December 01, 2021
Summary: Are you being told that you have a non-dischargeable debt? Not sure what that means? Find out if you have a non-dischargeable debt in Tennessee and what you can do about it.
Obtaining a Tennessee bankruptcy discharge is the best thing that can happen to you when you file for bankruptcy in the state. However, not all debts are dischargeable in Tennessee. For this reason, you'll need to know which debts are dischargeable and which aren't to help you plan your finances better after filing for bankruptcy.
Here are essential facts you need to know about filing bankruptcy in Tennessee and everything else in between.
A non-dischargeable debt is the kind of debt that can't be eliminated by filing for bankruptcy. According to the bankruptcy code, you'll be required to continue paying for the non-dischargeable debt even after successfully filing for bankruptcy.
The state of Tennessee recognizes both Chapter 7 and Chapter 13 of the Federal Bankruptcy Code to govern the bankruptcy process. Both individuals and businesses usually file chapter 7 bankruptcy, although it's commonly used by borrowers with unsecured debts, such as credit card debts. On the contrary, Chapter 13 is only filed by individuals, including sole proprietors.
Whether you file for Chapter 7 or 13, you'll still be required to pay for the non-dischargeable debts. In Tennessee, non-dischargeable debts include:
If you file for Chapter 7, a creditor can challenge the request to discharge a debt based on the following reasons:
In Tennessee, you must prove to the court that you indeed qualify to file for bankruptcy by completing the mean test.
This is a two-part test used to determine whether you fall below the median income of the state. The first part of the test involves calculating your family's gross income from all sources in the past six months. Then, the median will be calculated depending on the size of your family. If it falls below the minimum threshold, you'll have passed the test and be declared eligible for bankruptcy.
But if your median is higher than the threshold, you won't be eligible for Chapter 7, and you'll need to take the second part of the test.
The second part of the test lets you deduct some expenses from your monthly income. If the remaining balance isn't enough to pay for your debts using the Chapter 13 repayment plan, then you'll be eligible to apply for bankruptcy.
If you file for Chapter 7, your property will be sold by a trustee, and the proceeds used to pay for the debts. In the case of Chapter 13, your debts will be consolidated into one payment plan. You'll then be required to make monthly payments.
This plan may take between 3 to 5 years to complete.
Many people don't think filing for bankruptcy is a good option because they believe that they'll lose all they have. That isn't necessarily true because some properties are exempt from bankruptcy.
A trustee can't sell any property exempted from bankruptcy. Similarly, the value of your exempt estate will be deducted from the total value of your bankruptcy estate. By doing so, your debt will be smaller.
Exempt properties include:
Bankruptcy may push you a few steps back financially, and it may seem like there's no way to recover. But, believe it or not, bankruptcy offers you an opportunity to make a fresh start, especially with rebuilding your credit score.
All you have to do is create a plan to undo the damages of the bankruptcy process. For example, if you filed a Chapter 7 bankruptcy, all your debts will be cleared, but you'll have to deal with a bankruptcy record in your credit report for ten years.
Chapter 13, on the other hand, will help you manage your debts within 3 to 5 years, and the bankruptcy record will stay in your credit file for seven years.
That said, here's what you can do.
Checking your credit reports will keep you updated about the status of the report and if the entries made are correct. However, it's advisable to wait about 90 to 120 days after your case has been discharged to contact the credit bureaus for your report.
Usually, a Chapter 7 bankruptcy case is discharged within six months of filing for bankruptcy. That's when you begin counting the waiting period within which the credit bureaus should've completed updating your file.
In this case, all your credits named in the bankruptcy should be marked as "discharged in bankruptcy," and your balances reduced to zero. If the entries are wrong, notify the credit bureau to request a review.
If you file a Chapter 13 bankruptcy, your case will be discharged after the end of the repayment period, lasting anywhere between 3 to 5 years.
Similarly, you should ensure that all entries are correct and that your balance is zero on all the credits you paid for in the prepayment plan.
Lastly, make sure you check your scores regularly, even though they may not look good the first few months or years.
Did you know that 35% of your credit score consists of your payment history? If you have any payments to make on the non-dischargeable debts or in the Chapter 13 repayment plan, ensure that you honor all the monthly installments without fail. That'll also build your credit score and improve your records over time.
Learning from your previous financial mistakes is one of the best ways of recovering from bankruptcy. Now that you know what you did wrong, you'll also figure out how to prevent it from happening again.
For best results, consider getting help from a certified credit counselor to help you with things like budgeting, money management skills, or a credit rebuilding plan.
In this plan, you'll need to incorporate healthy spending habits with some strategies to rebuild your credit. For example, it's healthy to keep your credit balances low to avoid a credit max out.
Some credit rebuilding strategies include:
SoloSuit makes it easy to respond to a debt collection lawsuit.
How it works: SoloSuit is a step-by-step web-app that asks you all the necessary questions to complete your answer. Upon completion, you can either print the completed forms and mail in the hard copies to the courts or you can pay SoloSuit to file it for you and to have an attorney review the document.
"First time getting sued by a debt collector and I was searching all over YouTube and ran across SoloSuit, so I decided to buy their services with their attorney reviewed documentation which cost extra but it was well worth it! SoloSuit sent the documentation to the parties and to the court which saved me time from having to go to court and in a few weeks the case got dismissed!" – James
Here's a list of guides for other states.
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Need more info on statutes of limitations? Read our 50-state guide.
Need help managing your finances? Check out these resources.