The loss of a job, an unexpected injury or illness, or any other number of factors may cause people in Tennessee to struggle with debt. When looking to regain control of their finances, many look to debt relief options, including credit counseling and declaring Chapter 7 bankruptcy. It is important for people to understand the differences between these options in order to determine which is best suited for their needs and situation.
According to the Federal Trade Commission, credit counseling services are organizations that work with people and their creditors to develop modified payment plans. Instead of paying each of their individual creditors, those who work with these types of organizations will deposit money with their counseling service. The service will then dole out payments to each of their creditors in accordance with the established debt repayment plan. This option may not be suited for those who are unable to make monthly payments to their credit counseling service.
Declaring Chapter 7 bankruptcy is a more serious step than working with credit counseling services. Through this legal filing, people may have some of their assets liquidated. The proceeds from those sales are then used to pay back certain creditors. All, or a portion, of people’s other debts may then be eligible for discharge. Through a Chapter 7 discharge, people are released from their personal liability for certain debts, according to the U.S. Courts. Furthermore, the creditors whose debts were discharged are not permitted to take any collection actions against those who declare bankruptcy. While an effective debt relief option, not everyone is eligible for Chapter 7 bankruptcy. There are a number of eligibility requirements that must be met, including passing the means test.
In some cases, it may be difficult for people to see a way out from underneath overwhelming debts. There are a number of options available, however, which may help them achieve a fresh financial start. As such, it may be of benefit for those struggling with financial challenges to seek legal counsel. Working with an attorney may help them to understand their options, as well as to determine the best course of action given their situations.