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Chattanooga Bankruptcy Law Blog

Is tax debt dischargeable through Chapter 7 bankruptcy?

The income tax filing deadline is only about a month away. Tennessee residents may be pulling together their documents in order to have their taxes completed by professionals or to undertake their own plans for meeting this annual requirement. Some may have already filed their taxes and paid what they owe based on the income they earned in the prior year.

As readers of this bankruptcy and debt relief blog may know, there are many ways that individuals can end up with heavy debts. One way is through the failure to pay their income taxes to the government. A person who fails to do this may end up incurring fees, penalties, and other costs as they struggle to cover just the principal amount that they owe to the government.

Some debts may not be discharged in Chapter 13 bankruptcy

Personal bankruptcy is often viewed as a legal means of clearing one's debts and finding a clean slate on which to build a new financial future. Individuals who opt to use Chapter 13 bankruptcy as their path out of debt can expect to spend years working through the repayment plans that they created during their bankruptcy proceedings. Once a Tennessee resident receives their bankruptcy discharge, they may be surprised to find that they are not completely debt free.

That is because not all debts are dischargeable in bankruptcy. While this post will discuss some of the debts that may survive the Chapter 13 bankruptcy process, readers are reminded that the best source of information about their individual legal needs is their personal bankruptcy attorney. This post does not offer its readers any legal advice.

Mortgage debt may be on the rise

Getting into the housing market can be the dream of many Tennessee residents. It can take years for a person to save enough money to put down on a home, and once they are able to secure a mortgage they must find a way to pay the monthly bills that arrive so that they are not evicted. While some individuals are able to stay ahead of their mortgage payments, others are sent off course by unexpected bills and other financial struggles.

One financial entity believes that mortgage delinquencies and debt may be about to climb. There are two reasons that this expectation is on the horizon. The first is that the standards that apply to underwriting mortgages are about to ease, which means that more potentially unqualified individuals may get into mortgage agreements that they are not prepared to pay off.

Will filing for bankruptcy permanently destroy one's credit?

While bankruptcy may affect a Chattanooga resident's credit for a period of time, it is not a permanent black mark on one's record.

Under the law, a bankruptcy discharge will appear on a consumer's credit report for a number of years. For example, a Tennessee resident who uses Chapter 7 bankruptcy to get out of debt will see that process on their credit documentation for a full decade. Those who use Chapter 13 bankruptcy to overcome their financial woes will see it on their credit reports for seven years.

Understanding options for remedying medical debt

When Chattanooga residents come down with an illness and must visit a doctor, they can find themselves with hundreds of dollars in medical visit costs, not to mention their expenses related to prescriptions, diagnostic tests and other related bills. If their condition is serious they may be sent to see specialists, into the hospital or into immediate emergency surgery to try to improve their health.

In the end, a person will often do whatever they can to protect their future and to stay as healthy as possible, but those ends can require significant expenditures on their part. Medical debt is a major problem for many Americans and even men and women who have health insurance can be caught in difficult financial peril when unexpected or emergency procedures are necessary to save their lives.

States ranked on average consumer credit card debt

It is almost impossible to find someone who does not have at least one credit card in their wallet. While some Tennessee residents hold credit accounts with their favorite retailers so that they can get offers and deals through their cards, others have credit cards so that they can shop online without tying their checking accounts to their transactions. Credit cards are pervasive and in some cases their use can land consumers in a world of painful credit card debt.

Recently a ranking of the 50 states' credit card debt was released and readers may be happy to know that Tennessee ranked 30th on the list. However, this does not mean that Tennessee residents are debt free when it comes to their credit cards. On average, individuals in the Volunteer State carry nearly $6,000 in credit card debt on an average of 2.8 credit cards per person.

Liquidating property does not mean selling off everything

One of the most intimidating aspects of Chapter 7 bankruptcy is asset liquidation. Tennessee residents who use Chapter 7 bankruptcy may not earn enough income to pay off their debts over time and, therefore, may be required to sell their property in order to have money to give to their creditors. Asset liquidation is the process of selling the things that a person owns, but readers should know that they will not need to give up everything they own in order to complete the Chapter 7 bankruptcy process.

For example, individuals who have two homes, such as a primary residence and a vacation home, may be required to sell their vacation property. If a person owns a regular vehicle and a sports car, the sports car may be subject to liquidation since the individual technically may not need that item to maintain their life after their bankruptcy is over.

Can a person file for Chapter 13 bankruptcy more than once?

Filing for bankruptcy is an event that most Americans will be able to avoid throughout their entire lives. Those who do file for bankruptcy may vow never to let themselves experience financial hardships again so that they may avoid pursuing bankruptcy in the future. However, filing for bankruptcy more than once is something that occurs in the lives of Tennessee residents, but when it comes to pursuing second personal bankruptcy cases, individuals should know that they are limited as to when those subsequent cases may begin.

In the case of a person who wishes to file for Chapter 13 bankruptcy and received a bankruptcy discharge in the past, they may need to wait several years before bringing their second case. If their prior discharge came from a Chapter 13 action, then they must wait at least two years to file again. If their prior discharge came from a Chapter 7 action, then they must wait at least four years.

Making minimum payments won't solve credit card debt problems

When a Tennessee resident receives a statement from their credit card company, that statement will outline what purchases the individual has made with their card in the prior month, what costs have carried over from prior months of purchasing and what minimum payment the individual needs to make to avoid penalties on the account. While some people choose to pay off their credit card bills each month in full, others are not able to do so and just pay the minimums to keep their accounts open and available for additional spending.

However, if a person wants to conquer their credit card debt, just paying the minimums will not get them to their goal in a timely manner. Americans have, on average, around $8,000 in debt on credit cards. If they only make their minimum payments, it could take them over 20 years to clear out those debts. A person's interest rate, the amount of debt they carry and other factors can influence just how long it takes a person to pay off their credit card debts.

Loan consolidation as an option for managing debts

Individuals who have felt the heavy burden of insurmountable debts may have scrambled to find fast solutions to getting out from under the weight of unpaid bills. Despite their efforts, most will likely come to the conclusion that there are no fast fixes when it comes to getting out of a financial hole. While it is imperative that our readers get the right information about their specific options and needs, some Tennessee residents may find debt relief through the practice of loan consolidation.

There are different ways of consolidating loans and debts, such as those that individuals have on their homes, cars and credit cards. They may transfer all of their debts into a single loan so that they are making one payment per month instead of many and they may be able to negotiate a reasonable payment on their consolidated loan so that they do not risk a future default.

Kenneth C. Rannick, P.C.
4416 Brainerd Road
Chattanooga, TN 37411

Phone: 423-624-4002
Toll Free: 800-257-7594
Fax: 423-624-0509
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