How to Qualify for Chapter 7 Bankruptcy in Tennessee
April 30, 2025
How to Qualify for Chapter 7 Bankruptcy in Tennessee
Filing for bankruptcy is a major decision, but for many Tennessee residents struggling with debt, Chapter 7 bankruptcy can offer a much-needed financial reset. At Kenneth C. Rannick, P.C., we help individuals in the Chattanooga area navigate the bankruptcy process and determine if Chapter 7 is the right solution.
What Is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is often referred to as “liquidation bankruptcy.” It allows qualified individuals to discharge most unsecured debts—like credit cards, medical bills, and personal loans—without requiring repayment. In exchange, certain non-exempt assets may be sold by a court-appointed trustee to pay creditors. However, many people are able to keep most or all of their property due to Tennessee’s generous exemption laws.
The Means Test: Your Key to Qualification
To file for Chapter 7 in Tennessee, you must pass the Chapter 7 Means Test, which evaluates your income and expenses to determine if you truly can’t afford to pay your debts.
- Step 1: Compare Your Income
Your household income is compared to the median income for a Tennessee household of the same size. If your income is below the median, you automatically qualify. - Step 2: Deduct Expenses
If your income is above the median, the second step involves subtracting allowable living expenses (e.g., rent, utilities, food) from your income. If there’s not enough left over to pay a portion of your unsecured debts, you may still qualify.
Other Chapter 7 Requirements
Beyond the Means Test, you must meet several additional requirements:
- Credit Counseling: You must complete a credit counseling course from an approved provider within 180 days before filing.
- No Recent Bankruptcy: You cannot have received a Chapter 7 discharge in the past 8 years or a Chapter 13 discharge in the past 6 years.
- Honesty in Reporting: You must disclose all assets, debts, income, and financial history. Concealing information can lead to dismissal of your case or even criminal charges.
Property You Can Keep in Tennessee
Tennessee allows exemptions that protect certain property from being sold in bankruptcy. These may include:
- A portion of your home equity (homestead exemption)
- Vehicle equity
- Household goods and clothing
- Pensions and retirement accounts
- Public benefits like Social Security or unemployment
A Chattanooga bankruptcy attorney can help you maximize these exemptions.
How Kenneth C. Rannick, P.C. Can Help
Understanding bankruptcy law is challenging. At Kenneth C. Rannick, P.C., we guide Chattanooga residents through every step of the Chapter 7 process—from determining eligibility to protecting your assets and ensuring compliance with all filing requirements.
We’re here to help you make informed decisions and take back control of your financial future.
Struggling with debt? Learn seven key signs that it might be time to consider bankruptcy. Kenneth C. Rannick P.C. offers legal guidance to individuals in Chattanooga ready for a financial fresh start.
Can I Keep My Car If I File for Chapter 7 Bankruptcy in Tennessee?
What Are My Options If I Am Drowning in Credit Card Debt in Tennessee?
What Are the Documents Required to Apply for Chapter 7 Bankruptcy in Tennessee?
What is the Difference Between Chapter 7 and Chapter 13 Bankruptcy in Tennessee?
Understanding Chapter 7 Bankruptcy Qualifications
Understanding the Role of the Trustee in Chapter 13 Bankruptcy
Understanding which Debts can be Discharged in Chapter 7 Bankruptcy
Protecting Your Assets in Chapter 7 Bankruptcy
Are you a Tennessee resident facing financial challenges and considering bankruptcy? If so, you may have heard about a relatively new option called Subchapter 5 bankruptcy. But what exactly is Subchapter 5 and how does it differ from traditional Chapter 11 bankruptcy? More importantly, what benefits does it offer to individuals and small businesses? In this blog post, we will explore the world of Subchapter 5 bankruptcy and shed light on its advantages for Tennessee residents. Whether you're a struggling entrepreneur or an individual burdened by overwhelming debt, understanding the potential benefits of Subchapter 5 can help you make informed decisions about your financial future. What is Subchapter 5 Bankruptcy? Subchapter 5 is a relatively recent addition to the United States Bankruptcy Code, specifically designed to provide a streamlined and cost-effective bankruptcy process for small businesses and individuals. It was created as part of the Small Business Reorganization Act (SBRA) in 2019, with the aim of increasing accessibility to Chapter 11 bankruptcy relief. The Benefits of Subchapter 5 Bankruptcy Simplified Process: One of the key advantages of Subchapter 5 is its simplified and faster bankruptcy process. Unlike traditional Chapter 11 bankruptcy, which can be complex and costly, Subchapter 5 offers a more streamlined approach that is better suited for small businesses and individuals. Retention of Ownership: Under Subchapter 5, business owners have the opportunity to retain ownership and control of their company while developing a repayment plan. This allows for greater flexibility and the ability to restructure debts without losing ownership interests. Reduced Plan Requirements: Subchapter 5 eliminates certain stringent plan requirements that are typically associated with traditional Chapter 11 bankruptcy. This simplification of the plan process makes it more accessible to small businesses and individuals. Debt Repayment Plan: Subchapter 5 allows for the development of a debt repayment plan based on the individual's or small business's disposable income. This plan spans over three to five years, making it more manageable and achievable for debtors. Creditor-Friendly Approach: Subchapter 5 encourages creditor participation and collaboration, promoting consensual resolutions and a more amicable environment. This can lead to increased cooperation, reduced litigation costs, and ultimately, a more successful restructuring process. Subchapter 5 vs. Chapter 11 Bankruptcy: Understanding the Difference While both Subchapter 5 bankruptcy and traditional Chapter 11 bankruptcy share some similarities, there are significant differences between the two. The primary distinction lies in the complexity, cost, and requirements associated with each option. Subchapter 5 offers a more simplified and accessible bankruptcy process specifically tailored to the needs of small businesses and individuals, while Chapter 11 is better suited for larger businesses with more complex financial structures. If you're a Tennessee resident grappling with financial difficulties, Subchapter 5 bankruptcy may provide a viable solution. Its streamlined process, reduced plan requirements, and debtor-friendly approach make it an attractive option for small businesses and individuals seeking relief from overwhelming debt. Before making any decisions, it's essential to consult with a qualified bankruptcy attorney who can guide you through the process and help determine the best course of action for your specific situation. Remember, bankruptcy is not a one-size-fits-all solution, and the outcome will depend on various factors. However, understanding the potential benefits of Subchapter 5 bankruptcy can empower you to make informed decisions about your financial future. At Kenneth C. Rannick, P.C., we specialize in bankruptcy law and can provide the guidance and support you need during challenging times. Contact us today to schedule a consultation and explore your options for a fresh start. Take control of your financial future with Subchapter 5 bankruptcy. Let us help you navigate the path to a brighter tomorrow.