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What must Tennesseans do when filing for Chapter 13 bankruptcy?

Debt can be a powerful tool. Indeed, many Tennesseans successfully leverage debt to buy homes, build businesses and live the American dream. But debt can also trap those who accumulate too much or simply have bad luck at the wrong time. Fortunately, Tennesseans in this latter camp do not have to stay trapped; they have escape hatches like filing for Chapter 13 bankruptcy.

What is Chapter 13 bankruptcy? It is a form of consumer bankruptcy in which a person puts together a payment plan ranging from three-to-five years. The smaller a person's income, the shorter the payment period. At the end of the payment period, most if not all of the remaining debt is forgiven.

What must a person do to file for Chapter 13 bankruptcy? Several things. They need to complete credit counseling, create a repayment plan and assemble certain documents such as tax returns. Once those items are complete, the person will need to file for bankruptcy, including paying a filing fee and an administrative fee.

What happens next? From here, the person will need to comply with their repayment plan. In general, this means making payments to the bankruptcy trustee (a court-appointed individual who administers the bankruptcy). The trustee will then distribute the payments to the creditors.

Do certain debts have priority when creating a repayment plan? Absolutely. To name a few: The plan must account for the trustee's administrative fee in addition to paying in full debts like alimony, child support and non-dischargeable tax debts.

Tennesseans interested in learning more may benefit from speaking with an experienced bankruptcy attorney.

Source: FindLaw, "What are a Debtor's Obligations under Chapter 13?" Accessed Sept. 13, 2016

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

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