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Understanding bankruptcy options vital for Tennessee residents

Long before the great financial crises of 2008, Tennessee had one of the highest bankruptcy rates in the United States. That hasn't changed. In fact, in the first quarter of this year Tennessee had the highest per-capita bankruptcy rate of any state in the country, almost twice the national average.

For those Tennessee residents still struggling with serious financial challenges the following is a brief summary of the two most popular forms of bankruptcy: Chapter 7 and Chapter 13.

Individuals who file for bankruptcy generally file for Chapter 7 or Chapter 13 bankruptcy. Chapter 7 bankruptcy, or liquidation, is the most common. To qualify for Chapter 7 the filer must undergo a means test. If the filer satisfies the test they must then turn over their non-exempt property to the bankruptcy trustee. It is the trustee's job to sell the property and repay the creditors. After the bankruptcy is complete, the remaining debt is discharged.

Individuals who have considerable assets that are not bankruptcy exempt, or those with enough income to make payments, generally choose to file for Chapter 13 bankruptcy. In Chapter 13 bankruptcy, or reorganization, the filer enters into a repayment plan established by the bankruptcy court. Repayment plans typically run between three and five years. After completion of the repayment plan the remaining debt will either be discharged or modified.

Choosing whether to file for Chapter 7 or Chapter 13 bankruptcy is a highly fact-specific decision. There are many factors to consider before filing, but an experienced bankruptcy professional can help the filer consider those factors in light of the person's individual circumstances.

Article: Jackson Sun, "BBB: Learn the ins and outs of bankruptcy filing," Randy Hutchinson, April 18, 2013

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