Recognizing Financial Warning Signs
Financial struggles can sneak up on anyone. Maybe you lost a job, faced unexpected medical bills, or just got caught in a cycle of debt that’s hard to break. If you’re overwhelmed by bills, dodging collection calls, or losing sleep over money stress, you’re far from alone. Many Tennesseans face these challenges every day, wondering if bankruptcy is their only option.
At the Law Office of Eron H. Epstein, we’ve helped thousands of people across Southeast Tennessee and North Georgia explore whether bankruptcy is the right solution. While it may not be the best fit for every situation, bankruptcy can provide powerful legal protections and relief when used appropriately.
Here are some common signs it might be time to consider bankruptcy—and how Tennessee-specific laws can impact your options.
Signs Bankruptcy May Be the Right Option
1. Debt Payments Are Taking Over Your Budget
When more than 40% of your take-home pay goes toward paying debts (excluding your mortgage), you’re carrying a dangerous debt load. If your balances aren’t shrinking or you’re falling behind on essentials, it’s time to reassess.
2. You’re Facing Foreclosure or Repossession
Tennessee’s non-judicial foreclosure process moves fast. If you’ve received a notice about your home or vehicle, bankruptcy can immediately stop these actions and give you time to catch up.
3. You’re Using Credit Cards to Cover Essentials
Using credit cards for groceries, utilities, or other basics usually means your cash flow isn’t enough to meet your needs. This reliance often causes debt to grow faster than you can pay it down.
4. Collection Agencies Are Calling Constantly
Under Tennessee law (Tenn. Code Ann. § 28-3-109), creditors have up to six years to file a lawsuit to collect most debts. This means collection efforts can continue long after the original debt was incurred. If calls and letters have become a daily stress, bankruptcy can halt those efforts with an automatic stay.
5. You’re Considering Withdrawing Retirement Savings
This is almost always a warning sign that your financial situation has become critical. Not only will you face taxes and potential penalties on early withdrawals, but you’re sacrificing your future financial security. Tennessee bankruptcy exemptions under Tenn. Code Ann. § 26-2-105 protects most retirement accounts in bankruptcy, making this an unnecessary sacrifice.
6. Your Wages Are Being Garnished
In Tennessee, creditors who obtain judgments against you can garnish up to 25% of your disposable income. If your paycheck is being reduced due to garnishments, filing for bankruptcy can stop this process immediately.
7. You’re Facing Significant Medical Bills
Medical debt is a leading cause of bankruptcy filings nationwide, and Tennessee is no exception. If illness or injury has left you with bills you cannot reasonably pay, bankruptcy may discharge most or all of these debts, helping you regain financial footing.
Tennessee Bankruptcy Options
Bankruptcy is governed by federal law, but Tennessee requires the use of state exemptions that determine what property you can keep.
Chapter 7 Bankruptcy: A Fresh Start
Best for: Individuals with mostly unsecured debts and limited assets
Chapter 7 is often referred to as “liquidation bankruptcy,” but in Tennessee, many filers keep all their property thanks to exemption laws. This option allows you to discharge unsecured debts such as credit cards, medical bills, and personal loans in a matter of months.
To qualify, you must meet income guidelines under the Tennessee means test and have assets that fall within state exemption limits. These exemptions protect your home, vehicle, retirement accounts, and other essential property, depending on your situation.
Chapter 13 Bankruptcy: Reorganization
Chapter 13 is a reorganization plan that allows you to keep your property while repaying some or all of your debts over three to five years. This option is a strong fit for individuals with a steady income who don’t qualify for Chapter 7 or who need time to catch up on missed mortgage or car payments.
It’s also helpful if you own assets that exceed Tennessee’s exemption limits or have debts that can’t be discharged in Chapter 7. Chapter 13 is commonly used by homeowners needing to stop foreclosure and protect equity in their homes.
What Bankruptcy Can and Can’t Do
Bankruptcy provides powerful tools to reduce or eliminate many types of debt and protect your assets under Tennessee law. It can give you a fresh financial start when other options have been exhausted.
While bankruptcy can resolve most unsecured debts like credit cards and medical bills, some obligations—such as certain tax debts, most student loans, and recent fines—are typically not dischargeable. Also, if you want to keep a certain property secured by loans, you’ll still need to continue paying those debts or work out a repayment plan, especially under Chapter 13.
Knowing these details helps you make informed choices and approach bankruptcy with confidence and clear expectations.
How to Know What Comes Next
Choosing between Chapter 7 and Chapter 13—or deciding whether to file at all—depends on your income, the type of debt you’re carrying, and what you want to protect. There’s no one-size-fits-all answer, and that’s where our team can help.
At the Law Office of Eron H. Epstein, we offer free consultations to help you gain a clear understanding of your situation. We’ll walk you through your options and explain how bankruptcy laws apply, so you can make informed decisions without pressure or obligation.
We’ve helped thousands of individuals across Southeast Tennessee and North Georgia find the right path forward. If you’re seeing some of the warning signs above, we invite you to reach out. You don’t have to keep guessing or struggling through this alone. We’re here to help you figure out your next step—with honesty, not pressure.
