In Southwest Tennessee, many seek bankruptcy debt relief early in 2013

Bankruptcy can be a great way for consumers saddled with burdensome debt to get a fresh financial start. With the economy slowly gaining steam, bankruptcy filings in the U.S. are down overall in the early months of 2013.

However, many areas hit particularly hard by the recession are still struggling. Tennessee had the highest per capita rate of bankruptcy filings in the country during the first quarter of 2012. In an analysis of data from the U.S. Bankruptcy Court, Western District of Tennessee, The Daily News found that many residents of Shelby County are still seeking the protections offered by the bankruptcy code.

The basics of consumer bankruptcy

The recent numbers pertained to Chapter 7, Chapter 11 and Chapter 13 bankruptcy. Chapter 7 and Chapter 13 are the primary forms of consumer bankruptcy; Chapter 11 is mainly used for reorganization of corporate entities.

To understand what the numbers mean, it helps to have a basic understanding of the differences between Chapter 7 and Chapter 13 bankruptcy. Chapter 7 is otherwise known as "liquidation." In some Chapter 7 cases, valuable nonexempt assets are sold to partially repay creditors; however, in the vast majority of Chapter 7 bankruptcies, filers do not have to give up any of their property thanks to general federal and state exemptions. A Chapter 7 bankruptcy wipes out most forms of debt almost immediately.

Chapter 13 bankruptcy, on the other hand, involves the partial repayment of debt over a three to five year term. In Chapter 13 bankruptcy, a filer's debts are consolidated and he or she makes regular payments to a bankruptcy trustee to distribute to creditors. At the end of the three to five year term, most types of remaining debt are wiped out completely.

Chapter 13 can be a good option for those with a regular income. It is also attractive for those wishing to save their home; while filers still have to make their mortgage payments during the repayment term, filing for Chapter 13 stops foreclosure and allows homeowners to make up delinquent mortgage payments.

Chapter 7 cases up in Shelby County, which Chapter 13 filings are down

In the first three months of 2012, there were 3,063 bankruptcies filed in Shelby County under Chapters 7, 11 and 13. In the first quarter of 2013, there were 3,031 - a decrease of one percent, but still a relatively high number historically.

Fewer Shelby County residents filed for Chapter 13 bankruptcy in the first quarter of this year compared to the same time period last year; there were 2,161 and 2,216 Chapter 13 bankruptcies in 2012 and 2013, respectively. But, the number of Chapter 7 filings grew two percent, from 838 to 855.

Why the discrepancy between Chapter 7 and Chapter 13? Some experts say it is a function of the number of homeowners who are unable to keep up on their mortgage payments. Remember, under a Chapter 13 plan, foreclosure can be stopped and delinquent mortgage payments made up - but filers must still stay up to date on their mortgage payments during their Chapter 13 plan. Potential filers who cannot or do not wish to stay in their mortgage are usually better served by Chapter 7 bankruptcy.

Talk to a Southwest Tennessee bankruptcy lawyers near me today about your debt

If you are struggling with debt like so many others in Southwest Tennessee, bankruptcy could be the solution you've been looking for. Don't delay in addressing your debt concerns; the earlier you contact a bankruptcy attorney, the more options you're likely to have. Get in touch with a Shelby County bankruptcy lawyers near me today to learn more.