Debt is a shameful and taboo topic for many, even though most consumers carry some sort of debt. It’s important to understand that despite the impacts it may have on your credit, bankruptcy can be a good idea for many consumers. As such, understanding the benefits of this process is critical. If you’re in debt, it’s important to understand what options you have and why it’s imperative to work with a Memphis, TN consumer bankruptcy lawyer if you’re ready to begin this process. Luckily, this blog explores what you must know before filing for bankruptcy in Tennessee.
What Are My Bankruptcy Options?
If you’re considering filing for bankruptcy, understanding the options you have is critical. Generally, as a consumer, you can file Chapter 7 or Chapter 13. While both are used to help clear debts, the process in which your debt is handled differs drastically.
Chapter 7 bankruptcy involves the liquidation of assets to pay off credits. To file Chapter 7, you must pass the means test. Essentially, this determines whether or not you qualify for this process by comparing your income to the median earnings of consumers in your state. If you are over the median, you will not qualify for Chapter 7. If you qualify, you can expect this process to take around six months. Additionally, if you file Chapter 7, this will last on your report for ten years.
If you do not qualify for Chapter 7 or do not want to liquidate your assets, you may opt to file Chapter 13 bankruptcy. This involves creating a repayment plan that lasts between three and five years. This essentially consolidates all of your debt into one payment, which will be distributed to each creditor by the trustee assigned to your case. Upon the finalization of your repayment plan, any eligible remaining debt will be discharged. Chapter 13 bankruptcy will remain on your credit report for seven years.
When Is Filing for Bankruptcy a Good Idea?
Due to the impact that filing for bankruptcy can have, many assume this is a negative thing. However, it’s important to understand that it can be incredibly beneficial to file. Not only does it provide relief from certain debts, but it can stop harassment from debt collectors as you’ll be granted an automatic stay. As such, all collection efforts against you must stop.
It’s important to understand that though most debts can be forgiven, some do not qualify. For example, child support, alimony, and federal, state, or local taxes. As such, if you find that you have mostly personal debts like credit card debt, medical bills, utility bills, or personal loans, filing is likely in your best interest.
