Facing a financial crisis is a stressful experience. Many people in Tennessee and throughout the country are on the verge of losing their homes or are struggling to keep a business afloat or resolve other serious financial problems. In many cases, the most viable option is to file for Chapter 13 bankruptcy.
Disposable income is an eligibility requirement
In the world of finance, analysts, lenders and other financial professionals refer to Chapter 13 bankruptcy as “the wage earner’s debt relief.” This is because one of the primary eligibility requirements is that the filer must demonstrate that he or she has an ongoing, reliable form of income. As opposed to Chapter 7 bankruptcy, which typically involves liquidation of assets, Chapter 13 is more of a reorganization of outstanding debts into a payment plan, which is why disposable income is needed to take advantage of this type of relief.
Chapter 13 helps to avoid losing a home
Filing for Chapter 7 bankruptcy typically means that nonexempt assets sold, and the revenue generated from liquidation will be used to apply toward the filer’s debt. With Chapter 13, since a person continues to make payments to lenders, it is often possible to avoid home foreclosure, as long as the individual adheres to the terms of the court-approved plan. It may also be possible to retain ownership of other major assets, such as a vehicle or vacation property. A creditor can object to a proposed payment plan, although the ultimate decision is up to the bankruptcy judge.
Chapter 13 takes three to five years to process
A primary purpose of Chapter 13 bankruptcy is to give a person who has encountered financial crisis the time he or she needs to get his or her finances under control. Whereas Chapter 7 bankruptcy usually takes six months or less, Chapter 13 is a lengthier process, often taking between three and five years to complete. An experienced Tennessee bankruptcy law attorney can help determine whether Chapter 13 would be the best option to help resolve a particular financial dilemma.