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Chapter 13 basics

Bankruptcy has a bad reputation. But should it? In many cases, it serves as relief for Tennesseans who simply had bad luck. They got sick and overwhelmed by avalanches of medical bills; they bought something on credit only to lose their jobs when a company cut half its staff; they started businesses only to see the economy go into a spiral.

One form of bankruptcy is Chapter 13. This type of bankruptcy allows Tennesseans with a regular income to develop a three-to-five year repayment plan. During the repayment period, creditors are legally prohibited from trying to collect on the debt owed them.

What are the advantages? Perhaps the biggest advantage is the unlike Chapter 7 bankruptcy (which involves liquidating the bulk of a filer's assets), Chapter 13 enables filers to save their homes from foreclosure. Filing under this chapter puts an immediate halt to foreclosure proceedings, and gives the filer time to get current with his or her mortgage payments.

A second advantage is that Chapter 13 permits filers to space their secured debts over the life of the Chapter 13 repayment period. So, if for example, a filer owed money on a loan, failed to make a payment, and then had the loan accelerated so that it was all due at once, Chapter 13 would enable the filer to spread payments for the balloon payment over three-to-five years rather than having to pay it all at once.

Who is eligible? Any person, including people who are self-employed or running an unincorporated business (i.e., sole proprietors,) so long as their unsecured debt is under $383,175 and their secured debt is under $1,149,525 (these amounts change; they are adjusted based on the consumer price index.) Tennesseans who want to learn more about the bankruptcy options may benefit from discussing their options with an experienced bankruptcy attorney.

Source: uscourts.gov, "Chapter 13 - Bankruptcy Basics," Accessed May 16, 2015

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

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