Your phone won’t stop ringing, and none of the calls are good news. Maybe you’re two months behind on the mortgage, or you’ve already gotten the call about your late car payments.
Chapter 13 bankruptcy in Tennessee doesn’t ask you to hand over your house or your car. It rolls your debts into one court-supervised plan, gives you three to five years to catch up, and stops creditors from calling while you do it.
Mark T. Young & Associates walks Hixson and Chattanooga families through these situations. A free consultation can tell you quickly whether Chapter 13 fits your situation.
Key Takeaways
- Chapter 13 lets you keep your home and car while you repay debt over three to five years
- You need steady income and must fall under the current federal debt ceiling to qualify
- Foreclosure and repossession stop the moment your case is filed
- Tennessee’s own exemption laws protect a separate chunk of home equity and personal property
contact us today Mark T. Young & Associates
What Chapter 13 Bankruptcy Does
Chapter 13 bankruptcy reorganizes your debt into one monthly payment instead of wiping it out overnight.
A Chapter 13 bankruptcy attorney submits your proposed plan to a court-appointed trustee, who collects that payment each month and sends it out to your mortgage company, car lender, and other creditors in a set order.
You keep everything you own, and in exchange, you commit three to five years of disposable income to the plan. That’s different from Chapter 7 bankruptcy, which can force the sale of property not covered by an exemption. This is why people call Chapter 13 the wage earner’s plan.
Who Qualifies for Chapter 13 in Tennessee
The rules split into two buckets: income and debt.
You Need Regular Income, Not Perfect Income
You need a regular source of income, whether that’s a job, self-employment, Social Security, or retirement pay, because the plan depends on having something left over each month to pay creditor harassment.
The income doesn’t have to be large or steady in the traditional sense. Self-employed contractors, tipped workers, and people on disability all qualify as long as the money is predictable enough to build a plan around.
The Debt Ceiling You Can’t Cross
Federal law also caps how much debt you can carry into Chapter 13, under 11 U.S.C. § 109(e).
Right now, unsecured debt like credit cards debt and medical bills has to stay under $526,700, and secured debt like a mortgage or car loan has to stay under $1,580,125.
That ceiling might not hold much longer. The Senate passed its version of the Bankruptcy Threshold Adjustment Act on Aug. 3, 2026, which would raise the limit to a single combined $2.75 million cap. The House companion bill, H.R. 7730, has cleared committee but hasn’t passed the full House yet.
Mark T. Young & Associates runs these calculations before you commit to filing, so you walk in already knowing your real numbers.
What Happens to Your House and Car
Filing Chapter 13 triggers the automatic stay, under 11 U.S.C. § 362, and it takes hold the day your case is filed with the Eastern District of Tennessee’s Chattanooga bankruptcy court. Foreclosure sales stop. Repossession trucks turn around. Wage garnishments freeze mid-paycheck.
None of that is permanent by itself, since it just buys time for the real work: folding missed mortgage or car payments into the repayment plan so you catch up gradually instead of all at once. A homeowner three payments behind on a $1,600 mortgage doesn’t have to find $4,800 tomorrow. She repays it over the life of the plan, on top of the regular payment, while the stay keeps the lender from foreclosing. Car loans work similarly, and a debtor underwater on a vehicle can sometimes have the loan balance reduced to match what the car is worth today if the car was bought more than 910 days (about two and a half years) before filing.
The Chapter 13 Filing Process
Getting to a confirmed Chapter 13 plan follows a predictable sequence:
- Complete an approved credit counseling course within 180 days before filing, tracked through the U.S. Trustee’s list of approved providers.
- File the petition, schedules, and proposed repayment plan, which triggers the automatic stay that same day.
- Attend the meeting of creditors, usually about a month later, where the Chapter 13 trustee reviews your budget under oath.
- Get the plan confirmed at a hearing, assuming no creditor successfully objects to the payment amount.
- Make plan payments to the trustee for three to five years, then finish a debtor education course before the remaining eligible debts are discharged.
What You Get to Keep Under Tennessee Law
Exemption laws decide what property stays untouched no matter what a creditor is owed, separate from the debt limits above.
Under Tenn. Code Ann. § 26-2-301, a single homeowner can protect $35,000 of equity in a primary residence. Two people who jointly own and live in the home may both claim the exemption and can protect $52,500 combined. State law also allows a $10,000 personal property exemption that can cover a car, savings, or other belongings not already protected elsewhere. Tennessee residents use this state system, not the federal one, so these figures, not the numbers many national websites quote, are what apply in Hamilton County.
Frequently Asked Questions
Will Chapter 13 stop wage garnishment right away?
Yes, the automatic stay halts most garnishments the same day your case is filed. Your employer usually needs a copy of the bankruptcy notice before payroll stops withholding. If garnishment continues past that, your attorney can ask the court to enforce the stay.
Can I still finance a car during a Chapter 13 plan?
Generally not without the trustee’s permission, since new debt can throw off your budget. Some trustees approve a modest loan if the old vehicle breaks down and you have no other way to get to work. You’ll need to file a motion showing the new payment still fits.
What happens if I miss a Chapter 13 payment?
One missed payment usually brings a warning from the trustee, not automatic dismissal. Missing several in a row, though, can lead to dismissal or conversion to Chapter 7. Call your attorney the moment a payment’s going to be late.
Can I switch from Chapter 13 to Chapter 7 later?
Under the law, you have an almost automatic right to switch to Chapter 7 at any time. You don’t have to pass a formal income test the way you would if you were filing Chapter 7 from scratch. That said, the trustee will still look at your current income and expenses, and some courts do apply extra scrutiny if it looks like you’re trying to game the system.
Mark T. Young & Associates: A Hixson Bankruptcy Law Firm
You didn’t get into debt overnight, and there’s no shame in needing years, not days, to work your way out of it. Mark T. Young has spent decades helping Chattanooga-area families use Chapter 13 to hold onto the home and the car while creditors wait their turn instead of banging on the door. We’ll look at your real numbers, not just the averages you find online, and tell you plainly whether this path makes sense. Contact our firm today for a free consultation, and let’s figure out what a fresh start looks like for you.
