Tennessee Bankruptcy Eligibility
Tennessee law states that an individual must reside in the state of Tennessee for a minimum of six months before he or she can file for bankruptcy through the Tennessee bankruptcy court. These six months must be prior to a filing and not end after bankruptcy is complete.
Bankruptcy is a right to the American people, but the government has set new guidelines for who is eligible for bankruptcy. Bankruptcy is designed to help those who have met financial turmoil find relief from their debts. Those who have suffered from a loss of employment, the loss of an important client, a divorce settlement, or an illness requiring hospitalization are usually those who qualify for bankruptcy.
Bankruptcy does not eliminate all debts, however. Only some kinds of debts may be eliminated while other are always excluded. These exclusions include the payment of child support, the payment of alimony, the payment of fines, the payment of some taxes, any debts that are not listed under the petition for bankruptcy, falsified loan documents where the loan base is on false information, malicious and willful harm that resulted in debts, government student loans, unpaid liens, and unpaid mortgages.
Student loans may be eliminated if the bankruptcy court determines that the loan causes unnecessary hardship to the individual.
Bankruptcy Effects on Credit
Bankruptcy filing may not directly affect current or future credit. Credit is usually based on payment status and payments that are submitted on time. Bankruptcy will however be present on a credit records for up to ten years. New credit can be established following bankruptcy as all the current debts are eliminated and new bill payments can be made on time.
At times credit cards can be kept after bankruptcy. Other times credit cards may be disapproved. It is recommend that instead of using credit cards, and falling into previous habits, that individuals use cash or debt cards for purchases they would otherwise have used a credit card.
The government requires that after bankruptcy completion that individuals attend a financial management course where more advice is provided.
Tennessee’s Bankruptcy Chapters
Tennessee offers two different chapters of bankruptcy for eligible consumers. Chapter Seven bankruptcy allows individuals to eliminate their debts by liquidating their current property. Not all property is eligible for liquidation nor are all types of property exempt from liquidation.
Property can be kept if exempt, and non-exempt property can only be kept if the property’s value is paid to the assigned trustee. This trustee, as appointed by the court, will use the liquidated funds to pay off creditors. After six months the entire process will be completed, and the individual will be debt-free.
Chapter Thirteen bankruptcy is the other option in Tennessee. This type of bankruptcy allows individuals to pay off their own debts by using their own personal income. Upon filing the court will evaluate the individual’s income, expenses, debts, and household. A payment plan will then be calculated based on the extent of debt and the personal income. No payment plan is to exceed five years.
I have a friend who recently went through the process of filing for bankruptcy in Tennessee. He had been living in the state for over a year, so he met the residency requirement. However, he was initially unsure if he would be eligible for bankruptcy due to his income.
My friend had lost his job a few months prior and was struggling to find stable employment. He had accumulated a significant amount of debt and was unable to keep up with his monthly payments. After consulting with a bankruptcy attorney, he learned that his income level would determine whether he qualified for Chapter 7 or Chapter 13 bankruptcy.
In Tennessee, the means test is used to determine eligibility for Chapter 7 bankruptcy. This test compares an individual’s income to the median income in the state. If the income is below the median, the person is eligible for Chapter 7. However, if the income is above the median, they may still qualify based on their disposable income after deducting certain expenses.
In my friend’s case, his