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Determining the right type of bankruptcy

When Tennessee residents get in financial trouble, it can feel like they are all alone. The debts begin to pile up, while the person's income seems like it cannot catch up to enable the person to break free of the debt cycle.

In reality, individuals are not alone in their financial struggles, or in their search for relief. For instance, in the last quarter alone, there were well over 3,000 bankruptcy filings in a single county in Tennessee. Over the course of this year, there were over 9,000 bankruptcy filings in the county.

Among these numbers, the largest category of filings came from Chapter 13 bankruptcy filings. About 81.5 percent of all filings in the last quarter were Chapter 13 filings. Most of the remaining bankruptcy filings were under Chapter 7.

There are significant differences between Chapter 13 and Chapter 7, although both can provide debt relief for individuals in need. Under Chapter 7, a person's assets are liquidated in order to pay off his or her debts. This type of bankruptcy, known as straight bankruptcy, is what many individuals may think of when they hear of bankruptcy.

Chapter 13 differs from Chapter 7. Under Chapter 13, a repayment plan is established that allows the person to repay his or her debts over time through manageable payments. Accordingly, the person does not need to liquidate most of his or her assets like they would under Chapter 7, and therefore this form of bankruptcy can be very beneficial when individuals have the income to make the payments over time.

Ultimately, both types of bankruptcy can help individuals rid themselves of debt. What works best for a particular individual will depend on their personal circumstances.

Source: Memphis Daily News, "Bankruptcies top 3,000 after second quarter dip," Bill Dries, Oct. 16, 2014

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

Toll Free: 888-376-0282
Phone: 423-933-1606
Fax: 423-877-0363
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