Chapter 13 Bankruptcy in Tennessee: Eligibility, Plan, and Costs

Chapter 13 bankruptcy in Tennessee is a court-supervised repayment plan that runs three to five years, lets you keep your home, car, and other property, and discharges most remaining debt when you finish. It stops foreclosures, wage garnishments, and collection calls the moment you file, and it can force creditors to accept reduced payments on certain debts. In exchange, you commit nearly all of your disposable income to the plan for its duration.

Who Qualifies

Chapter 13 is for individuals with regular income. Businesses cannot file under this chapter, though sole proprietors can include business debts alongside personal ones. Wages, self-employment earnings, Social Security, pensions, and regular contributions from a spouse or partner all count as income for this purpose.

There are two debt ceilings. As of April 1, 2025, your noncontingent, liquidated unsecured debts must be under $526,700, and your secured debts must be under $1,580,125.¹² “Noncontingent” and “liquidated” mean debts where the amount is fixed and you’re definitely on the hook. Disputed debts don’t count toward the caps. If you exceed them, Chapter 11 is the alternative.

Three Years or Five

Your household income determines how long the plan runs. The court averages your income over the six months before filing and compares it to Tennessee’s median for a household your size. For cases filed between November 1, 2025 and March 31, 2026, the median is $62,339 for one earner, $80,722 for two, $95,011 for three, and $106,775 for four, with $11,100 added per additional person.³

Below median, the plan runs three years. At or above median, it runs five.⁴ Either way, you can pay off allowed claims earlier if you have the funds. Above-median filers also face stricter calculations of allowable expenses, which usually means higher monthly payments.

Before filing, you must complete a credit counseling session with a nonprofit agency approved by the U.S. Trustee Program within the 180 days before you file.¹ The session can happen by phone or online, and the agency issues a certificate you file with your petition.⁵

What You Can Keep

Tennessee has opted out of the federal bankruptcy exemptions, so you use state exemptions to determine what’s protected. Exemptions matter in Chapter 13 because your plan must pay unsecured creditors at least as much as they would get if your non-exempt assets were liquidated under Chapter 7. The more non-exempt equity you own, the higher your monthly payment.

Tennessee’s homestead exemption protects up to $35,000 in equity in your primary residence. Joint owners who both live there can protect a combined $52,500, split equally.⁶

For personal property, you choose up to $10,000 worth of items to protect, including furniture, electronics, and bank balances.⁷ Because Tennessee has no dedicated motor vehicle exemption, this $10,000 is often how you protect car equity, so prioritize carefully.

A separate $1,900 exemption covers tools, professional books, or equipment you need for work.⁸ A self-employed plumber, for instance, can protect both work tools and household goods.

Filing and What Happens Next

You file your petition with the bankruptcy court for your district. Tennessee has three: the Eastern District (Knoxville, Chattanooga, and surrounding counties), the Middle District (Nashville area), and the Western District (Memphis area). The filing fee is $313, payable in installments if you can’t afford it upfront.

Along with Official Form 101, the voluntary petition, you file schedules of assets, liabilities, income, and monthly expenses.⁹ You also need pay stubs covering the 60 days before filing,¹⁰ all required federal, state, and local tax returns for the four years before filing (with your most recent return going to the trustee),¹¹ a complete creditor list, and an inventory of all property with estimated values.

The moment the petition hits the court, the automatic stay kicks in. This is a court order that immediately halts foreclosures, wage garnishments, creditor lawsuits, and collection calls. The stay stays in place for the life of the case as long as you keep making plan payments. There’s one catch: if you had a prior bankruptcy case dismissed within the past year, the stay in your new case lasts only 30 days unless the court extends it.¹²

A Chapter 13 trustee is assigned to oversee the case. Roughly 21 to 50 days after filing, you attend the Meeting of Creditors, usually called the 341 meeting. The trustee and any creditors who show up question you under oath about your finances and plan. Most of these hearings last around ten minutes, and creditors rarely attend. A confirmation hearing follows, where the judge reviews whether your plan meets legal requirements. Once confirmed, you send monthly payments to the trustee, who distributes them to creditors.

How the Plan Treats Your Debts

Debts aren’t paid in equal shares. Chapter 13 creates a hierarchy, and where your debts sit in that hierarchy decides what you actually pay.

Mortgage Arrears

This is where Chapter 13 does its best work for Tennessee homeowners. You can’t modify the terms of your primary mortgage, but you can cure missed payments across the life of the plan while resuming regular payments going forward.¹³ Owe $12,000 in back payments on a five-year plan, and that gets spread across 60 months on top of your regular mortgage. Complete the plan and the lender cannot foreclose. You can cure the default right up until the home is actually sold at a foreclosure sale under Tennessee law.

Vehicle Loans

Buy your vehicle more than 910 days (about two and a half years) before filing, and you can “cram down” the loan to the car’s current market value. Owe $18,000 on a car worth $11,000, and the plan treats $11,000 as a secured claim paid in full with interest, while the remaining $7,000 becomes unsecured debt that may get only pennies on the dollar. If you bought the vehicle inside the 910-day window, you pay the full loan balance through the plan.⁴

Priority and Unsecured Debts

Recent income taxes, child support arrears, alimony, and any domestic support obligations that accrued before filing must be paid in full. These cannot be negotiated down.

Credit cards, medical bills, and personal loans are paid last. The amount unsecured creditors receive depends on your disposable income and what they would have gotten in a Chapter 7 liquidation. Some filers pay as little as ten cents on the dollar on unsecured debt; others pay much more.

What It Costs

The $313 filing fee is the smallest expense. Attorney fees are the main cost and vary across the three Tennessee districts. Bankruptcy courts often set “no-look” fees, flat amounts attorneys can charge without filing a detailed fee application. In Tennessee these typically run around $4,500 to $6,000, with more for complex cases. Attorney fees usually get folded into the plan payments rather than paid upfront, which makes Chapter 13 more accessible than it looks at first.

The trustee also takes a percentage of every dollar that moves through the plan, up to a maximum of 10%.¹⁴ That cut is built into your plan payments. If your plan is $800 a month, part of that goes to the trustee before creditors see anything.

Finishing the Plan

After you make every plan payment and complete a post-filing financial management course, the court grants a discharge. The financial management course is separate from the pre-filing credit counseling and must be completed before discharge issues.¹⁵ Both spouses in a joint case must complete it individually.

The discharge wipes out your personal liability for remaining balances on debts covered by the plan. Creditors cannot contact you or try to collect on discharged debts, and violating the order can bring contempt sanctions.¹⁶

Several categories of debt survive a Chapter 13 discharge:

Mortgage balances that extend past the plan period (you cured the arrears, but the mortgage itself continues).
Child support and alimony.
Student loans, unless you separately prove undue hardship.
Recent income taxes and tax fraud obligations.
Criminal restitution and fines.
Debts for death or personal injury caused by drunk driving.

Chapter 13 does discharge a few things Chapter 7 does not, including certain property settlement obligations from a divorce and some debts from willful property damage. That broader discharge is one reason higher-income filers sometimes prefer Chapter 13 even when Chapter 7 is available.¹⁵

If You Can’t Finish

Roughly a third of Chapter 13 cases nationally never reach discharge. Job loss, medical bills, or simply overcommitting on the plan payment can derail even careful filers. You have three options.

Modify the Plan

If your situation changes after confirmation, you, the trustee, or a creditor can ask the court to modify the plan. Modifications can raise or lower payments, extend the repayment period, or adjust what particular creditors receive.¹⁷ The modified plan still cannot extend beyond five years from when the first payment was originally due. This is usually the first move when trouble hits mid-plan.

Convert to Chapter 7

You generally have the right to convert to Chapter 7 if you qualify under the means test. Conversion makes sense when your income has dropped and you can no longer fund any meaningful repayment. The trade-off is that a Chapter 7 trustee can sell non-exempt assets to pay creditors. Property acquired after the original Chapter 13 filing is usually excluded from the Chapter 7 estate. If you received a Chapter 7 discharge within the previous eight years, you can’t get another one after conversion, so the case would close without eliminating your debts.

Dismissal

If the plan is dismissed, the automatic stay lifts and creditors resume collection where they left off. You still owe everything you owed before filing, minus whatever the trustee already distributed. Interest paused during the case can start accruing again. Dismissal doesn’t permanently block refiling, but there are consequences. If dismissal happened because you failed to comply with court orders or appear at hearings, you must wait 180 days before refiling. Refile within a year of a dismissal and the stay in the new case lasts only 30 days unless the court extends it after finding good faith. Two dismissed cases within a year, and the new filing gets no automatic stay at all unless you specifically request one.¹²

Effect on Your Credit

A Chapter 13 filing stays on your credit report for seven years from the filing date, three years less than Chapter 7. Many filers see scores begin recovering within two to three years of filing, especially if they stay current on debts outside the plan. Lenders increasingly treat completion of a Chapter 13 plan as evidence of years of consistent payments under court supervision, which reads differently to them than a straight liquidation.

1
Office of the Law Revision Counsel. 11 USC 109 – Who May Be a Debtor
2
NCLC Digital Library. April 1 Increase of Federal Bankruptcy Exemptions, Other Dollar Amounts
3
U.S. Trustee Program. Census Bureau Median Family Income By Family Size
4
Office of the Law Revision Counsel. 11 USC 1325 – Confirmation of Plan
5
United States Department of Justice. Credit Counseling Agencies – Tennessee
6
Justia. Tennessee Code 26-2-301 – Basic Exemption
7
Justia. Tennessee Code 26-2-103 – Personal Property Selectively Exempt From Seizure
8
Justia. Tennessee Code 26-2-111 – Additional Exemptions
9
United States Courts. Voluntary Petition for Individuals Filing for Bankruptcy
10
Office of the Law Revision Counsel. 11 USC 521 – Debtors Duties
11
United States Courts. Chapter 13 – Bankruptcy Basics
12
Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay
13
Office of the Law Revision Counsel. 11 USC 1322 – Contents of Plan
14
Office of the Law Revision Counsel. 28 USC 586 – Duties; Supervision by Attorney General
15
Office of the Law Revision Counsel. 11 USC 1328 – Discharge
16
United States Courts. Discharge in Bankruptcy
17
Office of the Law Revision Counsel. 11 USC 1329 – Modification of Plan After Confirmation