When most Tennessee residents think about filing for bankruptcy, they are probably thinking about Chapter 7 bankruptcy, which is commonly known as "liquidation" bankruptcy. In a Chapter 7 bankruptcy, the bankruptcy filer's assets are sold off, with some exemptions, and the proceeds are used to pay off outstanding debt. However, there is another option for residents to consider: Chapter 13 bankruptcy.
Chapter 13 bankruptcy is commonly known as "reorganization" bankruptcy. In a Chapter 13 bankruptcy, the bankruptcy filer gets to keep assets, and instead sets up a repayment plan with the bankruptcy court to address outstanding debt. In this fashion, the filer can pay back most of the debt owed to creditors over the course of a three to five year plan.
The main difference between Chapter 7 bankruptcy and Chapter 13 bankruptcy is a person's income. If the potential bankruptcy filer is earning an income that is above the threshold to qualify for Chapter 7 bankruptcy, then Chapter 13 bankruptcy might actually be the only option. Either way, filing for bankruptcy can be the best way to address a debt situation that has only gone from bad to worse.
At our law firm, we do our best to help our clients assess that type of bankruptcy filing is right for them. Not everyone will benefit from a Chapter 13 filing, but sometimes, they have too much income to qualify for Chapter 7 bankruptcy. There are many different types of debt solutions available to Tennessee residents. For more information about how Chapter 13 bankruptcy might be right for your financial situation, please visit our law firm's website.