Bankruptcy Lawyer Memphis, TN
Bankruptcy is the legal status of an debtor, an individual or business, not able to repay their debts. After the bankruptcy is filed, it is typically processed and ordered by a court. It is governed by Title 11 of the United States legal code, known as the Bankruptcy code. Title 11 is the total compilation of all federal statutes regarding the various bankruptcy process.
Why File Chapter 13 Bankruptcy?
Debtors typically opt to file Chapter 7 bankruptcy. Chapter 7 outlines the process of liquidating assets to pay off debts. Chapter 13, however, allows a debtor to keep property and pay debts
over time. Debtors have the opportunity to restructure their financial affairs to maintain their business and avoid foreclosure. The debtor shows the court a constant source of income, providing assurance that they can repay their creditors. Under Chapter 13, the court is empowered to approve a plan that meets Chapter 13 guidelines without consulting with or gaining the approval from the creditors.
Chapter 13 is different from Chapter 7 in that it consolidates debt instead of immediately addressing it with liquidated assets. Under Chapter 13, restructuring usually takes between 3-5 years–but and may not exceed 5. Employing restructuring of debt pays off many of the creditors and allows for unsecured loans and credit to be consolidated into one loan. This helps when a mortgage is in arrearages or for paying taxes. So, courts in recent years have approved Chapter 13 to be used to as a means of mortgage modification.
How Long Does the Bankruptcy Stay on Record?
A bankruptcy filing under the Fair Credit Reporting Act will stay on record for up to 10 years. A person filing bankruptcy will be unable to obtain a credit card or a mortgage for 1-2 years. Chapter 13 has the advantage over Chapter 7 in that property cannot be foreclosed upon. The discharge of debts comes from restructuring those debts, and not asset liquidation.
Chapter 13 allows the filer to keep their assets rather than lose them during the bankruptcy period. However, a foreclosure still occurs at the end of the bankruptcy. Essentially, Chapter 13 bankruptcy allows debtors to accomplish a copious discharge of debts; i.e., by consolidating the debts in one loan, a debtor wipes out all other debt obligations and reduces the number of creditors they need to repay.
Chapter 13 bankruptcy is less commonly filed than Chapter 7. It employs a structured payment plan to help a debtor pay off their debts on a schedule and avoid harassment by creditors. After filing, the debtor is required to attend debt credit counseling sessions. Once completed, a fee is charged for the filing of information on all of the debtor’s financials, such as income, debt expenses, and both secured and unsecured debt.
When is Bankruptcy Filing Complete?
A trustee is appointed to oversee the debtor’s progress and communicate with their creditors. They’ll meet with creditors and work out a repayment plan. Then, the mutually approved plan is filed and goes to the bankruptcy court for approval. Once approved by the court, the process of filing is complete. For further details about how filing Chapter 13 bankruptcy may help you, contact a bankruptcy lawyer Memphis, TN trusts at Darrell Castle & Associates, PLLC to set up a one-on-one consultation.