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Cleveland TN Bankruptcy Law Blog

Let us help you make short work of medical debt

A previous post on this blog discussed encouraging statistics showing that the number of bankruptcies has dropped, and some of this drop may be that more residents of Southern Tennessee and Northern Georgia have better health insurance that protects them from sudden and unexpected medical expenses.

The reality though is that many people in Bradley County and the surrounding areas run in to significant medical expenses, often with little or no warning. In some cases, the medical bills themselves pile up, and in other cases, a person chooses to pay off the doctors and hospitals with a credit card, but then the credit card bill piles up.

Ways of handling small business debt

Business owners in Bradley County, Tennessee, may not be able to quite identify with the news stories announcing the latest large commercial bankruptcy, especially if the business is nationwide and worth millions of dollars. Even if these owners are themselves in financial distress due to business debt, filing a Chapter 11 bankruptcy, which large businesses use, may seem a little out of reach or like overkill.

On the other hand, these owners may not want to take the route of filing a Chapter 7, or "traditional bankrupty," either, since for a business, that is a signal that the creditors of the business have leave to swoop in and take what is left of the business's assets. Effectively, a Chapter 7 is acknowledging the business has failed.

How does stripping off a lien work in Chapter 13?

One of the advantages to Chapter 13 bankruptcy is that, for certain types of secure loans, a struggling family can actually improve their financial position by "stripping off" a lien, which is a completely legal process that involves converting what was a secured loan, like a second mortgage, in to an unsecured loan, like a credit card or medical bill.

In practice, this means that debtors have to pay what they can toward the debt via a repayment plan, but then will be free of the obligation. Debts that remain secured debts, on the other hand, may be "discharged" in bankruptcy, but the owner of the loan will still be able to pursue the house, car or other collateral.

Drop in bankruptcies may be due to broader health insurance

Recent statistics suggest that the Affordable Care Act, commonly known as "Obamacare," may have helped some families in Tennessee and across the country avoid bankruptcy.

Over the last six years, the country has seen about a 50 percent decline in the total number of personal and family bankruptcy filings. There are many reasons why this might be the case. Since 2005, tougher bankruptcy laws have been in place, making it more difficult to file for bankruptcy or less attractive to do so. Moreover, no one would argue that the economy has been improving of late, and people have been able to get back to normal after the so-called "Great Recession."

The right approach to Chapter 13 bankruptcy

For some people in Bradley County, Tennessee, or in other parts of the greater Chattanooga metro area, the prospect of having to file a Chapter 13 bankruptcy is not good news for a struggling family, yet the family does not have much of a choice because they make a high income. For others, filing Chapter 13 is a conscious choice. For instance, some people are willing to trade off having to repay all or part of their debts in exchange for getting to keep all of their property instead of having to turn it over to a bankruptcy official. There are other financial and legal advantages to filing for Chapter 13 bankruptcy and skipping the more common Chapter 7 bankruptcy.

Assuming a Tennessee family has a meaningful choice, it is important for them to have sound legal advice as to what the advantages and disadvantages are to Chapter 7 and Chapter 13, as making the right decision can save a family a lot of money, protect their assets and help them get the best financial start possible. The wrong decision, on the other hand, may make a family's financial problems worse or end in a failed bankruptcy.

Before signing up for the credit card promo, check the fine print

Many residents of Bradley County no doubt go shopping in Cleveland or in nearby Chattanooga. When they get to the checkout line, they may be offered a store credit card that includes a discount or a wonderful deal too hard to pass up. Others may get special offers through the mail promising rebates, travel miles or special benefits.

Residents can come out ahead with these types of special promotional deals. But, they can entice even the most hard working and financially responsible of families to stretch their credit card balances. If a job loss or other financial setback strikes, the credit card bill goes unpaid and a family finds themselves overwhelmed by credit card debt.

How does the federal "means test" work?

Many people who live in Cleveland or in other parts of Bradley County, Tennessee, and who are facing financial challenges, may be frightened by the federal "means test" that is used in most family bankruptcy cases. But, residents should not fear this test.

The means test does not screen anyone completely out of the bankruptcy process. No one who has some financial problems, but who is high income should therefore assume bankruptcy is not an option.

How do I qualify for Chapter 7 bankruptcy?

This blog recently discussed some of the relief Chapter 7 bankruptcy may provide for individuals struggling with overwhelming debt. Those considering bankruptcy options to help them enjoy a fresh financial start may wonder how they can qualify for Chapter 7 bankruptcy. Eligibility for Chapter 7 bankruptcy is based on the Chapter 7 means test. To qualify for Chapter 7 bankruptcy, the filing party must satisfy the two-part test.

The first part of the means debt looks at the filing party's average monthly income for sixth months prior to filing for bankruptcy. This is then compared to the median family income in the filing party's state. If the filing party's income is less than or equal to the state's median income, they qualify to file for Chapter 7 bankruptcy. A variety of different sources of income are considered, while other sources are excluded, so it is helpful to know which income is considered and which is not considered.

Legal options may be available to stop wage garnishment

When struggling with overwhelming debt, one of the worst circumstances that an individual can face is having their wage garnished. Wage garnishment can be extremely stressful for individuals already struggling to manage debt, get caught up on payments and get ahead of their financial struggles and challenges.

Wage garnishment can occur when a creditor files a lawsuit against a party that owes the creditor a debt. If the creditor prevails in their lawsuit, it will result in a judgment against the party owing money. Once the creditor has a judgment, they can garnish the party's wages until the debt is repaid. Filing for bankruptcy can stop creditor collection actions from being filed. If a collection lawsuit has already been initiated, filing for bankruptcy may also halt its progress and prevent a judgment from being obtained.

Bankruptcy numbers remain high in Tennessee

Personal bankruptcy options include Chapter 7 liquidation bankruptcy or Chapter 11 reorganization bankruptcy. Depending on the unique circumstances and goals of the filing party, one option may be better than the other. Chapter 7 personal bankruptcy allows the filing party to liquidate assets that are not exempted from the process to repay creditors. Chapter 11 bankruptcy allows the filing party to reorganize their debts to repay over a manageable period of time.

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