If you’ve been out of work for an extended period of time or someone in your household has a chronic health condition, this year might not be the best financial year you’ve ever had. And perhaps, like so many others in Tennessee, you’re considering bankruptcy.
Choosing to file bankruptcy is a tough decision with an unfair stigma attached to it. It’s not easy to realize you need help with your debts, but before you move forward you need to understand what your bankruptcy will look like. For individuals, you may file for either Chapter 7 or Chapter 13 bankruptcy but determining which type of bankruptcy best fits your needs can be challenging. The following questions will determine the proper choice.
Do you have reliable income or not?
Income level is a key factor to determining whether you should apply for Chapter 7 or Chapter 13 bankruptcy. Bankruptcy regulations require you to take a means test, which compares your income level to the average income in a typical Tennessee household.
If your income is above a certain level, you may not qualify for Chapter 7 bankruptcy. Financial advisers often refer to Chapter 13, however, as the wage earner’s bankruptcy because you must prove that you have consistent and reliable income of a certain level to qualify for application.
Complete liquidation of assets versus restructured payments
When you obtain Chapter 7 bankruptcy, you must agree to sell most of your property and use the money gained to pay off your debts. If you own a home, it’s understandable that you would want to explore any options that might be available to retain possession of your home.
With Chapter 13 bankruptcy, creditors agree to restructure a payment program. This type of bankruptcy may enable you to hold on to your major assets, such as a house or vehicle. You would continue paying down the debt at a rate that is more economically feasible for you at the time.
How long does bankruptcy stay on your credit report?
You may be hesitant to file for Chapter 7 or Chapter 13 bankruptcy because you’ve heard that it will ruin your credit rating. While it’s true that bankruptcy does show on your credit report, it’s not necessarily true that your credit will be forever ruined.
Many people use bankruptcy as a valuable tool, not only to obtain debt relief but also to help restore their credit and lay the groundwork for a stronger financial future in the long run. By connecting with someone experienced in bankruptcy law, you can explore your options and determine which type of bankruptcy would best help you accomplish your goals.