People in Eastern Tennessee who are struggling with overwhelming debt have many questions if they are considering bankruptcy. One of the most frequently asked questions is whether they will lose their home or car in a bankruptcy proceeding. The answer to that question depends upon understanding how different bankruptcy proceeding operate.
In a bankruptcy under Chapter 7 of the United States Bankruptcy Code, the debtor's assets are sold, with the proceeds being used to pay off debts. Depending upon the debtor's financial situation, either the house or the car or both may be sold to satisfy the claims of creditors. Chapter 13, on the other hand, offers the best chance of achieving the benefits of bankruptcy and still keeping possession of the house and car.
A Chapter 13 debtor must prepare a repayment plan and submit it to the court. The plan must also be accompanied by financial records such as tax returns and payroll records. The plan and accompanying exhibits must demonstrate how the debtor plans to reduce existing debt from currently available sources of income. The plan must also show that most debts will be paid within three to five years after filing the petition. If the court finds that the reorganization plan is reasonable, an order will be issued requiring the debtor to pay his debts in accordance with the plan. Depending on the debtor's existing income and the amount of other debts, Chapter 13 offers the best chance of obtaining debt relief and maintaining possession of the family home and at least one automobile.
Obtaining maximum benefit from a Chapter 13 proceeding can be a complex task. Anyone who may be considering filing for bankruptcy protection may wish to consult a knowledgeable bankruptcy attorney for advice on which proceeding to choose, how to fill out the bankruptcy forms.