An overview of Shelby County bankruptcy in early 2013

May 08, 2013 (Press-News.org) An overview of Shelby County bankruptcy in early 2013

Article provided by Law Office of Steven F. Bilsky
Visit us at http://www.bankruptcyofmemphis.com

Shelby County was hit particularly hard by the recession. Even as economic conditions begin to improve across the country, many residents of Memphis and other parts of Southwest Tennessee are still having financial difficulties.

Fortunately, there is a safety net for those struggling with personal debt in the form of consumer bankruptcy. According to a recent report from The Daily News Online, many Shelby County residents took advantage of the protections offered by the bankruptcy code in the first quarter of 2013.

Chapter 7 filings rise in 2013

Generally, there are two types of consumer bankruptcy, Chapter 7 and Chapter 13. In limited circumstances, certain consumers may benefit from filing under Chapter 11 of the bankruptcy code, but Chapter 11 is typically reserved for the reorganization of businesses.

In January, February and March of 2013, The Daily News Online reported that there were 3,031 bankruptcies filed in Shelby County under these three chapters of the bankruptcy code. Most of them -- 2,161 -- were Chapter 13 bankruptcies. Another 855 were Chapter 7 bankruptcies, with the remaining filings designated as Chapter 11 cases.

Overall, Shelby County bankruptcies in the first quarter of 2013 were down by one percent compared to the same period last year, spurred by a 2.5 percent decline in Chapter 13 cases. However, the general trend did not hold across all types of filings; Chapter 7 filings grew by two percent in the first three months of 2013.

Chapter 7 quicker, Chapter 13 may be advantageous for wage earners

So why would Chapter 7 filings increase while Chapter 13 filings dropped? The answer likely has to do with the differences between the two types of bankruptcy and what they can do for consumers.

Chapter 7 bankruptcy is sometimes known as "liquidation." It gets this name because in some Chapter 7 cases, valuable nonexempt assets are "liquidated," or sold, and the proceeds are used to partially repay creditors before most types of debt are completely discharged. However, most consumers filing Chapter 7 bankruptcy do not have to worry about giving up assets. Generous state and federal exemptions -- including exemptions for equity in a home, personal property up to a certain value and the full value of tax exempt retirement accounts like 401(k)s -- allow most Chapter 7 filers to keep all their property.

One great advantage of Chapter 7 is that it is quick and clean; debts are eliminated in a matter of weeks in the typical Chapter 7 case. But, Chapter 7 may not be the right move for consumers who have substantial assets. What about those who have a regular income, and have accumulated some valuable property, but are simply unable to keep up with their debts? For these individuals, Chapter 13 may be the way to go.

Chapter 13 bankruptcies involve a three to five year repayment plan during which the filer makes regular payments to a bankruptcy trustee. The trustee then distributes these payments to creditors. Debts are consolidated and payments typically lowered under a Chapter 13 plan, making payment manageable given the filer's income. At the end of the repayment plan, most types of remaining debt are discharged completely. For consumers facing foreclosure, Chapter 13 can be advantageous because it stops the foreclosure process and allows them to catch up on past due mortgage payments.

Contact a bankruptcy attorney today

If you're having financial problems, there are legal solutions available. Many other Shelby County residents have been helped out of a financial hole through bankruptcy, and you can be too. Talk to a Shelby County bankruptcy attorney today to explore what bankruptcy might have to offer.