Understanding Chapter 13 bankruptcy eligibility

Life is completely unpredictable. Even when Tennessee residents feel like they have a handle on their economic situation, unexpected events can suddenly cause things to spiral out of control. Medical expenses, auto repairs or necessary expenditures on the home can quickly put families under a mountain of debt and make it difficult to meet financial obligations. Chapter 13 bankruptcy could help individuals get an overwhelming financial situation under control.

Chapter 13 bankruptcy allows individuals to repay their debts over time while enabling them to retain valuable assets like their home. Unlike Chapter 7 bankruptcy where debt is forgiven, Chapter 13 allows for debt restructuring with a three to five-year repayment plan. Those who file for Chapter 13 bankruptcy will need a regular income to qualify, which is why Chapter 13 is also known as the “wage earner’s plan.”

The timeline of the repayment plan will be based on the individual’s income level. Any person who earns a regular income is eligible for Chapter 13 bankruptcy if his or her total debt is within the threshold. The individual must also provide up-to-date tax returns and payments. Those who have had a bankruptcy dismissed within 180 days for a failure to appear in or comply with the bankruptcy court may not be eligible for Chapter 13 bankruptcy.

Although Chapter 13 can help those who are in a financial bind, it does have some disadvantages. Chapter 13 will negatively affect credit and make it difficult to qualify for new credit, at least in the short term. Those in Tennessee who want to know more about Chapter 13 bankruptcy may want to consider discussions with a legal representative. A knowledgeable and seasoned attorney can answer questions and provide much-needed guidance.