Debt Relief
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Tennessee Debt Relief: Your Guide to State Laws and Managing Debt

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Rich in music, American history, forests and mountain landscapes, Tennessee is a diverse area that appeals to rural and urban residents alike. Whether you call Tennessee’s remote mountainsides or bustling cities home, you can probably benefit from tips on debt relief, from ensuring that debt collectors are following the state’s laws to understanding your debt consolidation options, which is what this article will cover.

Debt in Tennessee: At a glance

Tennessee Debt
Type Per capita balance, 2018 U.S. per capita balance Rank out of 50 states*
Credit card debt $2,570 $3,220 42
Student loan debt $5,050 $5,390 32
Auto debt $4,620 $4,700 25
Mortgage debt** $24,850 $33,680 38
*No. 1 is highest
**First-lien debt only
Source: Federal Reserve Bank of New York, March 2019

Debt collection in Tennessee

When a consumer falls behind in making debt repayments, whether those payments are for a medical bill, credit card bill or loan, creditors often sell the debt off to a collection agency or use their services to get the debt repaid.

This new company then steps in to collect the debt, but in Tennessee there are certain laws the company must follow:

  • Collectors can make initial contact by phone, but they must state the name of the collection company and who the debt is for during the first call.
  • Within five days of making the initial call, the debt collection company is required to send the consumer a letter identifying themselves, the debt balance, and the company the debt is being collected for.
  • Debt collectors are required to tell consumers in Tennessee that they can dispute the debt and, within 30 days, can demand that the debt be validated and proof supplied.
  • Once the consumer asks for proof in writing, the debt collector cannot continue to collect on the debt until they have provided this proof.
  • Debt collectors are not permitted to refuse to give information to the consumer regarding the collection agency’s name, contact information or the original creditor.
  • Collectors cannot lie about or misrepresent how much the consumer owes or send false information to collection agencies.
  • No added fees or interest can be applied to the amount due unless those fees and interest were in the original contract.

In addition to complying with the above, there are certain behaviors that Tennessee debt collectors must adhere to. These are:

  • No calls before 8 a.m., after 9 p.m. or during any time that the consumer has said is inconvenient.
  • No calls to the consumer’s workplace, once consumer tells them not to.
  • Collectors cannot threaten to have the consumer arrested or criminally prosecuted, or use profanities or abusive language.
  • The number of calls each day must be reasonable, so calling three or more times per day would likely be a violation.
  • The debt in question can’t be discussed with anyone other than the consumer, their spouse or their attorney.
  • Wage garnishment cannot be threatened unless the law permits the collector to garnish wages and they intend to do so.

Because Tennessee is a one-party-consent state, consumers are permitted to record their calls with collection agencies and they do not have to disclose the fact that they are recording. Not only can this help ensure you get a record of what was discussed, but it can also provide proof if the collector runs afoul of one of these rules.

Responding to collection letters

If you receive a letter from a collection agency attempting to collect on an old debt, your first move should be to research the collection company. To do this, check the agency’s license with the Tennessee Department of Commerce and Insurance.

Next up is validating the debt. You’ve only got 30 days to do this, so you want to act quickly. The CFPB has letters you can use to formally request proof.

To file a complaint about a Tennessee company’s collection practices, you can complete the online form at the TN Department of Commerce and Insurance website. You can also file a complaint with the Federal Trade Commission and the Consumer Financial Protection Bureau.

Understanding Tennessee’s statute of limitations

When you don’t make the payments you contractually agreed to make, lenders and collection agencies are permitted to take you to court to collect. But they can’t take you to court whenever they please. Instead, they have to take you before the time limit, or statute of limitations, on the type of debt runs out. In Tennessee these limits are:

Tennessee Statute of Limitations on Debt
Mortgage debt 6 years
Medical debt 6 years
Credit card 6 years
Auto loan/installment loan debt 4 years
State tax debt 6 years

You still technically owe on debts that are outside their statute of limitations, so it doesn’t mean you’re in the clear once you reach these dates. A debt collection agency or the original creditor can continue to pursue you for payment way outside that time period; they just can’t sue you anymore.

Sometimes, collectors call about “zombie” debts, which are old, time-barred debts that have been discharged, paid, removed from your credit report, or are past the statute of limitations. You need to be cautious about how you proceed when the debt is a zombie debt because it’s possible to reset the clock on debt that’s past its statute of limitations, which would mean that a collector could then sue you.

Tennessee debt relief programs

There are a number of national credit counseling programs permitted to operate in Tennessee, a list of which can be found on the Department of Justice website. Tennessee residents who want to find a way to get out of debt can also use the free educational resources provided by The University of Tennessee Institute of Agriculture Extension Family and Consumer Sciences.

Laws governing entities that provide credit counseling in Tennessee limit the fees these services can charge. If the counselor is working on getting reduced late charges and finance charges on the accounts, their fees cannot exceed:

  • $50 for consultation and setting up an account
  • $10 monthly service fee, per creditor (not to exceed a total of $50)

Counselors who are reducing the principal amount owed to creditors, have their fees capped at:

  • $400 and 4% of debt for consultation and set-up
  • $10 monthly service fee, per creditor (not to exceed a total of $50)

Payday lending laws in Tennessee

  • Maximum loan amount: $500
  • Maximum loan term: 31 calendar days
  • Finance charges: 15% of the check face amount

When you have bills to pay before your next paycheck and you don’t have anything in savings to cover them, you might turn to payday lending. This is a process of writing a post-dated check to a lender in exchange for funds paid to you upfront. The check, which is usually dated to correspond with your next payday, is later cashed and the lender receives the funds loaned as well as the service fee.

Payday loans can be an overly expensive solution to a temporary problem. In some cases, you may be able to call creditors and get due dates extended rather than resort to payday lending, thus saving yourself on those fees.

If you do have to turn to payday loans, however, it’s good to know the rules governing them to ensure your lender is in compliance. One of the most important rules for Tennessee payday lenders is that they must provide each customer with a clear, written explanation of the fees charged as well as the date the post-dated check will be deposited. In addition, borrowers can have no more than 2 checks outstanding with any lender at one time and the value of those checks cannot exceed $500. In Tennessee, payday lenders also referred to as deferred presentment services, must be licensed by the state.

Tips to tackle debt in Tennessee

No matter what state you hang your hat in, there are some tried-and-true methods of debt reduction that have helped many consumers over the years. Some of the most popular Tennessee debt relief options include:


  • A method of limiting spending based on a simple formula of keeping total expenses lower than total income
  • Reduces dependency on credit cards as spending is controlled
  • Allows you to rearrange spending limits by priorities
  • May not work for individuals whose expenses far outweigh income
  • To start your budget, visit the Federal Trade Commission to get its free budget worksheet

Consolidating debt

  • A method of using a new, unsecured loan to pay off multiple existing debts
  • Often reduces overall interest paid and offers a fixed repayment term and fixed interest rate
  • Can help with making timely payments, as it reduces overall monthly bills
  • Allows for the consolidation of personal loans, medical debt and credit card debt but may not include auto loans
  • May have a shorter repayment term, requiring higher monthly payments
  • If you don’t have a high credit score, the fees and interest could make this option more expensive

Refinance and cash-out refinance

  • Accomplished by getting a new loan for your home to reduce overall interest paid
  • Can also be used to extend the payment term and lower monthly payments
  • If the home has equity, cash can also be taken out to help pay off and consolidate other debts
  • Paying off unsecured consumer debt, such as credit cards, with a cash-out refinance impacts the ability to simply discharge the debt through Chapter 7
  • When you can’t make payments on a refinance or cash-out refinance, you risk losing your home
  • Refinancing student loans is another option, though not ideal for federal student loans, as it would lead to you forfeiting participation in repayment and forgiveness programs

Use a balance transfer card

  • A strategy of transferring debt from high-interest  credit cards to new cards with limited-time low- or no-interest deals
  • Because the low- and no-interest deals often have short terms (12 to 21 months typically), they may require aggressive payments to eradicate the debt without fees and avoid falling into deeper debt
  • You may not be approved for a high enough credit limit to cover all your existing debt
  • You’ll need very good to excellent credit to qualify for the best offers

Filing for bankruptcy in Tennessee

If your debt has grown too great to imagine getting control on your own, or if an unexpected job loss or medical expense have thrown your budget for a loop, an alternative solution may be to go through the process of bankruptcy. The two main types of bankruptcy you can file are Chapter 7 and Chapter 13.

  • Chapter 13 bankruptcy. Referred to as a reorganization, the goal of Chapter 13 is to help you establish a payment plan to pay off your creditors within three to five years.
  • Chapter 7 bankruptcy. This is a plan for asset liquidation to repay creditors and wipe the financial slate clean without requiring ongoing payments. Those who wish to file will need to complete a means test to ensure that they can’t afford to reorganize debt through ongoing payment under Chapter 13.

To find out what specific forms you need to fill out and what court to file with, visit the court locator. In addition, because Chapter 7 and 13 filers are required to get credit counseling, you’ll want to find a Tennessee licensed nonprofit counselor.

The bottom line

Debt is easy to get into, and hard to get out of. No matter how overwhelmed you feel, however, it’s not impossible to free yourself. Tennessee residents who understand their rights and resources and who are familiar with the legal limits imposed on service providers and collection agencies have a great chance and freeing themselves from a high debt balance and getting back to enjoying all the scenery, music and history the state has to offer.

The information in this article is accurate as of the date of publishing.


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