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Bankruptcy options for specific situations

The forgiveness of debts is an age-old value, but in some spans of history, hardly anyone was allowed to walk away from a heavy debt obligation. We no longer have debtors' prison in the United States, but there was a time when we did. People in Tennessee, where the bankruptcy rate has, in some years, been the nation's highest, should be aware that debt relief is available.

But consider times past, when Robert Morris, a man who signed the Declaration of Independence and counted President George Washington among his friends, was incarcerated in debtors' prison. James Wilson, who also signed the Declaration of Independence, even served debtors' prison time while he was a Supreme Court associate justice.

Now, however, there isn't such a stigma attached to the need for debt relief. Times were certainly hard in the days of the American Revolution, but people now also find themselves in financial trouble for reasons beyond their control.

Even if overspending is the cause of money problems, no one should feel as if options aren't available.

For instance, Chapter 13 bankruptcy allows those who qualify to create a payment plan spanning three to five years. This type of bankruptcy is usually reserved for people who have assets such as home equity and who still have some income to devote toward payments.

Chapter 7, or liquidation bankruptcy, involves selling off property that doesn't fall into an exemption category. The sales money from the non-exempt property is then used to pay off debt. Any remaining debt is generally discharged.

We can be thankful that this kind of debt relief is available, even if harsher consequences were the norm many years ago.

Source: jacksonsun.com, "BBB: Learn the ins and outs of bankruptcy filing," Randy Hutchinson, April 18, 2013