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Cleveland Tennessee Bankruptcy Law Blog

Do you think you are prepared for the 341 meeting?

If you are filing Chapter 7 or 13 bankruptcy, and your 341 meeting is coming up, you may be getting a little nervous because you do not quite know what to expect.

Even though your attorney has explained how the meeting works, you could probably lower your stress level by reviewing what should happen and what you need to bring.

What is an executory contracts in a business bankruptcy?

Many Tennessee businesses that are considering bankruptcy have a number of continuing contracts, such as a supply contract, a real estate lease or any contract in which both parties have unperformed obligations. The bankruptcy code accords such contracts, known as executory contracts, a special status: the debtor in a business or commercial bankruptcy may either affirm or reject any such contract. The central question faced by debtors and their contracting partners is whether a given agreement is, in fact, an executory contract.

The bankruptcy code specifically gives a debtor the right to affirm or reject an unexpired lease, but it does not otherwise define the term "executory contract." The appellate courts have most commonly defined an executory contract as a contract, executed prior to the filing of the petition, under which both parties are still under some duty to perform. If the debtor rejects the contract, the contract is void and neither party has any further obligations. If the party affirms the contract, the relationship of the parties remains unchanged.

What happens to one's house if they file a bankruptcy petition?

One of the first questions asked by Tennesseans contemplating filing a bankruptcy petition is, "What happens to my house?" The answer depends on which chapter the Bankruptcy Code is used to seek relief and on the debtor's personal financial situation.

If a debtor is seeking total discharge from all debts, Chapter 7 is more likely than Chapter 13 to be used. They must first pass a "means test" to ensure that the debtor's net worth does not preclude the use of Chapter 7.

Comparing federal and Tennessee bankruptcy exemptions

One of the most important questions that must be answered when a resident consults an attorney about filing a bankruptcy petition is what exemptions should be used. Both state law and federal law permit debtors to declare certain assets exempt from creditors' claims in a bankruptcy proceeding, but the two lists are not identical. Moreover, a debtor must choose between a federal exemption and the state exemption for particular assets.

For most debtors, their house is their largest asset. Federal law permits a debtor to declare $25,000 of their homestead to be exempt from creditors' claims. Tennessee law allows a debtor to exempt $5,000 of real estate or $7,500 for joint owners. Married couples who are both 62 years of age may exempt $25,000.

Exemption planning as part of the bankruptcy process

One of the most basic services our law office offers Bradley County, Tennessee, residents is helping a debtor fill our his or her bankruptcy forms correctly. Indeed, bankruptcy clients have the right to expect that their attorneys will make sure that their official forms will be accurate and complete. If they are not, it can land the debtor in to a lot of trouble and even keep them from being able to get debt relief.

However, correctly filling out forms is the minimum duty of a bankruptcy attorney. A quality attorney, like the specialist at our law office, understands the full consequences of what a debtor says, or does not say, on his or her forms.

How does the CARD Act protect Tennessee families?

It is bad enough to deal with credit card debt, particularly when someone, at the same time, also has other issues, like unemployment or mounting medical bills from a recent and unexpected procedure. It is even worse when credit card companies take advantage of their customers, and families do not realize it until it is too late.

Fortunately, federal law offers some protections to families. About a decade ago, Congress passed the CARD Act, which was designed to protect consumers in Tennessee and around the country from the most common and aggressive techniques of credit card companies.

Survey: Americans amass over $1,000 in holiday debt

According to a recent survey, Americans on average picked up $1,054 in debts related to their holiday spending this season. Of this debt, over two-thirds of the people survey said they used a credit card to finance it.

Additionally, more than 15 percent of those surveyed said that while they did not use a credit card, they did use an in-store card, which operates in basically the same way as a credit card would.

Alternatives to reaffirmation of debt

A previous post on this blog talked about when a Bradley County, Tennessee, family might consider signing a reaffirmation agreement, which, as that post discussed, means that the reaffirmed debt is not affected by the bankruptcy.

Some people may balk at signing these sorts of agreements, however, especially since they mean that a creditor or their debt collector will have full legal power to take collection actions on that debt, including issuing garnishments and freezing one's bank account, for many years.

Should you sign a reaffirmation agreement?

When a Bradley County, Tennessee resident has to file bankruptcy, they often have several debts secured by collateral, or property the debtor owns but promises the bank or financing company can have if the debtor does not make good on his or her loans.

As previous posts on this blog have discussed, from a long term perspective a Chapter 7 bankruptcy will not protect a debtor's collateral from getting taken if they have fallen behind in their payments. Assuming they are not behind in their payments, though, they may get what is called a reaffirmation agreement from the creditor.

Review of alternatives to the bankruptcy process

At our law office, we believe that our clients deserve the opportunity to explore all options for resolving their debt should they run into financial trouble. While we do not hesitate to recommend bankruptcy to a southeastern Tennessee resident when that really is their best financial option, we also will not hesitate to let families know when they should consider trying another approach.

After all, while bankruptcy can give a family the fresh financial start they desperately need, it comes with some sacrifices. For one, a person's credit score is always going to take a hit after that person files for bankruptcy, making it harder for that person to get loans and other financial advantages in the short term.