Last week this Tennessee bankruptcy law blog explored some of the advantages and disadvantages of filing for Chapter 7 bankruptcy. This week's topic addresses the benefits and shortcomings of Chapter 13 bankruptcy for American consumers. Though the information provided in this post may be relevant to an individual's particular financial situation or legal matter, it should not be relied on as legal guidance or advice. However, it is important to consider the major component of the process so individuals are prepared to discuss their questions about the Chapter 13 bankruptcy process.
To begin, Chapter 13 bankruptcy allows individuals to keep their possessions. Unlike Chapter 7 bankruptcy which requires people to sell off or liquidate many items of property, Chapter 13 bankruptcy is based on the creation of repayment plans to satisfy the debtors' creditors. Debtors are able to craft repayment plans that meet their creditors' expectations and that fit into the debtors' capacities to pay.
Those repayment plans, however, can endure for a period of years. Some individuals may prefer to see their debts eliminated through a liquidation process rather than to be bound to their creditors through their repayment of their loans and debts. Additionally, some debtors may not be able to stick to their repayment plans and may have to go back to bankruptcy court to have their plans reapproved by their bankruptcy trustees and creditors.
Both Chapter 7 bankruptcy and Chapter 13 bankruptcy give debtors distinct paths to their most desired goals: debt relief and financial freedom. Each has potential strengths and weaknesses for those who utilize them. For individuals who are unsure of which path to choose, bankruptcy and debt relief lawyers are excellent resources to consult with regarding the benefits and shortcomings of each in the lives of individual debtors.