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When Is Filing Bankruptcy a Good Option?

Steven C. Frazier, Attorney At Law Jan. 18, 2024

Stressed man with petition to file for bankruptcy As an experienced bankruptcy attorney, I've had many clients come to my office in Kingsport, Tennessee, feeling overwhelmed by their financial situation. They're grappling with mounting debts and see no way out. It's in these moments that the question often arises: Is bankruptcy a good option? 

Let me tell you, there's no one-size-fits-all answer here. Deciding to file for bankruptcy is a significant decision that requires careful analysis of your financial circumstances, understanding the implications of various bankruptcy options, and considering the impact on your assets. 

As your attorney, my role is to guide you through this process, providing the information and support you need to make an informed decision. It's not about rushing into filing for bankruptcy; it's about understanding when bankruptcy could be a viable solution for your financial challenges. 

Evaluating Your Financial Situation 

As an attorney, I often find people in a tight spot financially, not sure of how to escape their debt. The first step in this journey is to evaluate your financial situation. This isn't just about looking at your bank account and seeing red numbers; it's about understanding your income, expenses, assets, and debts in their entirety. 

Start by listing all your sources of income and then your recurring monthly expenses. Don't forget to include periodic expenses like annual insurance premiums or property taxes. Then, make a comprehensive list of all your debts. These could be credit cards, student loans, medical bills, mortgages, or even personal loans from family members. 

Once you have these laid out, compare your income to your expenses and debts. If you're spending more than you're earning and have exhausted all means of increasing income or reducing expenses, bankruptcy might be an option to consider. But remember, filing for bankruptcy is a serious decision with long-term consequences. It will impact your credit score and may affect future loan or employment opportunities. 

Understanding Your Bankruptcy Options and Debt Forgiveness

In Tennessee, individuals typically file for either Chapter 7 or Chapter 13 bankruptcy, each with its own benefits and drawbacks. Under Chapter 7, you can discharge most of your unsecured debts, like credit cards and medical bills. However, you must pass a means test to qualify, proving that your income is below a certain threshold. 

On the other hand, Chapter 13 bankruptcy allows you to restructure your debts into a manageable repayment plan over three to five years. This option is more suitable for those with a regular income and who wish to keep their assets, such as a home or car. 

It's important to understand that not all debts are dischargeable in bankruptcy. For instance, student loans, child support, alimony, and certain tax debts generally cannot be wiped out. Hence, it's crucial to take a close look at your debts and understand which ones can and cannot be discharged before making any decisions. 

Considering the Impact on Your Assets

Bankruptcy isn't just about wiping out your debts; it also involves your assets. In Chapter 7 bankruptcy, some of your property may be sold to repay your creditors. However, Tennessee law allows you to exempt certain assets from being sold in bankruptcy. These exemptions include your home, car, personal belongings, tools necessary for your work, and even your retirement accounts, up to certain limits. 

In contrast, Chapter 13 bankruptcy doesn't require the sale of your assets. Instead, the value of your non-exempt assets is factored into your repayment plan, meaning you could end up paying more to your creditors over time. It's essential to consider the impact on your assets before deciding to file for bankruptcy. 

How Legal Counsel Can Help

Bankruptcy law can be overwhelming. As an attorney with years of experience in this field, I can guide you through every step of the process. From evaluating your financial situation to understanding your bankruptcy options and how they will affect your assets, I can provide the legal counsel you need. 

I can also help you fill out the necessary paperwork, represent you in court, and negotiate with your creditors if needed. My goal is to ensure that you make informed decisions that will lead to the best possible outcome for your financial future. Remember, bankruptcy is a tool designed to give you a fresh start, not a punishment. 

Filing for bankruptcy is a significant decision that should not be taken lightly. If you're looking for support in or around Kingsport, Tennessee — including Church Hill, Johnson City, Bristol, or anywhere in Northeastern Tennessee — seek professional legal counsel at Steven C. Frazier, Attorney At Law to help guide you through the process.