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How does a Chapter 7 bankruptcy filing work?

Tennesseans struggling with financial challenges may forego a bankruptcy filing just for the lack of understanding of how the filing actually works. This is understandable, since bankruptcy has an undeserved negative image. However, a filing, particularly Chapter 7 bankruptcy, can be a breath of fresh air for Tennesseans striving to keep financially afloat because of personal debts.

In Chapter 7 bankruptcy, a court assigned trustee collects a person's assets which will be sold to pay off creditors. Some assets may also be mortgaged and the selling of property or placing of liens on certain assets will still be subject to the Bankruptcy Code. Also, some assets and property will be considered exempt from sale. In order to be eligible for Chapter 7, the person should not have had a dismissed bankruptcy case within the last 180 days. The person should also have undergone credit counseling from an approved agency.

When filing for Chapter 7, the debtor must submit a petition to the court detailing assets and liabilities, expenditures and income, contracts, leases and other pertinent financial documents. Tax returns and other tax related documents must be provided as well. A certificate from the credit counseling agency must also be presented. Married couples can file individual bankruptcy claims or file jointly. The debtor will be required to pay a filing fee and a miscellaneous fee, as well as the fee for a trustee. These fees can be paid in installments. However, if the individual's income falls far below the poverty line, the court may decide to waive the fees.

More than 99 percent of individuals who file for this type of bankruptcy were discharged from their debts. Pending objection on the part of creditors, a debtor will be discharged from debts in 90 days or less after filing for bankruptcy and meeting with creditors.

Source:, "Liquidation Under the Bankruptcy Code," Accessed on Sep. 14, 2014

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

Phone: 423-624-4002
Toll Free: 800-257-7594
Fax: 423-624-0509
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