No one in Tennessee plans to end up bankrupt, but unexpected life events, such as illness, divorce or loss of a job, may force individuals to seek the protection of federal bankruptcy laws. While bankruptcy is often perceived to create a social stigma, it may be a better choice than persevering under a heavy debt load.
Consumers have two main choices in filing for bankruptcy. Under Chapter 7, the debtor's property will be seized by the trustee and sold to pay bills. Unpaid debts are discharged. Under Chapter 13, the debtor relies on anticipated future income to develop a plan of reorganization, under which creditors are paid over time.
Debtors are allowed to keep certain assets. Federal law and Tennessee law identify which assets are exempt from attachment, that is, which assets cannot be sold to satisfy the claims of creditors. Under Chapter 13, a debtor may be able to work out a plan to save the family home from a foreclosure sale. A bankruptcy becomes part of the debtor's credit history, but the effect may be slight. If the debtor was struggling to pay bills before the bankruptcy was filed, the credit rating may already have suffered. Some debts cannot be discharged, including most taxes, domestic support obligations and obligations that were the result of fraud by the debtor.
Deciding to file a bankruptcy petition is a weighty decision. It should be preceded by gathering as much information on the various proceedings and seeking advice from knowledgeable persons. In this regard, an experienced bankruptcy attorney can be a valuable asset in deciding whether to file a bankruptcy petition, in choosing the type of proceeding and assembling all of the information that the court will require.
Source: creditcards.com, "14 key factors when considering bankruptcy," Dana Dratch, accessed on May 12, 2018