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How does Chapter 13 work in Tennessee?

Many Tennesseans have heard of bankruptcy. And, many of those have heard of Chapter 7 bankruptcy, which involves the selling of a person's assets to pay their creditors. But, fewer have heard of Chapter 13 bankruptcy. Despite that obscurity, Chapter 13 is a common and often effective way for people to gain a fresh financial start.

What is Chapter 13 bankruptcy? It is known as a reorganization bankruptcy. In this type of bankruptcy, a person will not have to give up any property. Instead, they set up a temporary structured repayment plan to deal with their debts. How big and how many payments must be made varies from case to case, but once the period passes, any remaining debt disappears.

Who is eligible for Chapter 13 bankruptcy? Not everyone. It generally is only available to people with regular income sufficient to cover the repayment plan. And, even then, Chapter 13 applies for people up to a certain debt load. To be available, a person must have unsecured debts at or below $336,900 or secured debts south of $1,010,650.

What does the Chapter 13 process look like? It begins with credit counseling from an approved agency (at low or no cost). A list of approved agencies can be found at the United States Trustee's office. Assuming counseling does not do the trick, the next step is to file the bankruptcy petition. Then, the heavy lifting begins: assembling a thorough financial picture and transforming it into a repayment plan.

How long do repayment plans generally last? As a rule of thumb, they last for three-to-five years. People with average incomes below the state median typically receive three-year repayment plans. However, people with average incomes above the state median typically receive five-year repayment plans.

Source:, "Chapter 13 Reorganization Bankruptcy," accessed on Nov. 3, 2015

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Mark T. Young & Associates
2895 Northpoint Blvd.
Hixson, TN 37343

Toll Free: 888-376-0282
Phone: 423-933-1606
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