What to Know About Tennessee Laws and Legal Materials

This article provides a general overview of the Tennessee legal system, covering the aspects of debt management and bankruptcy, the formation of a business entity, and estate planning.

Debt Consolidation & Settlement

The people of the state of Tennessee can either opt for debt consolidation or debt settlement.

• Debt Consolidation: It involves taking many debts and merging them into one loan, usually with a lower interest rate and one monthly payment. The state of Tennessee has no special laws regulating debt consolidation companies. However, it is paramount to deal only with licensed and reputable firms.
• Debt settlement: It involves negotiating with creditors to reduce the total amount of money owed. Debt settlement companies do this because they help protect consumers from fraudulent business activities, and as such, they are licensed under the Tennessee Debt-Management Services Act.

Statute of Limitations on Debt

The statute of limitations for debt collection in Tennessee varies depending on the type of debt:

• Written Contracts: 6 years from the date of the breach or last payment (Tenn. Code Ann. § 28-3-109).
• Oral Contracts: 6 years.
• Open Accounts, for example, credit cards: 6 years.
• Judgments: Judgments entered in Tennessee are good for 10 years and may be renewed if necessary.

Tennessee Debt Collection Laws

Tennessee has enacted the following consumer protection laws with respect to debt collection:

• Tennessee Collection Service Act: The Tennessee Department of Commerce & Insurance enforces this act, which is supposed to state the guiding principles of ethical practices with regard to collection agencies. Its major provision pertains to the licensing of debt collectors, giving credence to accountability in this process.
• Exemptions from Garnishment: Tennessee law safeguards a portion of an individual's income from garnishment. This protection extends to wages, Social Security income and certain other benefits, ensuring that debtors retain a basic level of financial stability.

Bankruptcy in Tennessee

Individuals in Tennessee overwhelmed with debt may turn to federal bankruptcy laws for relief. The United States Bankruptcy Court handles all bankruptcy cases throughout the state of Tennessee under three districts: Eastern, Middle and Western. The most typical bankruptcy filings in Tennessee are available to

Tennessee residents include:

• Chapter 7 Bankruptcy: Known as liquidation bankruptcy, this option involves selling a debtor's non-exempt assets to pay creditors. Following this process, the remaining eligible d ebts are typically discharged.
• Chapter 13 Bankruptcy: This type of bankruptcy, popularly referred to as reorganization, applies best to those with regular income. This form of filing allows debtors to reorganize their obligations into a 3-5 year repayment plan without giving up their property.
• Chapter 11 Bankruptcy: Primarily used by businesses, Chapter 11 enables companies to restructure their debts while maintaining operations.

Tennessee-Specific Bankruptcy Considerations

Tennessee law offers state-specific exemptions available to bankruptcy filers seeking to shield certain assets:

• Homestead Exemption: Tennessee exempts up to $5,000 in home equity for single filers and up to $7,500 for filers with dependants (Tenn. Code Ann. § 26-2-301).
• Personal Property Exemptions: The state law also provides protections for various personal items, including clothing, furnishings and retirement accounts, up to specified amounts.

Tennessee Business Incorporation

Incorporation of business in Tennessee has to meet state-specific requirements. The outline of the steps involved is given here:

Business Formation Process

1. Business Name: Pick any unique business name that fits within the naming guidelines set by the Tennessee Secretary of State. It should not be in use by another registered business in Tennessee.
2. Registered Agent: Each business entity shall have a registered agent in Tennessee to serve all legal documents against it.
3. Articles of Incorporation/Organization: These are the formation documents that shall be filed with the Tennessee Secretary of State, providing essential information like the name, purpose, and registered agent.
4. Internal Governance: Corporations must prepare bylaws, while LLCs must provide an operating agreement governing how the internal management and structure of the company are maintained.
5. Annual Reports: The filing of annual reports and related fees with the Tennessee Secretary of State is required.

Business Licensing

While no general business license is required in the state of Tennessee, there are various licenses or permits that many different industries and professions must obtain:

• Professional Licenses: Professions such as law, medicine, and real estate require state licenses.
• Local Licenses: Many cities and counties, such as Nashville and Memphis, require certain permits or business licenses for particular types of businesses, such as food service, retail and hospitality businesses.

Tennessee Wills and Estate Planning

Estate planning in Tennessee primarily focuses on the preparation of testamentary and trust documents to provide appropriate management of assets and distribution upon death. Tennessee estate laws are described under the Tennessee Code Annotated, Title 32.

Wills in Tennessee

• Requirements for a Valid Will: In Tennessee, a will must be in writing, signed by the testator (the person making the will), and witnessed by at least two competent individuals (Tenn. Code Ann. § 32-1-104).
• Holographic Wills: Tennessee does permit holographic or handwritten wills, provided they are wholly in the handwriting of the testator and include certain requirements for validity.

Trusts in Tennessee

Trusts are a useful estate planning tool in Tennessee, providing flexibility for managing assets and avoiding probate.

• The Revocable Living Trust: This is the trust that, while the grantor is still alive, he can change or revoke. The ownership of assets can be transferred without going through probate; it saves time and also extra expenses.
• Irrevocable Trust: It cannot be modified once it has been set up, thus offering stronger protection for assets and possible tax advantages.

Probate in Tennessee

Tennessee's probate process involves a necessary procedure to validate a will and to distribute a deceased person's assets. Probate is handled by the county court in the county where the decedent lived. The executor named in the will is responsible for managing the estate and ensuring that debts are paid before distributing assets to beneficiaries.

• Small Estates: Tennessee has provided for a simplified probate in respect of small estates with values below $50,000 where heirs are allowed to settle the estate without formal probate. Tenn. Code Ann. § 30-4-102.

Conclusion

Tennessee's legal system provides a healthy approach to debt management, bankruptcy, business incorporation and estate planning. The state's plethora of consumer protections and clearly defined procedures for both businesses and individuals rounds out the legal system and makes it relatively approachable. To affect your particular situation with specific legal advice, consult with a licensed attorney in Tennessee as laws are subject to change and individual circumstances may vary.