Facing overwhelming debt can feel incredibly isolating and stressful. Many Tennessee residents find themselves in challenging financial situations and wonder if there's a path to a fresh start. If you have a regular income but are struggling to keep up with your obligations, Chapter 13 bankruptcy might be a viable solution. It's often referred to as a "wage earner's plan" because it allows you to reorganize your debts and pay them back over time, typically three to five years, while protecting your assets.
But how do you know if you qualify for Chapter 13? Let's break down some key considerations for Tennessee residents.
Understanding Chapter 13's Purpose
Chapter 13 bankruptcy is designed for individuals who have a steady income but need court protection and a structured plan to repay their debts. Unlike Chapter 7, which often involves the liquidation of non-exempt assets, Chapter 13 allows you to keep your property, including your home and car, while making manageable payments. This can be especially beneficial if you're behind on mortgage payments or car loans and want to prevent foreclosure or repossession.
Key Qualification Factors for Tennessee Residents:
Regular Income: To qualify for Chapter 13, you must have a "regular source of income." This could include wages, salary, self-employment income, rental income, retirement benefits, or even dividends from investments. The key is that your income is consistent enough to fund a repayment plan.
Debt Limits: There are specific limits on the amount of secured and unsecured debt you can have to be eligible for Chapter 13. While these limits are periodically adjusted, generally, your unsecured debts (like credit cards, medical bills, or personal loans) and secured debts (like mortgages or car loans) must be below certain statutory amounts. It's crucial to confirm the most current limits with a legal professional, as they can change.
Credit Counseling Requirement: Before filing for Chapter 13 (or any bankruptcy), you must complete a credit counseling course from an approved agency within 180 days of filing your petition. This is a mandatory step.
No Prior Dismissals: You cannot file for Chapter 13 if a previous bankruptcy petition was dismissed within the preceding 180 days due to your willful failure to appear in court, comply with court orders, or if you voluntarily dismissed it after creditors sought relief from the automatic stay.
The "Means Test" (Indirectly): While the means test primarily determines eligibility for Chapter 7, it can also influence your Chapter 13 plan. If your income is below Tennessee's median income for your household size, your repayment plan will generally be for three years. If your income is above the median, your plan will typically be for five years. Even if your income is high, Chapter 13 might still be an option if your necessary expenses leave little disposable income.
What Debts Can Be Included?
Chapter 13 is incredibly versatile. It can help you address a wide range of debts, including:
Mortgage arrears to stop foreclosure
Car loan defaults to prevent repossession
Credit card debt
Medical bills
Personal loans
Certain tax debts (though some priority taxes must be paid in full)
Child and spousal support arrears (these are priority debts and must be paid in full)
A significant advantage of Chapter 13 is the "automatic stay," which immediately halts collection efforts from creditors, including wage garnishments, lawsuits, foreclosures, and repossessions, as soon as you file. This provides much-needed breathing room to develop your repayment plan.
Talk to Chapter 13 Bankruptcy Attorneys in Nashville
Chapter 13 bankruptcy offers a structured, court-approved path to regain control of your finances. It can prevent the loss of valuable assets, stop creditor harassment, and provide a clear repayment strategy. While it's a significant legal step, it's often the most effective way for Tennessee residents with regular income to get a true fresh start.
Navigating bankruptcy law can be complex, and understanding your eligibility and the best course of action requires expert guidance. If you're a Tennessee resident considering Chapter 13 bankruptcy, don't hesitate to seek professional help. The experienced team at Flexer Law is here to provide empathetic, reassuring, and knowledgeable support.
Contact us today at (615) 805-6374 for a confidential consultation to explore your options and take the first step towards financial relief.