Most Tennessee residents have encountered financial challenges at some point in their lives. Any number of issues, from a fluctuating economy to unexpected expenses, can have a significant impact on the overall financial stability of a household. In circumstances where liabilities far outweigh assets, a person may determine it best to file for Chapter 7 or Chapter 13 bankruptcy.
Two debt relief programs with different eligibility requirements
When a person is considering filing for bankruptcy, he or she must choose a program that best fits his or her specific needs. Chapter 7 bankruptcy is different from Chapter 13 in several ways. A first logical step to take to determine which option is most viable in a particular set of circumstances is to review the eligibility requirements for both programs.
Income may be a qualifier or disqualifier
Chapter 13 bankruptcy is often referred to as a wage earner’s debt relief program. The reason for this is that applicants must first prove that they have a reliable means of income with enough money to continue to make to pay off their debts. The program enables creditors to offer alternative payment plans to make payments more feasible for the person who owes a debt.
Chapter 7 bankruptcy, on the other hand, is restricted to people who earn a certain level of income or less. Rather than continuing to make monthly payments toward a debt, this type of bankruptcy typically involves liquidation of all assets, from which the proceeds are then used to pay back creditors. If someone has lost a job or simply does not have a reliable form of income at the time, Chapter 7 bankruptcy would likely be a better option than Chapter 13. An experienced bankruptcy law attorney can help determine which program might be best to meet the needs of a specific client.