In Tennessee and elsewhere, most people experience financial problems at some point in life. When someone’s finances get out of hand, and there does not appear to be a way to get things back on track without tapping into additional debt relief resources, it is a good idea to consider bankruptcy. Chapter 7 and Chapter 13 bankruptcy programs are two of the most common types of consumer debt relief.
Determine which type of bankruptcy would be the best choice
It is possible to qualify for one type of bankruptcy but not another, which is why it pays to learn as much as possible about Chapter 7 and Chapter 13 programs to determine which would be the best fit in a particular set of circumstances. The following list includes basic differences between the two:
- Chapter 7 typically involves liquidation of assets.
- Chapter 13 is basically a restructuring program to pay down debt.
- Chapter 13 requires a reliable source of disposable income.
- Income must be at or below a certain level for Chapter 7.
- Creditors can object to a Chapter 13 plan, though a judge has the final say.
- Certain debts are not dischargeable under Chapter 7 bankruptcy.
- A homeowner may be able to keep his or her property under Chapter 13.
- Chapter 7 remains on a credit report longer than Chapter 13.
Both types of bankruptcy may be used to discharge credit card debt, which happens to be one of the most common causes of serious financial crises. There are various eligibility rules regarding income, as well as secured and unsecured debts that must be met in order to apply for either type of bankruptcy.
How to know if bankruptcy is a viable debt relief option
There’s a difference between encountering financial challenges that can be overcome by adjusting spending habits or becoming more disciplined with a budget and facing a situation where there are no foreseeable options to resolve a financial crisis because liabilities far exceed assets.
In such cases, it is helpful to speak with someone who is well-versed in bankruptcy law to determine if filing for Chapter 7 or Chapter 13 bankruptcy may be the best course of action to alleviate debt and lay the groundwork for restored financial stability.