If you're one of many Tennessee residents currently trying to overcome non-business related financial struggles, you'll be interested to know that lots of people have successfully recovered from similar situations by filing for Chapter 13 bankruptcy. If you cringe at the mere mention of the word "bankruptcy," you'll be glad to learn that although there is somewhat of a negative stigma attached to the idea, it can be a valuable financial tool when your ultimate goal is to restore financial stability without having to liquidate your assets.
Chapter 13 is often an optimum choice for immediate debt relief rather than filing for Chapter 7 bankruptcy, especially if you have a reliable source of income and you earn the same or more than the state median. It's always a good idea to explore all financial relief options available, as choosing one that fits your needs can be the first step toward overcoming your present crisis and building a stronger financial future.
Benefits of Chapter 13 over Chapter 7
Debt relief petitions include prerequisites that you must fulfill in order to be eligible to apply. The following list provides additional information about Chapter 13 bankruptcy and why it's often a better choice for people who have a secure means of income:
- Chapter 7 bankruptcy typically involves complete liquidation of assets that do not fall within allowed exemptions. If you're eligible for Chapter 13, on the other hand, you may be able to retain possession of major assets, such as your vehicles, vacation property or your home.
- Bankruptcy will always show on a credit report; however, a Chapter 13 filing usually remains on a report for seven years whereas Chapter 7 would continue to show on your report for 10 years.
- Another benefit of Chapter 13 bankruptcy is that you can restructure your payment system to make things more manageable while you're facing a financial crisis. Your lenders must agree to alternate plan schedules, which they're likely to do because their ultimate goal is to receive payment in full.
- With Chapter 13, your income pays your secure debts and debts you cannot dissolve, such as child support, taxes or alimony. Surplus disposable income after you pay off these debts goes toward paying non-secure debts, which you may not have to pay in full.
You might wonder what would happen if you pursue a Chapter 13 payment plan, then lose your source of income or face a medical emergency or other situation that impedes your ability to make good on the plan. In some situations, the court will grant relief due to hardship; you may also be able to convert your Chapter 13 bankruptcy to a Chapter 7, if necessary.
Choosing a course of action
Discussing your options with someone well versed in bankruptcy law is a logical first step to take if you want to learn more about practical tools available to overcome serious financial crises.