any actionable difference.
Filing for bankruptcy is a way to get a fresh financial start, but it’s important to understand that there are some exceptions. For example, you can’t get rid of certain tax debts, child support or alimony arrears, or student loans by filing for bankruptcy. Debts that you owe from personal injury lawsuits are also not dischargeable. It’s important to have a realistic understanding of what debts you may still be left with and what those payments could look like to ensure that filing for bankruptcy is an actual solution to your financial challenges.
How Can a Tennessee Bankruptcy Attorney Help You?
Making the decision to file for bankruptcy is a tough one, and it’s not something you should enter into without legal counsel. You need an experienced bankruptcy attorney who can evaluate your situation and ensure that bankruptcy is the right path forward and that Chapter 7 bankruptcy, specifically, is in your best interests. Call Tom Bible Law at 423-874-6628 to discuss your case in a free consultation today.