Knoxville Bankruptcy Attorneys

Providing Knowledgeable Legal Representation During the Bankruptcy Process

Thousands of people in Knoxville and the rest of Tennessee are feeling the weight of overwhelming debt and financial difficulties. Many people are only one job loss or major financial expense, such as a home or car repair or medical bill, away from a financial crisis, and when that happens, it can feel like there’s no way to get out from under debt. However, filing for bankruptcy is an option that can help you get debt relief and a financial fresh start.

If you’re considering bankruptcy or you want to know more about what the process entails and which filing type may be right for you, contact the Knoxville bankruptcy lawyers at Tom Bible Law. Our team has helped clients in Knox County and the surrounding area successfully file for bankruptcy and move forward without mountains of debt.

What Are the Different Types of Bankruptcy?

The U.S. bankruptcy code offers several types of bankruptcy for individuals, business owners, and corporations facing financial issues. Each of these types is slightly different, either in who is eligible, what the debt and income requirements are, or what must be done for the bankruptcy to be discharged. The most common bankruptcy types are:

Chapter 7: A Chapter 7 bankruptcy is one of the most common types for individuals. It is called a “liquidation” bankruptcy because any assets that aren’t exempted from the bankruptcy filing are sold to pay creditors. Some unsecured debts, such as credit cards, are also forgiven.
Chapter 11: This bankruptcy option is usually for businesses that need to restructure their organization and finances. A Chapter 11 bankruptcy can allow a business to continue operations as it goes through the bankruptcy process. The goal of this type of bankruptcy filing is for the business to get back on solid financial footing to be able to continue to grow and remain profitable.
Chapter 12: Chapter 12 bankruptcy is only for family farmers and family fishermen who meet debt and income requirements. Similar to a Chapter 11 bankruptcy, it allows the operation to keep going while restructuring debts and paying off creditors over a period of several years.
Chapter 13: A Chapter 13 bankruptcy allows you to reorganize your debt and create a payment plan that lets you pay creditors over a period of 3 to 5 years. At the end of the time, any remaining debts covered by the bankruptcy are discharged.

Before you can file for bankruptcy, you need to know which type suits your situation and what the process is. A bankruptcy attorney can go through all of your options with you, explaining what they involve and the benefits and drawbacks of each, so you can make an informed decision on how you want to proceed.

What Assets Are Exempt From Bankruptcy?

Not all assets are subject to a bankruptcy filing, and it’s possible to keep most — or even all — of your property in some cases. The bankruptcy courts acknowledge that debtors need some of their property to be able to continue to work and live and regain their financial footing. In Tennessee, the following assets are exempt from bankruptcy:

Certain types of personal property, such as pictures, clothing, and health aids
Compensation from wrongful death or personal injury cases, up to $10,000 or $7,500, respectively
Qualifying pension plans, such as those for public employees and teachers
Public benefits, such as Social Security, unemployment benefits, and workers’ compensation payments
Tools and supplies that are necessary for the person’s job up to $1,900 in value
Some types of insurance benefits

There are also some provisions to exempt part of a homestead property, but this can differ depending on whether it’s individually or jointly owned and how old the owners are, so it’s best to discuss this with an attorney to ensure you understand how it applies. Other potential exemptions include a certain portion of your earned but unpaid wages and a burial plot of up to 1 acre in size.

Who Is Eligible to File for Bankruptcy?

Each bankruptcy type has specific rules for who is eligible to file. For example, both individuals and businesses can file a Chapter 13 bankruptcy, but only family farmers or fishermen are eligible for Chapter 12. There may also be limits on how much you can have in secured debts and unsecured debts or how much income you must have to qualify for a payment-plan based bankruptcy option.

Chapter 7

To be eligible for Chapter 7 bankruptcy, you cannot have filed a Chapter 7 bankruptcy in the past 8 years or a Chapter 13 bankruptcy in the past 6 years. You must also wait at least 181 days after filing for bankruptcy to file again if your original case was dismissed.

You must have an income that has averaged less than the median income for a family of the same size in your state over the past 6 months. For example, the median income for a family of four in Tennessee was $90,197 for the 2024 fiscal year. That means that your average monthly income for a family of four would need to be less than $7,516 over the last 6 months to qualify.

Chapter 11

Chapter 11 has the least amount of eligibility criteria. There is no required amount of income to file, and there is no debt limit. This makes it a popular option for businesses and even individuals who have debts that exceed the limits for the other bankruptcy options.

Chapter 12

The eligibility requirements for a Chapter 12 bankruptcy depend on whether the filing party is an individual or a corporation or partnership. Remember, this bankruptcy type is only available to family farmers and family fishermen.

For individuals, the total debt limit is $11,097,350 for farmers and $2,268,550 for fishermen. In addition, at least 50% of the debts for farmers and 80% of the debts for fishermen must be related to the operation itself.

For a corporation or partnership to be eligible to file, the debt limits are the same, but the stock or equity in the company must be mostly owned by one family.

Chapter 13

Because a Chapter 13 bankruptcy requires making monthly payments as part of the process, you must be able to show that you have sufficient income to make those payments to be able to file this type of bankruptcy. There are also limits on how much unsecured and secured debt you can have. To be eligible, the combined total of your secured and unsecured debts cannot exceed $2,750,000.

These requirements are subject to change and can be challenging to apply to all cases. If you’re unsure whether you qualify for bankruptcy or which option is the right one for you, the attorneys at Tom Bible Law can help.

What Is the Process for Filing in Bankruptcy Court?

Each of the bankruptcy options has a slightly different process, but they all share the same basic steps. The first step is to determine whether bankruptcy proceedings are necessary, and for that, you need to talk with a skilled attorney. In some cases, you may be able to take an alternative route, such as selling off assets to pay down debt or negotiating with creditors to lower your interest rates or balances enough to make your payments more manageable again.

If you do decide to move forward with a bankruptcy, the process is as follows:

Hire an attorney. While it will incur some legal fees, it’s important to have dedicated representation during your bankruptcy filing. This gives you the peace of mind that everything is being done correctly and ensures you have an advocate on your side to guide you through the process.
Go through credit counseling. In most cases, you will need to go through a credit counseling course a maximum of 6 months before filing. This ensures you understand what the process is and how it can affect your finances in the long term after the bankruptcy is discharged. It can also help you understand what bills can be handled as part of a bankruptcy, such as credit card bills and medical bills, and what can’t, such as student loans.
File the correct forms with the bankruptcy court. This starts the official process and puts a stay on your accounts so that creditors can’t take any adverse action against you.
Meet with creditors. There will be a meeting with the creditors to inform them of the bankruptcy. Depending on the type of filing, you may need to propose a plan to make payments on some debts, such as mortgage payments.
Have the remaining debts discharged. When all of the terms of the bankruptcy have been fulfilled, you will receive a notice of discharge.

How Does Filing for Bankruptcy Affect Your Credit and Future Finances?

It’s true that filing for bankruptcy has a negative effect on your credit and can have other financial impacts in the years after, but it might be less than you think. Many times, by the time someone is ready to file for bankruptcy, they already have a long history of missed or late payments, delinquent accounts, and even repossessions. If your credit score is already in the poor range, the hit it takes from filing for bankruptcy isn’t likely to make much difference.

Chapter 7 bankruptcy stays on your credit report for up to 10 years from the filing date, and a Chapter 13 bankruptcy stays on your credit for up to 7 years. This is important to know because it is possible that filing for bankruptcy can make it more difficult to access credit in the future while the filing is still on your credit report. For example, you may have to wait a certain number of years after filing for bankruptcy before you can buy a home. You may also end up with a higher interest rate or less-than-ideal loan terms when seeking financing for large purchases. However, continuing to try to make payments that are more than you can afford and facing repossession or foreclosure are often worse than dealing with the after-effects of bankruptcy.

If you’re thinking about filing for bankruptcy, it’s important to ensure you understand exactly what the process involves and whether it’s the right option for you. Talking about your financial situation with a bankruptcy lawyer in Knoxville, TN, is the first step. Call Tom Bible Law today at 423-874-6628 to schedule a free consultation and find out how we can help you get started.