Struggles with overwhelming debt can affect every area of your life, including your relationships, your job and your physical health. If you are ready to make 2020 the year you begin your journey to financial freedom, getting out of debt is likely a high priority. One way find debt relief is through bankruptcy.
While bankruptcy provides a way to eliminate many of your debts, it can be complex and challenging to understand. The two most common forms of bankruptcy are Chapter 7 and Chapter 13. Although Chapter 7 is the most frequently used bankruptcy in the U.S., Chapter 13 may be more appropriate for your situation.
Which is right for me?
To qualify for Chapter 7, you must pass a means test, which assesses whether you have the ability to repay any of your debts. If you are earning a fair income and own your Tennessee home, Chapter 7 may not be the best option for you. Instead, you may file for Chapter 13.
One important difference between Chapters 7 and 13 is that the court will not liquidate your assets for Chapter 13. As long as you comply with bankruptcy laws, you may keep what you own. Instead of liquidating your assets to repay your debt, you will submit a repayment plan to follow over the next three to five years to repay as much as possible of priority debts, such as taxes or child support. You will also try to catch up on past due mortgage or car payments and other debt.
Staying on track
Chapter 13 is a way to reorganize your debts and pay down what you owe. Any disposable income you have will go toward unsecured debts like credit cards. Whatever debt you do not repay at the end of your agreement will be discharged.
The challenge for most people is paying what their plan requires. Missing even one payment may place you at risk of default, which may result in the dismissal of your case. This may allow your creditors to resume actions to collect the debt, including foreclosure, repossession, wage garnishment and others.
If you are seeking relief from your debts, you may wish to learn more about your bankruptcy options and the rules and benefits of each. Because there is talk of changes coming to the U.S. bankruptcy system, you would be wise to visit a debt relief attorney to be sure you have the most current and accurate information about the process and sound advice for the options most appropriate for your situation.