By Sharon Frankenberg,
Attorney at Law

In Chapter 7 bankruptcy, a trustee is selected in each case.  The trustee is often an attorney in private practice but he or she is not required to be an attorney.  The trustee is subject to supervision and auditing by the United States Trustee.  The job of the trustee is to evaluate assets and interests owned by the debtor at the start of the case and then sell them (with certain exceptions) to satisfy the debtor’s creditors.

When a debtor files a Chapter 7 bankruptcy, he or she ise entitled to protect some property from the trustee and creditors.  This protected property is identified as exempt.  A Tennessee resident in bankruptcy may exempt $5,000 in his or her homestead, $7,500 for joint owners.  This exemption increases to $12,500 if the single owner is 62 years of age or over; $20,000 for a married couple, one of whom is 62 or older; and $25,000 for a married couple, both of whom are 62 or older.  Also, $25,000 is the homestead exemption for an individual who has one or more minor children in his or her custody.  Most retirement and pension accounts are exempt.  Veterans’ benefits and Social Security benefits are exempt.  Some types of insurance policies may be exempt.  $10,000 of personal property is exempt as well.

Different types of debt are treated differently.  Unsecured debts are loan obligations that do not have any collateral securing their repayment.  Unsecured debts are usually medical expenses or credit card bills.  Secured debts have collateral that has been pledged to secure the repayment of the debt.  For example, a loan to purchase a car or a home mortgage is a secured debt.  Often in these cases, secured debts are reaffirmed.  Reaffirmation is where a written agreement is signed so that the debtor may make ongoing loan payments in order to keep collateral (eg., a car or home) which is pledged on a secured debt.  Collateral may also be redeemed by paying the current fair market value in one lump sum.  The other alternative is to surrender the collateral back to the creditor if the debtor is unable to pay for it.

The goal of filing a Chapter 7 case is the grant of a discharge to the debtor.  This means that your unsecured debts are wiped out and may no longer be collected from you.  While this happens in the vast majority of cases, there are exceptions.  The Bankruptcy Code in 11 U.S.C. Section 523 identifies multiple types of debts that may not be discharged by an individual debtor.  These include most taxes, student loans, domestic support obligations, criminal fines and debts obtained by false pretenses or fraud. An honest debtor should have no trouble obtaining his or her “fresh start” by receiving a bankruptcy discharge.

Obviously, this article does not cover every issue which might arise.  You should always contact an attorney to get advice and assistance with your unique situation.