Chattanooga Bankruptcy Law Blog

Most people are not surprised when someone advises them not to rake up too much of debt on their credit cards, as repaying an enormous credit card debt can often bring about significant financial challenges. It seems, however, that many Americans, including many in Chattanooga and Hamilton, have been forced to turn to credit cards to get by. The result is that at the end of the fourth quarter of 2018 nationwide credit card debt stood at a staggering $870 billion.

Many people have seen reports about the high dependency of Americans on credit cards, especially during and after the financial downturn of 2008. But what makes this latest debt figure interesting is that this $870 billion is almost 83% of the total revolving debt of $1.05 trillion that exists in the country. A major contributing factor was a rise of $26 billion in debt during the last quarter of 2018 alone, which is the highest quarterly increase among all the different categories of household debts in the country.

In the past, you may have considered yourself someone who handles money well. Now, you wonder whether having that idea was correct because you have landed on hard financial times. Before you start beating yourself up, you may want to remember that numerous people face financial difficulties and accrue substantial amounts of debt, and you have options for effectively addressing that debt.

You may have been thinking about filing for bankruptcy for some time because of the depth of your debt. However, you may have felt hesitant to file because you have tax debt and were unsure whether bankruptcy could help. Fortunately, if your situation meets certain criteria, you may have the chance to have your tax debt discharged.

Bankruptcy is a serious legal process that requires individuals to meet significant mandated tasks in order to eventually reach debt discharge. Those who file for Chapter 7 bankruptcy must agree to sell off some of their assets through liquidation in order to acquire enough money to pay off their creditors as fully as possible and work through their bankruptcy processes. In order to use Chapter 7 bankruptcy and its liquidation requirement Tennessee residents must first qualify for it.

Some individuals may be denied the chance to use Chapter 7 bankruptcy if their incomes are too high. Chapter 7 is generally reserved for those who do not have the discretionary income to put toward paying down their debts, and those debtors who can reorganize their income and debts so that repayment is an option may have to use Chapter 13 bankruptcy instead of Chapter 7.

Not all forms of bankruptcy are available to all debtors. While some bankruptcy options are available to individuals, others are only open to certain types of corporations or businesses. For Tennessee residents who wish to use bankruptcy to overcome their financial hardships, there are two main formats that are typically used: Chapter 7 bankruptcy and Chapter 13 bankruptcy.

Chapter 7 bankruptcy involves the liquidation of personal assets so that a debtor may repay their creditors for their outstanding loans and obligations. Chapter 13 bankruptcy, however, involves the use of a debtor's disposable income to repay creditors over time. Because the debtor in a Chapter 13 bankruptcy must submit a plan to their bankruptcy court that details how they will use the money they are making to satisfy their debts and liabilities, they effectively reorganize their finances to pay off what they owe to others.