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When is Chapter 7 bankruptcy the right choice?

Interest is a powerful thing. Indeed, if the interest rate is high enough and the principal is big enough, interest can be insurmountable. And yet too many Tennesseans attach a stigma to an essential way to escape the bone-crushing burden of debt -- bankruptcy. For most people frantically trying to move the boulder of debt from off their chest, there is nothing embarrassing about filing for bankruptcy. Bad things happen -- investments sour, health evaporates, jobs disappear.

To recover from these maladies, one option is to file for Chapter 7 bankruptcy. Under this form of bankruptcy, a filer liquidates all of their available assets. In plain English, they sell off most of their stuff. The proceeds of the sale are used to pay creditors.

But contrary to the popular belief that Chapter 7 requires a person to sell off everything they own, including the clothes on their back, not all assets have to be sold off. Some assets are exempt. For instance, sometimes as much as $12,000 worth of assets can be classified as exempt. This exemption can be a useful way to safeguard essential property.

Chapter 7 is not right for everyone, but it is right for some. The biggest hurdle is the means test. If a person passes the test, they can file for Chapter 7. If they fail, they need to choose a different form of bankruptcy, like Chapter 13.

Other considerations are the type of debt and the reason you are mulling bankruptcy over. Not all debts are dischargeable in bankruptcy. Student loans, child support and certain taxes will be waiting on the other side of a bankruptcy. Likewise, bankruptcy is not an every-year option. A person can only file once every eight years. Because of that, filing should not be taken lightly.

Tennesseans curious about their options may benefit from discussing their situation with an experienced bankruptcy attorney.

Source:, "When should you consider bankruptcy?," Matt Mikus, July 24, 2015

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

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