Chapter 13 bankruptcy and CFPB protection removals

On Behalf of | May 27, 2022 | Chapter 13 Bankruptcy |

There are many good, hard-working people in Tennessee and throughout the country who are experiencing serious financial trouble right now. You might be one of them. If so, you’ll be glad to know that there are numerous debt relief options that may be helpful to you, including Chapter 13 bankruptcy.  

The Consumer Financial Protection Bureau (CFPB) recently made some changes that removed protections consumers used to have regarding seizure of property in connection with debt. In short, you, as a consumer, now have less protection and debt collectors have more power.  

How debt collectors are using their newly acquired power 

If you’re struggling to pay off a debt, the CFPBs protection removals have, in many cases, enabled debt collectors to seize your property without a court order in order to satisfy a debt. While they wouldn’t keep your property, they would sell it and use the proceeds of the sale to pay back the money you owe.  

Many financial analysts say that because lenders may no longer need a court order to seize property, they’re often less willing to negotiate feasible payment terms or forbearance requests, which is when a creditor allows a person who owes a debt to defer payments for a certain period of time.  

How filing Chapter 13 bankruptcy can help avoid seizure of property 

You may have heard Chapter 13 bankruptcy referred to as “the wage earner’s bankruptcy,” which is a relevant term because, to qualify for this particular debt relief program, you must prove that you have a reliable income. When you file for this type of bankruptcy, it activates what is known as an “automatic stay.”  

An automatic stay provides certain protections to a petitioner, such as those including in the following list:  

  • Under a Chapter 13 automatic stay, no one can shut off your utilities. 
  • Debt collectors may not repossess your property. 
  • A landlord cannot evict you from your home. 
  • Your mortgage lender cannot pursue a foreclosure, and if one had already begun, it must cease when the automatic stay kicks in. 
  • The government cannot garnish your wages to cover a debt.  

If you’re protected by an automatic stay under Chapter 13 bankruptcy, your property will be safe and sound until your case is fully processed. You don’t have to worry that you’ll wake up to an empty driveway because your vehicle has been repossessed. You won’t lose your home in connection with late mortgage payments.  

Determining if you’re eligible for the wage earner’s bankruptcy 

Before filing for Chapter 13 bankruptcy in Tennessee, you must take what is called a “means test.” It’s a test that compares your current income to the median average income throughout the state. If it’s at or above a certain level, you’re eligible for this specific program. The test also compares your income for six months past to the amount of debt you owe to determine if you have enough money coming in to pay down your debt. 

If you don’t earn enough money to qualify for Chapter 13, don’t lose heart. There are other bankruptcy options for which you might be eligible. Overall, if you’re worried about property repossession, foreclosure or other financial crisis issues, it may be in your best interest to learn more about ways in which filing for bankruptcy can be a valuable financial tool.  

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