Bankruptcy is a legal process that allows people or businesses who cannot pay their debts to get a fresh start by liquidating their assets and using the proceeds to pay off creditors. If you are considering filing for bankruptcy in Tennessee, you should first understand how the process works and what it can do for you. You should also be aware of the potential drawbacks of bankruptcy, including the impact it can have on your credit rating.
What’s the difference between Chapter 7 and Chapter 13 bankruptcy?
Chapter 7 bankruptcy is also referred to as liquidation bankruptcy. Under Chapter 7, a trustee is appointed to oversee the sale of your non-exempt assets. The proceeds from the sale are used to pay off your creditors. Chapter 7 is generally quicker and easier to file. Chapter 7 can also eliminate some types of debt, such as credit card debt, while Chapter 13 does not.
Chapter 13 bankruptcy is also referred to as a reorganization bankruptcy. It is less common than Chapter 7 bankruptcy, but it can be more beneficial for certain debtors. Under Chapter 13, you create a repayment plan to pay off your debts over a three- or five-year period. You are also allowed to keep your property during the repayment period.
How long do bankruptcies stay on your credit report?
Chapter 7 bankruptcy stays on your credit report for 10 years after filing, while chapter 13 stays on your report for 7 years. This means that it may be difficult to obtain credit during that time. This is especially important if you’re planning on making major purchases like buying a car or home. This is not to say that that you will always be denied credit after bankruptcy. Many people are able to obtain credit and even buy homes after filing.
Bankruptcy can be an excellent way to address crushing debt, but people who file should be aware of the impact that bankruptcy can have on their credit reports. You’ll have to look at your circumstances and determine what’s best for you.