When faced with serious financial challenges, many Tennessee residents may understandably begin to consider whether or not filing for bankruptcy might be the best option for them. In making this decision, it will be important for people to have an understanding about the two primary forms of consumer bankruptcy and how each plan differs. This knowledge will help debtors to make the right choice for their debt-relief needs.
As explained by Experian, the Chapter 7 bankruptcy is often referred to as a liquidation plan because in this type of proceeding, a person’s assets may be seized by creditors in order to essentially repay some of the debt owed. With a Chapter 13 bankruptcy, there is typically no loss of assets as instead debts are restructured so that a consumer may literally repay some of what is owed directly.
The United States Court indicates that when a consumer enters into a Chapter 13 bankruptcy plan, a trustee is appointed. This trustee in turn works with all of the creditors to come to an agreement about how much money they will each receive. That agreement is part of determining an amount of money to be paid by the consumer to the trustee every month. Upon receipt of the payment from the consumer every month, the trustee disperses money to each creditor as part of the overall plan agreement.
A Chapter 13 bankruptcy lasts 36 months on the short end to 60 months on the long end. As with a Chapter 7 bankruptcy there is a special means test that consumers must pass to qualify for a Chapter 13 plan.