"But" many people ask, "Won't I have to give up all of my property if I file bankruptcy?" The answer is no. Tennessee Law recognized that some things are necessary for a person's comfort and survival. Certain property, including your working tools, insurance, household furnishings, radio, television, musical instruments, some bank, savings and loan or credit union accounts, your automobile, your home, and other property that you own, are exempt from unsecured creditors -- which means you will be allowed to keep them -- if the value of your equity in them does not exceed certain amounts, and if proper steps are taken to claim the exemption. Most debtors have no assets above the exemptions.

Many debtors have purchased cars and other personal property on conditional sales contracts. Such debts are called "secured" and the exemptions generally do not apply to them. Under the new bankruptcy code, the court must approve any reaffirmation of consumer debt except debts secured by a home or other real estate. If you want to keep the collateral, the court will only approve reaffirmations that are in the best interest of the debtor. So you may expect that the court will approve settlements with secured creditors only if you receive the value of the car, furniture, or their personal property involved. Some liens on furniture and household goods may be avoided by bankruptcy if they were used as security for a personal loan.

Debts secured by a mortgage or deed of trust, on your home or other real estate, generally will not be affected by a liquidation-type bankruptcy -- you will have the choice of paying that debt or losing the home. If your "problem debt" is secured by your home, to avoid foreclosure, you should consult an attorney about filing a Chapter 13 or Chapter 11 bankruptcy case.

Some debts are not discharged by bankruptcy. These include most taxes, child support, spousal support, most student loans, and debts resulting from submission of false financial statements or other similar fraudulent conduct and debts arising from the willful or malicious injury to another's person or property. A debtor faced with this type of debt should review his situation with his attorney and consider filing a Chapter 13 petition. Some of these problems are avoidable under the new Chapter 13 laws which have changed a lot in favor of the debtor.

Under the new code the debtor now proposes to the court for approval, a plan to pay all or some part of his debts. The court may approve the plan if it is proposed in good faith and will result in the creditors getting at least as much as they would have received in other type bankruptcy cases. It must also meet certain other requirements. These include submission of some part of the debtor's future earnings to a trustee to use in completing the plan. Even some small businessmen can use Chapter 13 now.

Most of us try to plan our affairs so that debts do not get out of hand. Sometimes, though, unexpected expenses or losses can upset our plans. Others of us are just careless. Whatever the cause, if you find yourself hopelessly in debt, bankruptcy may give you an opportunity to start over. However, if you have filed a previous bankruptcy, there is a six (6) year limit before you may file for another liquidating bankruptcy.

There are alternatives to bankruptcy which you should investigate. Financial counseling is available through Consumer Credit Counseling. They provide budget counseling and voluntary repayment programs between clients and creditors. You may contact them at (615) 777-3404. Additionally, you may want to consult with your creditor about working out a payment plan instead of filing bankruptcy. Most creditors would rather work something out than force someone into bankruptcy.

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The information available through TBALink LawBytes is basic legal information and is not a substitute for legal advice. LawBytes is provided by the Tennessee Bar Association as a public service and for general information only. It should not be considered legal advice. You should consult your attorney if you have questions concerning any specific situation. If you do not have an attorney, may we suggest that you contact your local bar association's referral service. The topics covered through TBALink LawBytes will provide basic information and should make it easier for someone with a problem to decide whether they need professional help from a lawyer or if another agency could provide them with assistance.