Chapter 13 bankruptcy is not the same as Chapter 7, yet it often gets the same amount of disdain from those who talk about it. While bankruptcy is often perceived negatively, the reality is that any kind of bankruptcy can have benefits for the person who is struggling financially.
The difference between the two primary forms of consumer bankruptcy is that Chapter 13 is usually used for those who are still working and who earn too much to go through Chapter 7 bankruptcy. Chapter 13 allows you to repay part of what you owe over time, while Chapter 7 liquidates some of your assets to repay your debts.
Choosing Chapter 13 bankruptcy: What you need to know
One of the first things you should know is that Chapter 13 bankruptcy does require a long-term commitment. You will be making payments for between three to five years, allowing you to consolidate your debts and to pay only one lump sum each month. If you stick to the plan and pay on time, you can emerge from bankruptcy and have any remaining qualified debts erased.
Chapter 13 bankruptcy is called a wage-earner’s plan because it is designed for people who are still bringing in an income. For instance, if your bills are costing you $2,400 a month and you earn $2,000, this form of bankruptcy may help you minimize your debt down to $1,600 and give you the opportunity to pay that in installments.
If you are interested in learning more about Chapter 13 bankruptcy, your attorney can explain how it works in Tennessee. It could be the right choice for your situation.