What We Do
We Help Chattanooga Residents Get Out Of Debt Using Chapter 7 or Chapter 13
Otherwise known as liquidation, Chapter 7 bankruptcy can be the simplest and quickest form of bankruptcy filing and could be the best option for households, small corporations, and partnerships. Chapter 7 can be the beginning of a financial Fresh Start and may be the beginning of new hope for your brighter tomorrow.
How Does Chapter 7 Bankruptcy Work?
In Chapter 7 proceedings, the Court appoints a Trustee who evaluates whether you have unprotected assets, or there were transactions that might be undone and proceeds might be redistributed to fairly pay out money to creditors according to special rules of which creditors should be paid instead of others. Most Chapter 7s, however, are considered “no-asset” cases, meaning that there is little or no non-exempt (unprotected) property to be seized and sold.
When we meet with you, an attorney will evaluate your case before it is filed and look at it as a Chapter 7 Trustee would. We evaluate whether it is likely you will lose any property. We don’t like surprises so we take every step possible to avoid any mistakes. We take every step so that you know ahead of time what you are getting into. You should not have to be afraid of the unknown. You should be fully informed and understand exactly what to expect in a Chapter 7 case.
Establishing Eligibility for Chapter 7 Discharge
To be eligible for a Chapter 7 discharge, there may be a means test (a complicated form prepared by attorneys) which will determine eligibility to obtain a Chapter 7 discharge. Debtors who have certain types of household income under the median income, or who have predominately non-consumer debt do not have to fill out the long means test form. The formula involves income, expenses and debt. If the Consumer Debtor is considered over the median income, the last six month’s worth of income are considered along with many expenses such as car payments, back taxes, child support, school expenses, utilities, transportation expenses, medical needs, etc.
How the IRS Comes Into Play
Using the IRS’ collection standards as a guideline, eligibility for Chapter 7 sometimes won’t be possible if the Debtor can still pay at least $100/month to unsecured creditors after deducting those amounts. In the few cases where a Debtor can’t qualify for Chapter 7, a possible Chapter 13 case is the next logical step. It is crucial your lawyer is staying current on the ever changing trends in the law. The courts are constantly interpreting the complicated Bankruptcy Code as to which line items on the means test form are to be included (or excluded) as income on the test, and what type of expenses are or are not allowed.
This area of the law is very complicated. It is time sensitive to accurately and legally refine the data on the means test to ascertain whether the Consumer Debtor is eligible to obtain a Chapter 7 discharge. In our office we will not allow a paralegal do the means test. We believe it’s too complicated to entrust to a paralegal or a legal secretary to make the necessary legal analysis. Chose a very knowledgeable attorney.
Filing for Chapter 7 starts with the filing of an official petition, sworn documents, schedules and “statement of financial affairs,” which will include:
- A list of all creditors
- Amount and type of claims
- Source, amount and frequency of income
- List of all property
- Detailed breakdown of living expenses
Filing Your Petition
Filing the petition typically will bring an “automatic stay,” holding off your creditors from any further collection efforts. The creditors are invited to a meeting of creditors (also known as a “341 meeting”) and you will be required to attend. Most creditors do not come to the 341 meeting. Your main responsibility will be to cooperate with your trustee. Before you file you must take a Credit Counseling Class and after you file you must timely take a Financial Management course. Both courses only take a couple of hours and may be done on line, by phone or in person. The course providers must be approved for this district so we provide you with information on who are the approved providers.
You have a very broad array of the types of debts that are dischargeable in Chapter 7. There are some that are not. You need to discuss each of your debts with an attorney for a legal opinion on that. If you file Chapter 7 you will not be allowed to keep your house or car if you don’t pay off the consensual lien against them. You can still lose your house or car after a Chapter 7, but foreclosure or repossession are a last resort for the lender. Candid discussions with an experience attorney are needed to help you figure out the best way for you to keep (or surrender) your house and vehicles. Before you file you should know if you will likely keep (or lose) your house and vehicles.
Property you get to keep in Tennessee in Chapter 7
- Homestead in your real estate where you live ranging from $5,000 to hundreds of thousands of dollars depending upon your residential history, dependents and age. This area of law can be very complex and a knowledgeable lawyer can help you take advantage of subtle nuances in the law.
- Bibles, schoolbooks, pictures, clothing, storage devices
- Burial plots
- Health aids
- Lost earnings payments
- Personal injury settlements to $7500 or wrongful death to $10,000
- Crime victims compensation to $5000
- Health or disability benefits
- ERISA-qualified benefits like a 401-k
- Public benefits such as Social Security or unemployment
- Business partnership property
- Tools of the trade to $1900
- $10,000 in personal property for husband and wife each
- Life insurance annuity
- Life insurance cash value for a debtor or a dependant
- Homeowners insurance proceeds.
The exemptions in Chapter 7 can vary from case to case. It is possible that if you have moved to Tennessee over the past couple of years then the laws of other states or federal law could impact your exemptions. You must have an experience attorney evaluate your exemptions. Failure to do so could result in your being very disadvantaged.
Like most other states, Chattanooga’s Chapter 13 bankruptcy is designed to be a structured payout to creditors; rather than wiping the slate clean, it’s a reorganized debt that gives the Debtor more time to pay. The Chapter 13 plan does not necessarily require all creditors to be paid in full. A good Chapter 13 plan is tailor-made just for you.
Your plan should not be a cookie-cutter prepared by a non-attorney. In our office plans are always calculated by an attorney because there are so many tricky nuances in the law that might not be noticed by a non-attorney. Chapter 13′s are common in cases where there are mortgages or other loans that need to be reinstated and brought current, taxes or child support that cannot be wiped clean, or simply moral convictions that debts should be paid.
How Chapter 13 Bankruptcy Works
Chapter 13s require a regular income with a disposable income left over after paying for your basic living expenses. Chapter 13 filings require a detailed repayment plan for a three-to-five year period. Debts will need to be prioritized, with all top-priority claims (such as recent taxes) paid in full. Chapter 13 plans involve making a monthly payment to the court’s bankruptcy trustee, who then distributes the payment to the various creditors according to the Court approved plan.
Commonly, Chapter 13 plans:
- modify and reduce car payments,
- stop interest and penalties from further accruing on unsecured tax claims, and
- defer collections while more important other claims are paid.
Recently we have been successful in eliminating second mortgages on houses where the value of the house is less than the payoff of the first mortgage. Sometimes we look at a Chapter 7 case but then determine that a Chapter 13 plan is a much better “fit”.
We Help You Take Control of Your Financial Future!
The plan is not slavery. We will work together with you to craft a plan with the goal to help you regain hope and regain control of your financial future. If you cannot complete the repayment plan as it’s agreed on, Chattanooga bankruptcy law does allow several other alternatives. Perhaps you might be eligible for a hardship discharge, you might convert to Chapter 7, or your case could be dismissed. We walk you through that process too. You can meet with us for a free case evaluation. Make an appointment for a meeting soon.“Your Chapter 13 plan is administered by a court-appointed Chapter 13 Trustee. The Trustee in the Eastern District of Tennessee is C. Kenneth Still, Trustee, P.O. Box 511, Chattanooga, Tennessee 37401-0511, 423/265-2261. The Trustees office hours are from 8 a.m. – 4 p.m. Monday – Thursday and 8 a.m. – noon on Friday. Payments may be mail to the PO Box or hand-delivered during office hours. The Trustees office does not accept cash payments. Your Chapter 13 record of receipts and disbursements can be obtained by you online 24 hours a day by logging on to www.trustee13.com. Your user id to obtain your records is your case number (you need to include the hyphen after the first two digits of your case number) and your password is the last four digits of your social security number.”