Filing bankruptcy in Tennessee is a last resort, but it can help you get out from under overwhelming debt and reset your finances. Many people choose Chapter 13 with a three- to five-year repayment plan rather than discharge debt because they want to keep their home and retirement accounts. However, filing for liquidation bankruptcy does not mean losing everything. We often help clients understand their options and file Chapter 7 in Memphis.
According to the United States Courts, the Bankruptcy Code allows for the liquidation of only your nonexempt property, distributing the proceeds to creditors.
How does Chapter 7 bankruptcy work?
The court puts an automatic stay on your debts when you file for bankruptcy. This temporarily stops creditors from harassing collection calls, repossessing property, foreclosing on your home and garnishing your wages. A trustee assigned by the court reviews your finances and assets. This person oversees the sale of nonexempt property and heads a meeting, called a 341 meeting, between you and your creditors.
Although the process is stressful, you may be ready to reclaim your life and start fresh within six months of filing. The court discharges most of the remaining unsecured debt. This wipes out what you still owe, and you no longer make payments.
What is exempt property?
You can keep certain property after going through liquidation bankruptcy. This exempt property is off-limits from creditors and ensures you have the means to live. The homestead exemption protects some or all of the equity in your primary residence and vehicle. Wages that you earn after you file bankruptcy are also not counted as part of the eligible estate.
Federal law protects your 401(k)s, pension plans, Social Security and a variety of other benefits. Although your credit score takes a hit, you can begin rebuilding it quickly. Passing the means test is the first step towards the rest of your life and making a debt-free future possible.