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How does TN Chapter 7 differ from other bankruptcy types?

A Tennessee Chapter 7 bankruptcy filing is one of the more commonly filed types of bankruptcy. Often referred to as a liquidation bankruptcy, it is applicable for people who have a certain amount of assets and property. It is also advisable for people who have a salary that is below the state's average income. Tennesseans should not confuse a Chapter 7 filing with other types of bankruptcy filings.

How does Chapter 7 differ from other types of bankruptcy filing? First, unlike a Chapter 13 bankruptcy filing which relies on a repayment plan to clear debts, Chapter 7 uses the existing assets and property of the filer to pay for the debts. The court will then determine which assets will be exempt from liquidation. The remaining assets will then be distributed and liquidated with the help of a court-appointed trustee. Money accumulated from the liquidation will be divided among the filer's creditors depending on the priority determined in the Bankruptcy Code.

In Chapter 13, the repayment plan is three to five years before bankruptcy discharge. Is it the same in Chapter 7? No. There is no specific time frame for Chapter 7, as long as there is enough money from the liquidated assets to cover the debts. Does Chapter 7's qualification differ from other bankruptcy types? Yes. In other bankruptcy filings, there is a limit to secured and unsecured debts. On the other hand, Chapter 7 filers will need to pass a "means test" to be eligible. This means their income should not go over the average state income.

Can Tennesseans lose their home or cars when filing for Chapter 7? A home may be exempt as long as a filer maintains mortgage payments. On the other hand, a vehicle may be taken unless special arrangements are made. A bankruptcy professional can help filers make arrangements to keep both their home and vehicle.

Source:, "General Comparison of Chapter 7 and Chapter 13 Bankruptcy," accessed on Dec. 30, 2014

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

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