Debt relief is anything that can help someone cope better with a bad financial situation. As a bankruptcy attorney in Nashville, Tennessee, Ron Nevin has helped many people find relief from excessive debt. Here, Nevin explains the term -debt relief- and talks about some legal options available to help individuals who are struggling to meet their financial obligations.
With the economy still on shaky ground and unemployment in some states at all-time highs, many people are finding themselves faced with sky-high debt and piles of bills. When it comes to debt relief, it can come in several forms. Most commonly, however, the term -debt relief- refers to either a Chapter 7 or a Chapter 13 bankruptcy.
Chapter 7 Bankruptcy Chapter 7 bankruptcy is what many people call a -straight- bankruptcy. In a Chapter 7 bankruptcy, most of your debts are discharged. For individuals who are struggling with late credit card payments, medical bills or impending foreclosure, this means relief from threatening phone calls, harassing letters and the fear of losing their home. While a Chapter 7 bankruptcy may not leave you completely without debt (you are still responsible for domestic support obligations, taxes and student loans), it does end the stress and anxiety that accompanies seemingly insurmountable debt.
Chapter 7 is not without disadvantages, though. When you file for Chapter 7 bankruptcy, the bankruptcy trustee can sell any of your nonexempt assets in order to help satisfy your creditors. In extreme cases, however, when an individual is faced with a large amount of debt and no means to repay it within a reasonable timeframe, Chapter 7 bankruptcy may be the only option that makes sense.
Chapter 13 Bankruptcy On the other hand, debt relief comes in a slightly different form in a Chapter 13 bankruptcy. Chapter 13 is most appropriate for someone who is earning an income but, for some reason, has amassed a large amount of personal debt and has fallen behind on payments. When you file for a Chapter 13 bankruptcy, your debt is consolidated and you’re given a payment plan.
Your Chapter 13 payment plan is advantageous for a number of reasons. First, the plan makes your debt more affordable on a month to month basis. Because your debt is consolidated, you’re no longer responsible for paying several bills each month. Instead, you will make a single payment, the amount of which will be determined by your income and necessary living expenses. Second, your payment plan spreads your debt out over a longer period of time, usually from three to five years. This lowers your monthly obligation substantially and allows you to keep more of your income. Having more income to pay for your living expenses helps prevent you from incurring additional debt while you’re paying off your existing creditors, thereby -stopping the cycle- so you can get back on your feet.
Chapter 13 bankruptcy provides relief by allowing you to pay off your debts and improve your credit. It simply changes your situation from one in which you can’t meet your monthly obligations into one in which you can. This also means that the whole of your debt will be paid from your income, not from the sale of any of your assets. Chapter 13 also allows you to keep real property, even if it is not your primary residence, so long as you continue to meet your obligations under your Chapter13 payment plan.
Before deciding to file for bankruptcy, it is always advisable to speak with an attorney to determine which debt relief option may be available to you. In some cases, you can even achieve debt relief without filing for bankruptcy at all. By re-negotiating your agreements with creditors or working out a mutually agreeable discounted payment schedule, an attorney may be able to help you through a difficult financial time while minimizing the impact on your future credit.
This article is for informational purposes only. You should not rely on this article as a legal opinion on any specific facts or circumstances, and you should not act upon this information without seeking professional counsel. Publication of this article and your receipt of this article does not create an attorney-client relationship.
Ron Nevin is a writer for Yodle Law Marketing, a business directory and online advertising company. Find alawyer or more lawyers articles at Yodle Consumer Guide.