When debt becomes too overwhelming, Tennessee consumers may turn to bankruptcy as a last resort. There are two main types of bankruptcy to choose from: Chapter 7 and Chapter 13. Many consumers prefer Chapter 7 because it completely eliminates debt and allows debt-ridden consumers to start a debt-free life quickly. However, in the process, it is possible for consumers to lose their home, vehicles and other assets. That's why many choose Chapter 13 bankruptcy. Chapter 13 works similar to a debt consolidation plan, in which consumers pay down debt through affordable monthly payments. Find out if this option is right for you and whether you qualify.
Chapter 13 is a little more stringent than Chapter 7, which has no debt limitations. To qualify for Chapter 13, your unsecured debts must be under $383,175, with your unsecured debts totaling less than $1,149,525. Chapter 13 is available for individuals, including those who are self-employed with an unincorporated business. Those with partnerships or corporations do not qualify.
In addition to the above requirements, you must have also attended credit counseling within the past 180 days. However, if the situation is an emergency, this requirement may be waived. If you filed for bankruptcy within the past 180 days and had your petition dismissed because you failed to follow court orders or appear in court, then you do not qualify for Chapter 13.
If you decide to file for Chapter 13, you will need continue making all of your mortgage payments on time in order to stop foreclosure. However, you can reschedule your other secured debts and consolidate them into a 3-5 year payment plan so you can reduce debt over time and stop creditor harassment. Although you won't be able to quickly eliminate debt with a Chapter 13 bankruptcy, you are showing lenders that you are making a good faith effort to pay back loans despite your financial situation.
Source: United States Courts, "Individual Debt Adjustment," accessed Dec. 14, 2014