If you’ve explored all your debt relief options, you may have decided that bankruptcy is the best choice for your needs, especially if other choices didn’t work out. However, knowing which form of bankruptcy you should pursue can be difficult, as there are many factors that influence each Chapter. As such, if you’re unsure how to proceed, the following blog explores the different bankruptcy chapters for consumers and the factors you should consider when choosing. You will also discover the importance of discussing your legal options with an experienced Memphis, TN consumer bankruptcy attorney if you are ready to begin this process.
What Are the Different Kinds of Bankruptcy for Consumers?
As a consumer, there are typically two forms of bankruptcy you can choose from if you’ve decided that this process is right for you. It’s important to understand the differences between these two Chapters so you can make an informed decision for your process.
The first option you can pursue when filing for bankruptcy as a consumer is Chapter 7. This is a shorter process in which you will have non-exempt assets liquidated by the trustee assigned to your case to pay off debts to creditors. Once all eligible assets have been liquidated and the creditors have been paid, the remainder of your qualified debts will be discharged. As such, you are no longer liable for these debts. It’s important to understand that you must pass a “means” test to file for Chapter 7. Essentially, this means your debt must be lower than the average income for your household size in Tennessee to proceed with this option.
The other option for consumers who wish to file for bankruptcy is to pursue a Chapter 13 filing. Essentially, this Chapter is a repayment plan in which you and your trustee will reorganize your debts into one monthly payment. This payment plan will last three to five years, depending on the circumstances of your case. You will pay the trustee, who then distributes your payments to your creditors on your behalf. Once you have made your final payment, all remaining eligible debt will be discharged. Unlike Chapter 7, this process allows you to retain the majority of your assets.
What Factors Influence Which Bankruptcy Chapter I Should File?
It’s important to understand that there are several factors that can influence which form of bankruptcy you should pursue.
Generally, the first thing you must consider is your income level. As mentioned, you cannot file for Chapter 7 if your income is too high, so you’ll need to pursue Chapter 13 instead.
You’ll also need to consider the value of your assets. If you have a considerable amount of non-exempt, high-value assets, filing for Chapter 13 can help you protect them, as they will be seized and liquidated during Chapter 7 to repay creditors.
Finally, you should consider the type of debt you are in. For those with unsecured debts, like medical bills or credit cards, Chapter 7 can offer a faster option. However, if you have secured debts and want to keep the asset, like your home or vehicle, Chapter 13 may be ideal.
Bankruptcy can be an incredibly difficult process, which is why it’s imperative to discuss your legal options with an experienced attorney. Unfortunately, many assume they can navigate this process on their own, which often has unfavorable outcomes. You may find that your case is dismissed, or that you can face legal consequences if you make errors, as you may be accused of fraud.
At the Arnold Law Firm, our team understands that this process can be overwhelming. That’s why we’re happy to help guide you through this process so you can fight for the best possible outcome for your circumstances. Contact us today to learn how we can assist you during these difficult times to help you get the financial fresh start you deserve.
