Is a Chapter 13 bankruptcy right for me?
Homeowners in Tennessee facing serious financial challenges may find that filing for Chapter 13 bankruptcy helps them relieve their debt while saving their homes.
Residents in Tennessee who find themselves cringing every time a new bill or credit card statement arrives may well wonder if or how they will ever be able to stay on top of their debts. Financial challenges can arise due to a myriad of life events ranging from the death of a spouse, the loss of a job, a personal health crisis or more. Regardless of the reason for the situation, when help is needed, bankruptcy may be a viable option.
Two types of bankruptcy
There are two primary forms of consumer bankruptcy and the one most people know of or associate with consumer bankruptcy is Chapter 7. In these plans, assets such as homes or vehicles may be seized by creditors to repay debts. For this reason, homeowners are often hesitant to even consider bankruptcy when their debt spirals out of control.
In a Chapter 13 bankruptcy, however, no assets are lost to creditors. This means people who own homes may be able to keep those homes while still benefitting from bankruptcy relief.
The Chapter 13 plan process
A Chapter 13 plan is essentially a form of debt consolidation and repayment. Consumers can have their qualifying debts consolidated per the terms agreed upon by the courts, the creditors and the trustee. Debtors make one payment every month to the trustee. That person then remits payments to the creditors per the original agreement. This lasts for a period of 36 to 60 months.
Credit Karma explains that some creditors may agree to receive an amount less than what was originally owed in exchange for knowing that they will receive something and that they will no longer need to pursue debt collection.
Filing for Chapter 13 provides some immediate relief against foreclosure action. However, mortgages are not included in a Chapter 13 bankruptcy but the plan is designed to give homeowners sufficient financial breathing room so that they may get current on their mortgages. It is expected that debtors make all mortgage payments on time while in Chapter 13.
Qualifying for a Chapter 13 plan
Debtors must have sufficient regular income to be approved for a Chapter 13 bankruptcy. There are also limits on the amount of secured and unsecured debt they may have. Consumers must also have filed all federal income tax returns to meet the requirements for a Chapter 13 plan.
Legal help is important
A Chapter 13 bankruptcy may offer Tennessee residents the chance to keep their family homes and get their financial lives back on track. Before making the choice to pursue this form of debt relief, people should contact an experienced attorney for assistance.