Chapter 7 bankruptcy often seems like the best choice for individuals who have a lot of personal debt. It is faster and does not require that someone make payments for years before a filer’s case can be favorably resolved. Chapter 13 bankruptcy takes longer for someone to complete and requires years of structured payments.
However, the extra time and effort are often worthwhile for those struggling financially in Tennessee. Why do people choose Chapter 13 bankruptcy over Chapter 7 bankruptcy to resolve their issues with unsecured debt?
1. They have too much income
There are strict rules limiting household income levels for a Chapter 7 bankruptcy. Some people won’t be able to pass the means test to qualify for a Chapter 7 filing in the first place. For some people with higher incomes, Chapter 13 bankruptcy is the only viable solution for their financial challenges.
2. They have too much home equity
There are personal property exemptions for some assets. A trustee assigned to a Chapter 7 case may liquidate some non-exempt property in Chapter 7 bankruptcy. Those in the early years of their mortgages may find that Chapter 7 bankruptcy allows them to protect the little equity that they have thus far. But those who have paid off their homes or who have tens of thousands of dollars in equity may find that Chapter 13 proceedings that do not risk asset liquidation are a better option for their families.
3. They have issues with secured debts too
Not all debts are eligible for discharge in bankruptcy proceedings. Some people have car loans or mortgages with terms that they cannot continue to meet. They may worry about the repossession of their vehicles or the foreclosure of their homes because of the unfavorable terms of their loans.
Chapter 13 bankruptcy can help to give people time and leverage to renegotiate some of their debts and obtain better terms that allow them to continue paying their secured debts. Those with more assets or more complicated financial circumstances may find that Chapter 13 bankruptcy is a superior better solution.
Learning more about what happens in Chapter 13 bankruptcy can help people determine if such a filing is the right solution for their circumstances. For those who are facing foreclosure or who don’t qualify for Chapter 7 bankruptcy, this opportunity may be particularly appealing.