People in Tennessee who are struggling with debt might be wondering whether they should file for bankruptcy and what types of debts they would be able to discharge. Some debts cannot be discharged in any kind of bankruptcy, and Chapter 13 bankruptcy differs from Chapter 7 in terms of how dischargeable debts are handled.
Debts that cannot be discharged
In general, child support and alimony cannot be discharged in bankruptcy nor can most tax debts. Discharging student loans is only allowed in very limited circumstances when a person can demonstrate “extreme hardship.”
Potentially dischargeable debts include personal loans from friends and family, medical debt, credit card debt and utility bill debts. With a Chapter 13 bankruptcy, a person works out a payment plan with creditors over a period of three to five years. If they stick with this payment plan, remaining debts may be discharged at the end of the payment period. The advantage of Chapter 13 is that it can allow a person to keep certain assets, such as a home, as long as they are able to make payments on it.
With a Chapter 7 bankruptcy, some of a person’s assets might be sold to cover certain debts while the rest are discharged. However, even under Chapter 7, many assets may be considered exempt up to a certain value, including vehicles. Chapter 7 can be the best choice for people who have few assets since they might be able to keep them all. A person who owes too much money to qualify for Chapter 13 may lose assets with a Chapter 7 if they have a lot of them, but all eligible debts can be discharged rather than having to make payments on them for a few years.
Bankruptcy can give people struggling with debt a fresh start. An attorney may be able to help a person determine whether bankruptcy is the best choice in their situation and if they qualify for a Chapter 7 or a Chapter 13 filing.