According to the Middle Tennessee Bankruptcy Court which serves Nashville and the surrounding area, there have been 6,845 bankruptcy filings since the beginning of 2011. No matter where you live or what you do, everyone can be subject to financial failure at one time or other, especially in the recession the United States has recently been experiencing. But if you have experienced hard times and have been forced into a bankruptcy, what type bankruptcy should you file?
There are two types of bankruptcies most individuals can file- a Chapter 7 or a Chapter 13. A Chapter 7 bankruptcy, commonly called liquidation of your assets, is normally the simplest and quickest form of bankruptcy. It is available to individuals, married couples, corporations, and partnerships. A Chapter 13 bankruptcy is the second bankruptcy available to individuals and is called a wage earners plan. It enables individuals with regular income to develop a plan to repay all or part of their debts.
A Chapter 13 offers individuals a number of advantages over liquidation under Chapter 7. Here are seven reasons you might want to file a Chapter 13 in lieu of a Chapter 7:
- To save your home from foreclosure. By filing under Chapter 13, individuals can stop the foreclosure proceedings and prevent the home from being liquidated by a Chapter 7. The reorganization plan can give the homeowner much needed time to catch up on their mortgage payments that they will need to do in order to prevent foreclosure.
- To reschedule secured debts. Other than a mortgage for your primary residence, you can reschedule any other secured debts over the life of the Chapter 13 plan, thus possibly lowering the payments. Under Chapter 7, all liens will be satisfied.
- To provide protection for co-debtors. If you file for Chapter 7 bankruptcy, your co-debtor will still be libel for the debt and at the creditors mercy. Under a Chapter 13, the creditors cannot cease any collections from a co-debtor as long as payments are being made on time.
- To keep non-exempt property. As spelled out by each state law, you are allowed to keep only exempt property when filing a Chapter 7. If make your payments on time, a Chapter 13 allows you to keep all property including non-exempt property.
- To consolidate your loans under one plan. A Chapter 13 trustee is appointed to disperse payments to all the creditors on time. You will pay just one person, the trustee, for all your debts. Under Chapter 7, the trustee liquidates all non-exempt assets to pay off debts.
- To extend certain tax obligations, student loans, or other such qualifying debts. In a Chapter 13, you can pay these debts off over time, but there is no relief for these type debts under a Chapter 7.
- To qualify for bankruptcy relief. You wont be allowed to file for Chapter 7 if you cannot meet the Means Test imposed by the 2005 revisions to the bankruptcy law. If your average income over the past six months is more than the median income for a family your size in your state, or if you have discretionary income after deducting taxes and living expenses that exceeds certain limits set by law, you will not be eligible for filing a Chapter 7. Your only relief for a bankruptcy would be a Chapter 13 under this case.
Choosing the appropriate bankruptcy to file can be a complicated and tricky process. You might need a bankruptcy lawyer in order to help you understand how these complex laws may apply in your particular situation. If you determine you are in need of relief from the stress associated with debt and you live in or around the metropolitan area of Nashville, Tennessee, contact us here today at . We will help you find a bankruptcy attorney in your area that will help you with any questions you may have on bankruptcy law.
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