Chapter 13 in Memphis: A Good Thing or a Threat?
There’s a question that’s arisen a lot in Memphis over recent years: is Chapter 13 worse than Chapter 7 bankruptcy?
In large part, the question came up because of a study produced by MLK50 in 2023. It asks a lot of good questions about Chapter 13 in Memphis and Shelby County. And as a Memphis bankruptcy lawyer who has been helping people file for decades, there are parts of the study I would love to clarify.
What We Know About Chapter 13 Bankruptcy in Memphis
Memphis has one of the highest bankruptcy rates in the country, including Chapter 13 bankruptcy. A lot of people have wondered if there’s anything in particular about Memphis that sets these numbers so high.
For example, are there policies we’ve put in place that make bankruptcies more likely? Is there some geographic or demographic reason why Chapter 13 bankruptcy filings are so high in our city compared to others?
Before understanding the reasons why filings are high in Memphis, it’s important to understand what Chapter 13 bankruptcy actually is.
Chapter 13 is an extremely powerful tool that can change a person’s life if they need it. When you file, you set up a payment plan with the help of your attorney and the courts. The plan is designed completely around you and your financial situation. As a result, it’s meant to be completely affordable for you to pay each month. And when you’re done paying off this plan, the rest of your debts are completely discharged, and you have a fresh start.
It allows you to stop repossession, stop foreclosure, and end wage garnishment. And it has the power of the courts behind it, so it’s enforceable by law.
Over the years, our attorneys have helped families keep their assets, stay in their neighborhoods, and provide stability for their children, all with the help of Chapter 13.
In fact, we’re so proud of the good things we’ve seen that we published a free report about it. The Power of Chapter 13 outlines some of the ways this section of the bankruptcy code can help you.
But at the same time, it does come with potential disadvantages. For example, not everyone will qualify. And some people who do qualify stop paying into the plan for a variety of reasons, including everything from unexpected job loss to simply not wanting to.
When that happens, the debts aren’t discharged, and so you’re left back where you started. So we always encourage people to be thoughtful about using this powerful option.
What Explains Memphis’ Chapter 13 Statistics?
The report outlines a few reasons why Memphis may have a higher rate of Chapter 13 bankruptcy than other big cities.
For one, they note our lack of public transportation. Other big cities, like New York and Chicago, have more robust public transportation systems with a lot of different options. Generally in Memphis, most people consider it critical to have a car. A lot of families that come in to see us need their cars for school, work, and to be a part of the community. That makes Chapter 13, which stops repossession, an attractive choice.
The report also mentions Memphis’ eviction laws. Chapter 13 doesn’t stop an eviction in the long run. While it can sometimes be a short-term solution, eventually when your lease runs out, you could still have to move. We advise clients about this whenever they come to see us with this problem, because we’re concerned about your long-term success.
Our View on Chapter 13 and Our Responsibility to Our Clients
Most alarmingly, the report describes some law offices strongly encouraging or even funneling clients into Chapter 13, even when it isn’t the best option for them.
We can’t speak to the practices of other law firms, but at our firm, we never push a certain type of bankruptcy just because it benefits us. In fact, it doesn’t benefit us to do that at all.
If you aren’t able to complete your bankruptcy (in other words, you don’t finish paying off the plan), we don’t get our fee. So it’s in our best interest to file Chapter 13 for people who will be successful with it.
But in addition, it’s our obligation as attorneys to give our clients the best legal advice we possibly can. So we focus entirely on you and your goals and what you need out of this process.
At our free, initial consultation, our main goal is to find out what problem you want to address and what you want your life to look like after your bankruptcy. We’re here to give you a fresh start, freedom, and new options in life.
The Bankruptcy You Need from People Who Care
Bankruptcy isn’t always the perfect solution, and it does have some disadvantages and limitations. But it can be an elegant and important way for people in debt to get a fresh start and new lease on life.
We believe it is the moral, ethical, and humane thing to offer people a way out of debt. And, to that end, we want to help every client who walks through our doors and, as a result, the city of Memphis.
We offer a free consultation so you can get to know us. At that first meeting, we’ll walk through all of your options and give you an idea of what to expect from the process.