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Discharging debt through bankruptcy

Not all debt is bad debt and not everyone who accumulates too much debt is necessarily unwise with their financial habits. Some people start a business that ultimately does not work. Others have a spot of bad luck, like an illness or a layoff. Tennessee residents who find themselves in this situation may have options, including filing for a Chapter 7 or Chapter 13 bankruptcy.

Bankruptcy allows Tennessee residents to wipe the slate clean or, at least, almost clean. At the end of the bankruptcy process a court will issue an order that permanently prevents creditors from trying to collect on the debts they were owed. In other words, the person who owed those debts no longer has to pay them as a matter of law.

When the debt will be discharged depends on the type of bankruptcy that a Tennessee resident selects. In a Chapter 7 bankruptcy, known as "liquidation" bankruptcy, the court will normally discharge the debt shortly after the creditors have had their chance to object to the bankruptcy. This period typically happens about 60 days after the debtor sits down with creditors in what is called a creditors' meeting and about 120 days after the debtor first filed for bankruptcy.

In a Chapter 13 bankruptcy, known as a reorganization, the court will wait much longer. That is because Chapter 13 involves the debtor creating a payment plan that can last three-to-five years. At the end of the payment period, the court will issue an award discharging the remaining debt, subject to some exceptions. On average, discharge happens about four years after a person files for a Chapter 13 bankruptcy.

Source: FindLaw, "The Debt Discharge in Bankruptcy FAQ," Accessed July 26, 2016

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

Toll Free: 888-376-0282
Phone: 423-933-1606
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