Personal Bankruptcy FAQs
Franklin, Tennessee bankruptcy attorney Dawn Garcia offers answers to frequently asked questions about personal bankruptcy. For information tailored to your specific circumstances, please call or contact our office so we can discuss how we may be of service to you.
- Should I file for personal bankruptcy?
- What are the types of personal bankruptcy?
- When does filing Chapter 7 make sense?
- When does filing Chapter 13 make sense?
- What happens to my home mortgage during bankruptcy proceedings?
- How long does a bankruptcy stay on my record?
- Will filing for bankruptcy end those calls from creditors and collection agencies?
- What debts does bankruptcy not cover?
Should I file for personal bankruptcy?
Bankruptcy is an option you might consider if you:
- Are having difficulty paying normal household bills for food, utilities, etc.
- Are paying only minimum amounts (or nothing) on your credit cards
- Can not budget yourself out of debt within five years
- Are getting notices that your mortgage or loans are being foreclosed
- Have had a severe financial setback, such as losing your job or a major client, or are suffering from the effects of a divorce or a costly illness
What are the types of personal bankruptcy?
There are two kinds of personal bankruptcy in the State of Tennessee:
- Chapter 7 – Straight bankruptcy wipes out all debts (except those listed below) and provides an immediate fresh start. Also called liquidation bankruptcy, assets and valuables may be sold by the court to pay creditors.
- Chapter 13 – Wage earner bankruptcy sets up a repayment plan to pay back debts over three to five years. Some debt is restructured and attempts are made to ensure you end up with a reasonable monthly payment.
When does filing Chapter 7 make sense?
When the following conditions exist, filing Chapter 7 may be your best bankruptcy option:
- You cannot pay your debts
- Your creditors are pestering you or threatening to sue you
- You do not have any debts with co-signors
When does filing Chapter 13 make sense?
If you need some breathing room to pay your debts, Chapter 13 could be your best bankruptcy options, especially if you—
- Are beyond on your mortgage payments
- Owe the IRS
- Do not qualify for Chapter 7
- Need relief from collection proceedings
- Have debts with co-signers
- Can pay your debts within three to five years
What happens to my home mortgage during bankruptcy proceedings? I do not want to lose my home.
The State of Tennessee dictates the threshold amount of equity you can have in your home and the exemptions for other possessions you may have when you file for Chapter 7 bankruptcy. (Check with Dawn Garcia since these amounts are changed on occasion.) This is not an issue in a Chapter 13 filing.
Trustees appointed by the court make these decisions. Your trustee may choose not to sell your house when the equity surpasses the exemption. A bankruptcy attorney can review your options with you to meet your personal and financial recovery goals.
How long does a bankruptcy stay on my record?
Bankruptcies remain on credit reports between seven and ten years. Deciding to declare bankruptcy is a serious decision. That is why it is important to consult an experienced bankruptcy attorney so you fully understand the bankruptcy options and their consequences.
Will filing for bankruptcy end those calls from creditors and collection agencies?
Yes. During the time you are working out a plan or your court-appointed trustee is gathering and preparing to sell your assets to satisfy your debt, bankruptcy code dictates that your creditors must stop all collection against you.
Once the bankruptcy petition receives the “Relief Ordered” stamp on the filing, you are protected. If a creditor still tries to collect directly from you after that point, you should immediately notify the creditor in writing that you have filed bankruptcy and provide the case name, number, and filing date or a copy of the filed petition. If the creditor still continues to collect, you may be entitled to take legal action.
What debts does bankruptcy not cover?
Bankruptcy cannot relieve you of all debts. The following are generally still your responsibility:
- Alimony
- Child support
- Drunk driving judgments
- Criminal fines
- Criminal restitution
- Debts incurred by fraud or intentional wrongdoing
- Back taxes under three years old
- Mortgages and car loans
- Student loans
- Luxury goods purchases of more than $550 made within 90 days of filing
- Cash advances of $825 or more within 70 days of filing
- A qualified bankruptcy lawyer can review the list with you to give you a full understanding of the debts covered and not covered.
