Understanding Bankruptcy in Tennessee

Tennessee residents struggling financially in this tough economy may be wondering about bankruptcy as a solution to their problems. Some people might resist because they do not want to be seen as being irresponsible. Rather than being careless with money, though, it is very likely that people who file for bankruptcy have simply fallen on hard times, such as being hit with unexpected medical bills, losing a job or going through a difficult divorce.

Bankruptcy might be the best choice under the circumstances, but anyone considering this path to debt relief ought to take a realistic approach and learn how bankruptcy works and what it actually can and cannot do.

Consumer Bankruptcy

Most consumers who file for bankruptcy do so under either Chapter 7 or Chapter 13 of the bankruptcy code. Under Chapter 7, often called liquidation bankruptcy, a debtor can be completely relieved of some debts, and under Chapter 13, often called reorganization bankruptcy, debt balances may be reduced and reorganized. Either way, a bankruptcy filer will have to make some sacrifices - possibly losing property or having to drastically reduce spending for a number of years.

Neither type of bankruptcy eliminates all kinds of debts. Taxes, child support, spousal maintenance payments and student loans are some types of debt that are generally not dischargeable in bankruptcy.

Other Bankruptcy Concerns: Fraud and Credit Rating

It is a very bad idea to run up a lot of credit card debt right before filing for bankruptcy, anticipating that the debt will soon be discharged. Bankruptcy courts are likely to consider this to be fraudulent behavior, and these debts will likely not be discharged.

On the bright side, bankruptcy does not automatically result in permanently ruined credit. It is possible to obtain a secured credit card very soon after debts are discharged, with a regular credit card within a year or so. These credit cards make it possible to rebuild your credit safely - often times, even sooner than if you never declared bankruptcy in the first place. Some bankruptcy filers can even qualify for a mortgage two or three years afterward.

Consulting an experienced bankruptcy attorney is a wise move for anyone contemplating bankruptcy as a way to manage and get relief from overwhelming debt.