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Chattanooga Bankruptcy Law Blog

Background on bankruptcy with creditors and employment

Tennesseans who are thinking about filing for bankruptcy due to financial challenges will undoubtedly consider the option due to the allure of debt relief and moving forward with his or her life. Whether it is a Chapter 7 bankruptcy, a Chapter 13 bankruptcy or some other chapter, there are certain factors that must be understood even after the case is completed. Two that frequently arise are if the creditor continues trying to collect on a discharged debt after the case has been completed and how a bankruptcy affects employment at a current job.

Creditors are not supposed to try and collect on a discharged debt. If a creditor does try to do this, the debtor has the right to file a motion and report the action requesting that the situation be handled. The court will frequently do this to make certain that there has not be a violation of the discharge. Once a debtor has been granted a discharge, there is a permanent statutory injunction that is meant to stop creditors from acting to collect a debt. That includes a legal filing to collect. The creditor can be sanctioned for a violation. Generally, that will result in a fine for the creditor.

The right approach to filing for bankruptcy and rebuilding credit

Financial challenges are often cited as the biggest reasons why Tennessee residents decide to consider filing for bankruptcy. A concern that many have, however, is how the process will negatively affect their credit and what they can do after the bankruptcy is completed to rebuild their credit. Fortunately, there are ways to get back on stronger financial ground through bankruptcy and to rebuild credit. Having legal assistance is essential to this process.

Credit scores are used when seeking a mortgage, trying to buy an automobile, even when trying to get an apartment or a job. Although bankruptcy will impact credit scores in the immediate aftermath of the legal case, a person who has received a discharge of their debts with bankruptcy can act quickly in rebuilding credit. There are various steps a person can take when they are trying to get their credit back in good shape.

What should you know about the Chapter 7 bankruptcy means test?

Tennessee residents whose financial challenges have reached the degree that they are considering filing for personal bankruptcy might think that Chapter 7 bankruptcy is often the easiest solution to their issues. It is a useful way to get out of debt. However, while it is a relatively easy process to understand, there are certain rules that govern it. The "means test" is one that should be examined in depth so the person is prepared.

The means test is a basic standard by which it will be decided if the debtor can file for Chapter 7. There are certain debtors who can bypass the means test. It is not applicable if a disabled veteran amassed debt while he or she was on active duty or providing homeland defense. The disability rating must be a minimum of 30 percent and greater than half the debt must have been accrued while on active duty. Regardless of income and expenses, the disabled veteran can file for Chapter 7.

Important points about a discharge when filing for bankruptcy

When a Tennessean thinks about filing for bankruptcy for debt relief, there is a certain amount of personal relief when finally taking the steps necessary to move forward with the process and get clear of financial challenges. However, there are also issues that people might not be fully aware of that can come up later and leave them confused and even disappointed.

The discharge is designed to allow people to get clear of certain debts. There are debts that are not subject to discharge. Before trying to file for bankruptcy, it is vital to examine the nature of the debts and decide if bankruptcy is the best possible alternative. The following debts are not dischargeable: taxes, child support, spousal support; most student loans; criminal restitution and court fines; and personal injury judgments that stemmed from DUI.

What are dangers of using a debt relief company?

Tennessee residents who are dealing with financial challenges will frequently consider numerous alternatives to eliminate debt. In a desperate state, it is easy to fall for impressive sales pitches and testimonials as to the benefit of a debt relief company and think it is preferable to bankruptcy. However, trying to use debt settlement tactics has its risks. Before contacting and entering into an agreement with one of these companies, it is important to understand the details and dangers.

With a debt settlement program, the debtor will be asked to deposit money into a savings account for 36 months or longer before the debts will be settled. Payments will need to be made into this special account and this can be just as problematic for the debtor as the payments they were making before attempting this strategy. Oftentimes, they abandon the program before it helps them in a noticeable way and they find themselves in a worse situation than they were in when they started.

Debt relief and protection from collectors' unfair practices

While seeking debt relief through legal means is meant to help a debtor get beyond financial challenges and move forward with a fresh start, Tennessee residents must also be aware of how legal protection can stop debt collectors from using various tactics that violate the Fair Debt Collection Practices Act when it comes to certain behaviors. Unfair practices might be against the law, but that does not mean debt collectors will stop using them to try to get all or some of the debt repaid.

The debt collector cannot collect any amount from the debtor unless it is authorized based on the agreement. That includes interest, fees, other charges or expenses. If the debt collector accepts a check or other payment that has been post-dated by more than five days, the person must be notified in writing that the collector intends to deposit it between three and 10 days before it is deposited. A debt collector is not allowed to solicit a post-dated check or other payment instrument.

What is the basic purpose of a Chapter 7 bankruptcy?

For debtors in Tennessee who are seeking a way to get a fresh financial start, sometimes the simplest questions are the ones that are most difficult to answer. Specifically, it is important to understand the exact purpose of filing for bankruptcy under Chapter 7. This is the most commonly used form of bankruptcy for people who are seeking relief from debtors. Chapter 7 can be filed voluntarily or involuntarily. It will involve the debtor, the trustee and the creditors. The trustee will oversee the asset liquidation by taking possession of non-exempt assets and selling them for cash to be distributed to the creditors.

For debtors, Chapter 7 is a strategy to have the debts discharged and move forward with a fresh financial start. Individuals are eligible for Chapter 7. It is not available for LLCs, partnerships or corporations. It is not an absolute right to receive a discharge under Chapter 7. However, if the debtor is upfront about the situation, tells the truth and adheres to the rules, the discharge will be granted. Once the discharge is obtained, only dischargeable debts can be eliminated. There are certain debts that are non-dischargeable. Tax liabilities and interest on them are often non-dischargeable.

Although bankruptcies are down, medical debt still a problem

Debts can accrue for a multitude of reasons for people in Tennessee and throughout the nation. One that frequently arises and is often unavoidable is medical debt. It is not just that people cannot control when they or a loved one will need medical treatment that is extremely costly, but the bills are massively expensive. Medical debts are one of the main reasons that people consider filing for bankruptcy to get debt relief and a fresh start.

However, recent information has indicated that the number of bankruptcy filings has reduced by around 50 percent in the past six years and it is believed to be because of people having insurance through the Affordable Care Act. The research from Consumer Reports says that the ACA has helped people who might otherwise have accumulated massive medical costs that frequently precede a bankruptcy avoid that fate. Although the court does not ask the reason for the filing, research indicates that medical bills are a common cause.

Chapter 13 payments and confirmation

Tennesseans who are moving forward with a bankruptcy under Chapter 13 must understand when the payments must start and its connection to the confirmation hearing. Since Chapter 13 is a repayment plan rather than a liquidation and, depending on the situation, the payments are required to be made within three to five years, the timing of when the payments will commence is vital. So too is the confirmation hearing.

When filing for Chapter 13, the debtor must begin making payments to the trustee within 30 days even if the court has yet to approve it. If there are secured loan payments or lease payments that are due prior to the plan's confirmation, there must be adequate protection payments made with the amount that would be paid to the trustee deducted. This is common with car and home payments. Within 45 days of the meeting of creditors, a confirmation hearing will be held to determine if the plan is feasible or not and if it meets the criteria for Chapter 13. The creditors will have 28 days' notice of the hearing and have the right to object to its confirmation. Commonly, the creditors will object that the payments are less than what the creditors would get if there was a liquidation and all disposable income that the debtor is projected to earn has not been used to make payments within the time frame of the plan, three or five years.

What are the fees and necessary information for a Chapter 7?

Tennesseans dealing with financial challenges who have decided that filing for Chapter 7 bankruptcy is the best method to get back on stronger financial ground must understand certain facts about a case. There are filing fees, administrative fees and certain information must be provided to the court to proceed. These are clerical issues that should not be a major sticking point to a Chapter 7 bankruptcy, but are still imperative to successfully complete the case.

There is a fee of $245 to file, a $75 miscellaneous administrative fee, and a $15 trustee surcharge. At the time of filing, these fees will generally be paid to the clerk. Depending on the circumstances, the court might allow the debtor to pay the filing fee in installments. There is a limit of four installments and the debtor is required to make the last payments no more than 120 days after the petition has been filed. If there is sufficient cause, the court can give an extension if the last installment is paid at least 180 days after the petition has been filed.

Kenneth C. Rannick, P.C.
4416 Brainerd Road
Chattanooga, TN 37411

Phone: 423-954-7180
Phone: 423-624-4002
Fax: 423-624-0509
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