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Reorganizing debt through Chapter 13 bankruptcy

For many years, bankruptcy was viewed rather negatively by most financial consulting firms. Some in the industry referred to it as the "10 year mistake." Today, however, the American Bankruptcy Institute reports that bankruptcy was unavoidable for nearly 1.5 million individuals and more than 35,000 businesses nationwide. Tennessee residents consider filing for bankruptcy relief should know that attitudes have shifted, and many view bankruptcy as a viable way to ease the strain of debt.

Bankruptcy is a legal process designed to eliminate overwhelming debts through a variety of means. One form of bankruptcy is Chapter 13, which is commonly referred to as "reorganization" or "wage-earner" bankruptcy. Unlike Chapter 7, which is a form of liquidation bankruptcy, Chapter 13 bankruptcy allows filers to clear a large share of their debt through a repayment plan.

The repayment plan that borrowers enter into establishes the terms under which the filer will repay their debt. The repayment term typically runs between three and five years, and a trustee assigned by the court oversees the repayment process. What debt is included in the final repayment plan requires a collaborative process, which includes both the courts and the creditors. Throughout the process, creditors are allowed to comment on the terms of plan.

In the end, the court must approve the final plan. Once the plan has been approved, the trustee has been assigned and the terms of the repayment plan have been established, the court discharges remaining debt that falls outside the terms of the final agreement. For some, a little debt reorganization is all the help they need to get back on track. It doesn't take much to fall behind. Fortunately, with a little help, it is possible to stay on track to find a fresh start. There are options available, even when the situation is troubling.

Source: CBS News, "Number of individual bankruptcy filings drop," Ray Martin, Sep. 11, 2012

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Mark T. Young & Associates
2895 Northpoint Blvd.
Hixson, TN 37343

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