Chapter 7 (Liquidation): Designed to wipe out unsecured debts entirely within 4 to 6 months. To qualify, your income must pass a strict financial screening known as the "Means Test." In exchange for discharging your debts, a court-appointed trustee can theoretically liquidate non-exempt property to pay creditors. However, through strategic use of exemptions, the vast majority of consumer filers keep all of their personal property. ​ Chapter 13 (Reorganization): Designed for wage earners who do not qualify for Chapter 7 or want to save a home from foreclosure. You keep all of your assets and enter into a court-supervised 3-to-5-year repayment plan. You make a single monthly payment to a bankruptcy trustee, who distributes the funds to your creditors based on a strict legal hierarchy. Any remaining dischargeable debt at the end of your plan is completely wiped out.

The Automatic Stay (11 U.S.C. § 362) is a powerful federal injunction that takes effect the millisecond your bankruptcy petition is officially filed with the court. By federal law, all collection efforts must freeze instantly. The Automatic Stay legally stops: ​ Wage garnishments and bank account levies. Home foreclosure sales and vehicle repossessions. Ongoing civil lawsuits over debts. Eviction proceedings. All collection phone calls, letters, and harassment from debt buyers. ​ If a creditor knowingly violates the stay, they can be held in contempt of court and forced to pay severe financial damages and attorney fees.

Tennessee requires bankruptcy filers to use state-specific property exemptions rather than federal exemptions. To protect your home and personal property from being taken by the court, we apply these limits: The Homestead Exemption: Protects equity in your primary residence. An individual filer can protect up to $35,000 in equity. Married couples filing jointly can protect up to $52,500. If you are over the age of 62, the homestead exemption increases to $12,500 for individuals or $20,000 for joint filers. For those with minor children, the exemption rises to $25,000 (individual) or $50,000 (joint). The Personal Property "Wildcard" Exemption (T.C.A. § 26-2-103): Allows an individual to exempt up to $10,000 ($20,000 for married couples) of any personal property they choose, including cash in a bank account, electronics, clothing, or equity in a vehicle.

No, not if you wish to keep them. If your home equity falls within the Tennessee homestead exemption limits, and your vehicle equity fits within your wildcard exemption, a Chapter 7 trustee cannot touch them. To retain these assets, you must continue making your normal, monthly mortgage and car payments and sign a Reaffirmation Agreement, which legally binds you to that specific debt post-bankruptcy. In a Chapter 13, your assets are fully protected as long as you maintain your monthly reorganization plan payments.

Bankruptcy is highly effective at discharging general unsecured debts. This includes:   Credit card balances and department store cards. Hospital and medical bills. Personal lines of credit and signature loans. Repossession deficiencies and old broken lease balances. Payday loans and high-interest title pawn debts.   Secured debts (like mortgages and car loans) can also be discharged if you surrender the underlying property back to the lender.

Certain debts are deemed too important to public policy to eliminate. Under federal bankruptcy law, you cannot discharge: Child support obligations and alimony. Student loans (unless you can prove extreme, permanent undue hardship in a separate trial). Most recent federal, state, and local income taxes (unless the taxes are over 3 years old and met strict filing deadlines). Criminal fines, restitution orders, court costs, and traffic tickets. Debts or judgments resulting from fraud, embezzlement, or operating a vehicle while intoxicated.

The Means Test is a statutory filter designed to ensure higher-income earners do not abuse Chapter 7. Step One: The court compares your household's gross annual income over the last 6 months against the median income for a similarly sized household in Tennessee. If your income falls below the Tennessee median, you pass automatically and can file a Chapter 7. ​ Step Two: If your income is above the median, the test calculates your net disposable income after deducting allowed, standardized living expenses (rent, food, healthcare, secured debt payments). If your remaining disposable income is below a defined threshold, you still qualify for Chapter 7. Otherwise, you must utilize Chapter 13.

If you fall behind on your mortgage payments, banks will refuse partial payments and initiate foreclosure. Filing a Chapter 13 stops the foreclosure sale instantly via the Automatic Stay. Your plan takes the total amount of your missed mortgage payments (the arrearage) and spreads it out over a 3-to-5-year repayment window.   You begin making your normal monthly mortgage payment directly to the bank again, while simultaneously paying a monthly amount to the trustee to slowly chip away at the past-due balance. As long as you make these payments, the bank is legally barred from foreclosing.

Chapter 7 remains on your credit file for 10 years from the filing date. ​ Chapter 13 remains on your credit file for 7 years from the filing date. Your credit score does not remain ruined for a decade. In fact, many clients see an immediate bounce in their score shortly after discharge because their high "debt-to-income" ratio is reset to zero.   You can receive offers for secured credit cards immediately after your case closes, and you can typically qualify for an FHA home mortgage just 2 years after a Chapter 7 discharge, provided you maintain a clean payment history.

None. Bankruptcy is a legal tool designed by our nation’s founders and authorized under the United States Constitution. Major corporations, real estate developers, and billionaires use the bankruptcy code routinely as a standard strategic shield to limit liabilities, reorganize operations, and protect wealth without single ounce of shame. ​ Using the federal laws to stop predatory interest rates, halt garnishments, and protect the financial future of your children is a smart, responsible choice to shield your family.