If you’re considering bankruptcy in Jackson, Tennessee, you’re probably confused about the difference between Chapter 7 and Chapter 13. This confusion is completely normal – after 28+ years helping over 15,000 West Tennessee families through bankruptcy, I can tell you that choosing the right chapter is crucial to getting the best outcome for your situation.
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The wrong choice can cost you thousands of dollars and years of unnecessary payments. You could also lose assets if you file the wrong chapter of bankruptcy. The right choice gives you the fastest, most complete fresh start possible under Tennessee law.
Let me break down exactly how Chapter 7 and Chapter 13 work in Tennessee, so you can understand which option will serve your Jackson family best.
Chapter 7 Bankruptcy: The “Fresh Start” Option
Chapter 7, often called “liquidation bankruptcy,” is the most common form of bankruptcy filing in Tennessee. For most Jackson families, Chapter 7 provides complete debt elimination in just 3-4 months.
How Chapter 7 Works in Tennessee
- We file your bankruptcy petition in the Western District of Tennessee Bankruptcy court
- Automatic stay immediately stops all collections, calls, and garnishments
- Bankruptcy trustee reviews your case (usually just paperwork review)
- You attend one meeting with the trustee and me, as your attorney (341 Meeting)
- Court discharges your debts approximately 90 days later
- You’re debt-free and can start rebuilding your financial life
Who Qualifies for Chapter 7 in Tennessee?
The Means Test determines Chapter 7 eligibility. For Tennessee residents, you typically qualify if your household income is below these monthly amounts:
- Single person: $5,163/month ($61,591/year)
- Family of 2: $6,521/month ($78,250/year)
- Family of 3: $7,732/month ($92,789/year)
- Family of 4: $9,154/month ($109,852/year)
Note: These are 2025 figures and adjust periodically. Even if your income is above these limits, you may still qualify based on your actual expenses.
What Debts Does Chapter 7 Eliminate?
Chapter 7 eliminates most common debts including:
- Credit card balances
- Medical bills
- Personal loans
- Payday loans
- Collection accounts
- Old utility bills
- Business debts (for sole proprietors)
- Deficiency balances from repossessions
Debts that survive Chapter 7:
- Recent tax debt
- Student loans (in most cases)
- Child support and alimony
- Court fines and restitution
- Recent luxury purchases over $800
Unsure what debts you can eliminate? Call Rob Vandiver Law at 731-554-1313 for a free debt analysis specific to your Tennessee situation.
Property Protection in Chapter 7
Most Jackson families keep all their property in Chapter 7 thanks to Tennessee’s generous exemption laws:
- Homestead: Up to $35,000 equity ($52,500 married)
- Vehicle: value or equity included in 10,000 personal property exemption
- Personal property: Up to $10,000 ($20,000 married)
- Retirement accounts: Unlimited protection for 401(k), IRA, etc.
- Life insurance: Cash value unlimited if spouse or dependent is a beneficiary
Chapter 13 Bankruptcy: The “Reorganization” Option
Chapter 13 bankruptcy allows you to keep all your property while paying a portion of your debts through a court-approved payment plan over 3-5 years.
How Chapter 13 Works in Tennessee
- We file your petition and propose payment plan to the court
- Automatic stay immediately stops all collections and foreclosures
- You begin making monthly plan payments (usually within 30 days)
- Court confirms your plan after creditor review period
- You make payments for 3-5 years while keeping all property
- Remaining eligible debts are discharged at plan completion
Who Should Consider Chapter 13?
Chapter 13 is often the better choice if you:
- Make too much money to qualify for Chapter 7
- Are behind on mortgage or car payments and want to catch up
- Have significant non-exempt property you want to keep
- Owe recent taxes that aren’t dischargeable in Chapter 7
- Have co-signers you want to protect from collection
Chapter 13 Payment Calculation
Your monthly Chapter 13 payment depends on:
- Your disposable income after allowed living expenses
- Value of non-exempt property you want to keep
- Priority debts like taxes and support obligations
- Length of plan (3 or 5 years based on income)
Example Jackson Chapter 13 case:
- Monthly gross income: $6,500
- Allowed expenses: $5,200
- Disposable income: $1,300
- Chapter 13 payment: $1,300/month for 60 months
- Total paid to creditors: $78,000
- Original debt: $150,000
- Debt reduction: $72,000
Want to see what your Chapter 13 payment would be? Contact us at 731-554-1313 for a free payment calculation based on your Jackson household budget.
Side-by-Side Comparison for Tennessee Families
| Factor | Chapter 7 | Chapter 13 |
| Time to complete | 3-4 months | 3-5 years |
| Income limits | Must pass means test | No income limits |
| Monthly payments | None after filing | Required for 3-5 years |
| Property protection | Limited by exemptions | Keep all property |
| Mortgage arrears | Must be current | Can catch up over time |
| Tax debt | Limited discharge | Can pay over plan term |
| Attorney fees | $1,500-$2,500 typical | $4,750 typical |
Real Jackson Success Stories (Details Changed for Privacy)
The Williams Family – Chapter 7 Success
Situation: $65,000 in credit card and medical debt, current on house and car payments, combined income $75,000 Result: All debt eliminated in 4 months, kept house and cars, saved $1,100/month in debt payments Best choice: Chapter 7 because they qualified and had no property issues
The Davis Family – Chapter 13 Success
Situation: $4,000 behind on mortgage, $45,000 other debt, high income, didn’t want to lose house Result: Saved home from foreclosure, paid $850/month for 5 years, eliminated $25,000 in unsecured debt Best choice: Chapter 13 because they could catch up on mortgage and had income above Chapter 7 limits
Single Mother from Jackson – Chapter 7 Success
Situation: $35,000 medical debt from cancer treatment, $28,000 annual income, renting apartment Result: All medical debt eliminated, no payments required, fresh start in 90 days Best choice: Chapter 7 for immediate relief and income qualification
Common Misconceptions About Chapter 7 vs Chapter 13
Myth: “Chapter 13 is better for your credit”
Reality: Both chapters have similar long-term credit impact. Chapter 7 often allows faster credit rebuilding because your debt-to-income ratio improves immediately.
Myth: “You can choose whichever chapter you want”
Reality: Chapter 7 has income limits and means testing. Not everyone qualifies for both options.
Myth: “Chapter 13 means you pay back all your debts”
Reality: Most Chapter 13 plans pay back only a percentage of unsecured debt (as low as 1%, but depends on other factors), with the remainder discharged.
Myth: “Chapter 7 means you lose everything”
Reality: Tennessee’s exemptions protect most family property. Over 99% of my Chapter 7 clients keep all their possessions.
How to Choose: Key Decision Factors
Choose Chapter 7 if:
- You qualify under the means test
- You’re current on secured debts (house, car) you want to keep
- You want the fastest possible fresh start
- Your property fits within Tennessee exemption limits
- You have primarily credit card and medical debt
Choose Chapter 13 if:
- You don’t qualify for Chapter 7 due to income
- You’re behind on mortgage or car payments
- You have significant non-exempt property
- You owe substantial recent tax debt
- You want to protect co-signers from collection
- You can afford the monthly payment plan
The Tennessee Advantage: Why Location Matters
Filing bankruptcy in Tennessee provides several advantages:
- Generous homestead exemption protecting your home
- Reasonable personal property exemption for cars and other small assets
- No state income tax making post-bankruptcy budgeting easier
- Experienced local trustees familiar with Tennessee law
Don’t Make This Decision Alone
Choosing the wrong bankruptcy chapter can cost you thousands of dollars and years of unnecessary stress. You could also lose assets by filing the wrong chapter. The decision requires careful analysis of your income, expenses, assets, and long-term goals.
During your free consultation at Rob Vandiver Law, I’ll:
- Calculate your exact means test results
- Analyze your property exemptions
- Review all your debts for dischargeability
- Explain both options in detail for your situation
- Recommend the best strategy for your Tennessee family
- Answer all your questions with no pressure to decide immediately
Take Action Today
Don’t spend another month making payments on debt you could eliminate or wondering which bankruptcy option is right for you. The consultation is free, and you’ll leave with complete clarity about your best path forward.
Every day you wait costs you money in continued debt payments and interest charges. Let me put my 28+ years of Tennessee bankruptcy experience to work for your family’s fresh start.
Contact Rob Vandiver Law today:
Call: 731-554-1313 Email: receptionist@robvandiver.com
With over 15,000 successful bankruptcy cases in West Tennessee, I’ll help you choose the right chapter and guide you through the entire process. Your financial freedom is just one phone call away.
The best bankruptcy is the one that fits your specific situation. Let’s figure out which one that is.
