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Filing for bankruptcy can be an effective means of debt relief

Say you are facing a personal crisis in which the money you bring home simply cannot meet all of your financial obligations. Credit card bills go unpaid, you are late on your water and electric bills, and you might even wonder if you will be able to keep your house due to missed mortgage payments. You may be experiencing harassment from collection agencies, and the threat of foreclosure may be looming on the horizon. You need debt relief, fast.

One debt relief option that may help some individuals in Tennessee is bankruptcy. There are some things that one should consider, of course, to determine whether filing for bankruptcy is right for them.

If an individual owns his or her own home, that individual should educate himself or herself as to what will happen to his or her home if he or she files for bankruptcy. It may not be possible for an individual to keep his or her home in a Chapter 7 bankruptcy. However, if an individual qualifies for Chapter 13 bankruptcy, he or she may be able to keep the residence.

In addition, certain debts cannot be extinguished through the bankruptcy process, such as child support or spousal support arrearages, tax debts, and student loan debt. If these debts constitute the majority of one's debts, filing for bankruptcy may not help unless, by extinguishing other types of debts, filing for bankruptcy frees up the income needed to tackle debts not dischargeable through bankruptcy.

Finally, it is important to consider the differences between Chapter 7 and Chapter 13 bankruptcy. Chapter 7 essentially liquidates most of a debtor's assets to extinguish the debtor's debts, giving the debtor a clean financial slate to start upon. In a Chapter 13 bankruptcy, a debtor will enter into a court ordered payment plan to pay down their debts over a period of years. After the period has ended, remaining debts will be discharged. Chapter 13 lets a debtor keep his or her property, but a Chapter 7 bankruptcy typically resolves a debtor's debt issues quicker, usually within a matter of months.

In the end, filing for bankruptcy is one debt relief option that many individuals drowning in unpaid bills may want to consider. For those who want to know how filing for bankruptcy will directly affect them, speaking with a bankruptcy attorney may be a good idea.

Source: Deseret News, "Financial Tips & Tricks: When is bankruptcy the best option?" Andrew Clawson, June 21, 2016

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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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