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How can Chapter 7 bankruptcy lead to debt relief?

Any Tennessee resident who struggles with massive debt may find the idea of permanent relief hard to imagine. Adhering to a tight budget and keeping expenses to a minimum never seems to make a dent in their overall debt and increases the anxiety of what comes next. Instead of resorting to solutions that actually make things worse, such as payday loans, it may be time to consider filing for Chapter 7 bankruptcy. Despite its bad reputation, bankruptcy has proven time and again to be an effective and legal way to find a fresh start.

What is Chapter 7 bankruptcy? In this form of bankruptcy filing, also called a "liquidation bankruptcy," a court-appointed trustee will collect certain assets belonging to a debtor and sell them to pay off what the debtor owes. This does not mean a debtor will lose all property and assets. The bankruptcy code considers certain properties and assets exempt from liquidation, and some can be mortgaged to pay off creditors.

Are there any debts that cannot be discharged through Chapter 7? Yes, although most debts can be managed by liquidation bankruptcy, it does not cover delinquent spousal and child-support payments. Also not covered are taxes and criminal compensation orders, or payments a person must make to an injured person in a drunk driving or similar criminal case.

How does a debtor qualify for Chapter 7? Anyone who wishes to qualify for this bankruptcy will have to undergo credit counseling from an accredited agency and then pass a means test that examines income and debts. The application to the court then moves forward and bankruptcy proceedings begin. This type of bankruptcy is available to more than just individuals. Corporations, partnerships and other business entities can apply for Chapter 7.

Source:, "Liquidation Under the Bankruptcy Code," Accessed on Nov. 5, 2014

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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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