When Tennessee consumers face overwhelming debt, they may look at various options but eventually settle on bankruptcy. They are often given two choices: Chapter 7 or Chapter 13. Which one is better? Many consumers prefer Chapter 7 bankruptcy because of the many advantages it offers.
Chapter 13 may be a good choice for some consumers, but it has some limitations. The debt limit is $336,900 for unsecured debt and $1,010,650 for secured debt. It also doesn't fully eliminate debt immediately; instead, it requires a repayment plan over a period of 3 to 5 years. Chapter 7, on the other hand, has no limitations on debt. In addition, qualified debts are wiped out, offering a fresh financial start with no repayment required. In return, though, consumers may have their homes, cars and other property repossessed in the process.
There are many other benefits of Chapter 7. After filing, consumers can keep any future income without having to surrender it in the bankruptcy. Some exceptions include inheritances, death benefits and property obtained in a divorce. Furthermore, the bankruptcy process is fairly quick. The discharge order is typically issued within 90 days.
While Chapter 7 offers many benefits, some consumers would rather repay their debt through Chapter 13. This option also allows consumers to keep their assets. Plus, Chapter 7 does not discharge student loans, taxes and liens. It also does not remove one's child support or alimony obligations. Keeping all this in mind, it is important for those wanting to eliminate debt to thoroughly assess their options and choose the one that best fits their needs.
Source: FindLaw, "Reasons to File for Chapter 7 Bankruptcy Instead of Chapter," accessed Nov. 15, 2014