If you were to take a survey to determine how many Tennessee residents have faced serious financial challenges in the past five years, you may be surprised at the high number that would likely result. Even the slightest unexpected life change can throw your finances out of whack. The key to overcoming such problems often lies in how much you know ahead of time about various debt relief options that may be available in a particular situation.
For instance, there are several types of bankruptcy; however, what works for one person may not be in another’s best interests. To resolve financial crises as soon as possible, you need to find the plan that best fits your particular circumstances and ultimate finance goals. If you currently earn reliable income, Chapter 13 bankruptcy may be worth your consideration.
Why some people choose it over Chapter 7
While some Tennessee residents mistakenly believe all bankruptcies are pretty much the same, it’s definitely not true concerning Chapter 7 and Chapter 13. The following list explains some of the differences between the two and discusses why someone might opt for one over the other:
- Chapter 7 typically involves complete liquidation of all your assets with some exceptions. Therefore, if one of your highest priorities is to protect ownership of your property, this may not be the best debt relief plan for you.
- Chapter 13, on the other hand, often includes ways to retain assets while continuing to make payments to satisfy debt through a structured repayment plan.
- Chapter 13 generally provides a three to five-year time span for you to carry out that plan.
- Whether your plan includes a three or five-year timeframe largely depends on whether your current income is above or below the median in Tennessee.
- If you implement a Chapter 13 bankruptcy plan, it prohibits creditors from attempting to collect debts while the plan remains active.
- Chapter 13 doesn’t appear on your credit report as along as Chapter 7 does. The latter typically shows on a credit score for 10 years while the former usually remains on your credit report for seven years.
A main factor that determines your eligibility to file for Chapter 13 is your ability to show proof of steady, reliable income. Once you do so, you can request this type of bankruptcy to reorganize your finances and set forth new payment plans that are more feasible according to your current circumstances.
Chapter 13 often helps people get back on their feet following medical emergencies, unexpected demotions at work or other situations that brought undue financial strain to their lives, making it impossible to meet their mortgage payments or expenses, on time.