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Breaking down the basics about Chapter 13 bankruptcy

Anyone filing for bankruptcy undoubtedly faces considerable stress, both financially and emotionally. Unfortunately, overwhelming debt can lead a debtor to make decisions without enough information about which type of bankruptcy filing is best for their particular situation. Some people think a Chapter 7 bankruptcy filing is the best solution for their debt woes, but Chapter 7 is not for everyone. In some cases, particularly for someone who has regular income, Chapter 13 bankruptcy may be a better solution.

Chapter 13 is more popularly known as a "wage earners plan" because people who file for this form of bankruptcy have regular income and are helped by a court to pay off their debts through payments that are manageable. A bankruptcy filer will be required by the court to provide such information as the identities of creditors, the amounts owed and the creditors' addresses. A person will also be required to provide a list of contracts, assets and liabilities and an expense and income schedule. This gives a bankruptcy trustee a clear picture of a person's financial standing.

Once the filing is approved, a person will be protected from creditors. This means that a bankruptcy filer cannot be subjected to repossession, lawsuits, wage garnishments, collection or any other form of creditor harassment. A filer can retain particular assets, like a house or car. Creditors also cannot collect from debt co-signers, because these third parties are also protected by this form of bankruptcy.

Although filing for Chapter 13 bankruptcy can lead to a fresh financial start, it is a major financial decision, so Tennessee residents should get the most accurate information available in order to help evaluate the options.

Source: Ebony.com, "The Different Degrees of Bankruptcy, Explained," Lynette Khalfani-Cox, June 19, 2014

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