You’ve likely heard common misconceptions about bankruptcy, like that filing means losing everything, or that it ruins your financial future forever. These myths often create fear and stop people from pursuing the fresh financial start they need.
At our office, we’ve helped thousands of residents in Chattanooga, Southeast Tennessee, and North Georgia navigate bankruptcy with clarity and confidence. Below, we answer the common questions people ask about Chapter 7 and Chapter 13 bankruptcy in this region.
Common Myths about Chapter 7 Bankruptcy in Tennessee
“Will I lose everything I own if I file Chapter 7 in Tennessee?”
No, most people who file Chapter 7 in Tennessee keep all of their property.
Tennessee law provides exemptions that protect the things you need to live and work. One key protection is the homestead exemption, which shields a portion of your home’s equity. The amount depends on factors like whether you file individually or jointly as a married couple.
Tennessee’s personal property exemptions also cover many everyday items, including:
- Clothing, furniture, and basic household goods
- Appliances and medically prescribed health aids
- Reasonably necessary food, clothing, and fuel
- A portion of your wages
There are also specific exemptions for vehicles, retirement accounts, and tools of your trade.
Because of these protections, most Chapter 7 filers in Tennessee do not lose any of their essential property.
“Will everyone know I filed for bankruptcy?”
No, most people will not know unless you tell them.
While bankruptcy filings are technically public record, they aren’t publicized. Someone would have to go out of their way to search court records to find your case.
Creditors listed in your case are notified, but your employer typically isn’t—unless wage garnishment needs to be stopped. Bankruptcy does show up on your credit report, but only individuals or companies who check your credit will see it.
“Can I ever get credit again after filing for bankruptcy?”
Yes, many people begin rebuilding their credit shortly after their case is discharged.
While bankruptcy does impact your credit, many people qualify for secured credit cards shortly after discharge and can rebuild their credit within 1-2 years. FHA home loans and auto loans often become available within a few years.
To support our clients after bankruptcy, our office provides access—at no cost—to the 720 Credit Score program. This step-by-step course is designed to help you rebuild your credit the right way and lay a strong financial foundation for the future. It’s just one more way we make sure our clients are set up for long-term success, not just a short-term solution.
“Can I choose which debts to include in my bankruptcy?”
No, you are required to list all of your debts when you file.
Tennessee bankruptcy law mandates full financial disclosure. That means listing all debts, assets, income, and expenses. Leaving anything out (intentionally or not) can jeopardize your case.
That said, not all debts are treated equally. Some debts, such as credit cards and medical bills, are typically dischargeable. Others, such as child support, alimony, recent taxes, and debts from fraud, generally cannot be cleared through bankruptcy.
Even though you must include all debts, you can choose to repay certain ones after your case is complete. For instance, if you owe money to a family member or friend, you may decide to pay them back later, even if the debt was legally discharged.
“Do I make too much money to file Chapter 7 in Tennessee?”
Not necessarily, your income alone doesn’t automatically disqualify you.
Chapter 7 eligibility is based on a “means test” that compares your household income to Tennessee’s median for your family size. Even if you’re above the median, you may still qualify after deducting allowed expenses like housing, childcare, medical costs, and more.
The means test can be technical, and some exceptions and adjustments may apply. It’s a good idea to have a bankruptcy professional review your specific numbers to determine whether Chapter 7 is a fit for you.
Common Myths about Chapter 13 Bankruptcy in Tennessee
“Is Chapter 13 worse than Chapter 7?”
Not necessarily. Depending on your situation, Chapter 13 can actually offer more protection.
While Chapter 7 is faster and wipes out many debts, Chapter 13 provides options that Chapter 7 doesn’t. For example, it lets you:
- Stop foreclosure and catch up on missed mortgage payments
- Pay off car loans often at reduced interest rates
- Protect assets you might lose in Chapter 7
- Address certain debts, like recent taxes, that Chapter 7 can’t discharge
Chapter 13 plans typically last 3 to 5 years. During that time, you make regular payments based on your income. At the end of the plan, any remaining unsecured debts are usually discharged.
“Do I have to pay back all my debts in full with Chapter 13?”
No, most Tennessee Chapter 13 filers repay only a portion of their unsecured debts.
How much you pay depends on several key factors:
- Your disposable income after necessary living expenses
- The value of any non-exempt property you own
- The length of your repayment plan, typically 3 to 5 years
Under Chapter 13, debts fall into different categories with different repayment rules:
- Secured debts, such as mortgage arrears or car loans, usually must be paid in full.
- Priority debts, like recent taxes or child support, also generally require full repayment.
- Unsecured debts, including credit cards, medical bills, and personal loans, often receive only partial repayment, sometimes as little as pennies on the dollar.
The goal of the plan is to base payments on what you can reasonably afford, balancing your income and living expenses, not necessarily to repay every debt in full.
“Can I keep my home if I file Chapter 13?”
Yes, Chapter 13 is specifically designed to help you keep your home and prevent foreclosure.
When you file, an automatic stay immediately halts foreclosure proceedings. Your repayment plan then allows you to catch up on missed mortgage payments for 3 to 5 years while continuing to make your regular monthly mortgage payments.
For many Tennessee homeowners facing foreclosure, Chapter 13 offers the time and structure needed to regain financial stability and protect their most valuable asset.
“Can I buy a car during my Chapter 13 plan?”
Yes, but you’ll need court approval first.
If your vehicle breaks down or you need reliable transportation for work, you can file a request with the bankruptcy court to finance a new car. The court reviews factors like how necessary the vehicle is, whether the price and loan terms are reasonable, and how this purchase might affect your ability to complete your repayment plan.
When these conditions are met, the court often approves such requests, helping you maintain essential transportation during your Chapter 13 plan.
Considering Bankruptcy?
If you’re feeling overwhelmed by debt in Chattanooga, Southeast Tennessee, or North Georgia, don’t let fear or misinformation keep you from exploring your options. Bankruptcy is a legal tool designed to protect and help people—just like you—get back on stable ground.
At our office, we’ve helped thousands of individuals and families regain control of their finances. We’ll review your situation, walk you through your options, and help you decide what makes the most sense for your future.
Contact us today for a confidential consultation. Getting accurate information is the first step toward relief.
