Tennessee residents who file Chapter 13 bankruptcies pay down their debts by making monthly payments for three or five years. Once they have made all of their required monthly payments, they receive a document that states the remaining balances on eligible debts will be discharged. Chapter 13 payment plans leave individuals with just enough money to meet their obligations and enjoy a reasonable standard of living, which means the people who file Chapter 13 bankruptcies rarely have funds available to deal with setbacks or emergencies.
Taking out new debt during a Chapter 13 bankruptcy
People who file Chapter 13 bankruptcies are usually barred from taking on new debt, but an exception to this general rule may be made when an individual would find it difficult or impossible to make their required monthly payments without taking on new debt. New debt is often approved during a Chapter 13 proceeding when the money will be used to purchase a vehicle for commuting to and from work.
New debt taken on during a Chapter 13 bankruptcy must be approved by a court. Individuals who wish to take out loans must first submit documents to the court that state why the money is needed and what it will be used for. Bankruptcy trustees sometimes hold hearings to determine whether or not new debt should be approved, but some applications are approved or denied without a hearing. If the bankruptcy trustee approves the new debt, the court order that is issued must be provided to the lender.
A financial fresh start
A Chapter 13 bankruptcy offers an escape from overwhelming debt and provides the opportunity for a financial fresh start. Chapter 13 payment plans do not leave individuals with much money to cope with setbacks or emergencies, which means borrowing is sometimes needed to make ends meet. People who file Chapter 13 bankruptcies are usually barred from taking out loans, but the court may approve new debt if the money is needed to ensure that required monthly payments will continue to be made.