Chapter 7 is a liquidation bankruptcy whose primary purpose is to have your debts discharged. The bankruptcy discharge relieves you after bankruptcy from having to pay many of your pre-bankruptcy debts. However, not everyone qualifies to file for Chapter 7 Bankruptcy, so an individual or married couple must have little or no disposable income to qualify for Chapter 7 relief. If you, or you and your spouse, make too much money, you may be required to file a Chapter 13 Bankruptcy.

When you file for Chapter 7 Bankruptcy, the Bankruptcy Court appoints a trustee to administer your case and review your assets and debts. The Chapter 7 trustee’s job is to find and to potentially sell any non-exempt (unprotected) assets to pay back your creditors. If you do not have any non-exempt assets, your creditors will receive nothing from your bankruptcy trustee. Chapter 7 Bankruptcy is typically filed by low to moderate income individuals or couples with little to no assets who want to get rid of unsecured debt such as credit card debt, medical debt, payday loans and signature loans.

Chapter 13 is a reorganization bankruptcy for individuals or couples with regular income who can pay back a portion of their debts through a court-approved repayment plan. As discussed above, if you, or you and your spouse, earn too much money to qualify for Chapter 7 relief, you may have no choice but to file for Chapter 13 Bankruptcy. Many Mississippians also file for Chapter 13 Bankruptcy because they are behind on mortgage payments or vehicle payments and they want to keep and save their home, vehicle, or both. Chapter 13 offers many of the benefits that Chapter 7 offers in that you can still discharge most, or all, of your unsecured debt while being able to catch up on missed mortgage payments or past due vehicle payments.

In Chapter 13, you get to keep all your property (including non-exempt assets). However, in exchange for that benefit, you pay back a portion, or all, of your debts through a repayment plan. Just like in a Chapter 7 Bankruptcy, in a Chapter 13 Bankruptcy the Court appoints a Chapter 13 trustee to administer your case and review your assets, debts, income and expenses; however, in a Chapter 13 Bankruptcy, you will make a monthly payment to the Chapter 13 trustee, who, in turn, pays your creditors. The amount that you pay to your Chapter 13 trustee, and repay to your creditors, depends on several factors such as the value of your non-exempt assets, your income, expenses, household size and the types of debts that you owe. Chapter 13 is typically for people who can afford to make monthly payments to a trustee to get current on missed mortgage or vehicle payments or to pay off non-dischargeable debts such as alimony, child support or delinquent tax liabilities.

When filing for bankruptcy protection, you must include everything that you own (land, home, vehicles, personal property, bank accounts, retirement accounts, etc.) as well as everyone or every entity to whom you owe money. Failing to list all your assets or all your debts can have serious legal ramifications and you should consult with an experienced bankruptcy lawyer to discuss your rights and obligations.

When individuals or couples file for bankruptcy protection, the Bankruptcy Court issues an Order known as the Automatic Stay. The Automatic Stay is a powerful tool for Mississippians that are facing foreclosure, wage garnishment, repossession of vehicles or other property and harassing collection calls from creditors. Most people have heard of a restraining order or have watched a movie or television program where a restraining order was discussed. Unlike a restraining order, where you must go to court and ask a judge for the restraining order to be issued, when you file for bankruptcy protection, the Bankruptcy Court immediately issues the restraining order (known as the automatic stay) which stops debt collections, wage garnishments, repossession efforts and foreclosure proceedings. What chapter of bankruptcy you file is largely dependence upon your own set of facts and circumstances and the different chapters of consumer bankruptcy are discussed below.

In a Chapter 7 Bankruptcy (also known as the liquidation chapter), the Bankruptcy Court discharges (or cancels) most, or all, of your debts. Common types of debt that you cannot discharge include certain types of taxes, domestic support obligations such as alimony and child support, most student loans, criminal fines, court ordered criminal restitution and personal injuries that you may have caused while operating a motor vehicle, boat, or aircraft while under the influence of drugs or drugs or alcohol. Other debts that can be excepted from discharge include debts that arose due to fraud or theft, and intentional injuries that you inflicted on someone else.

Not everyone qualifies to file for Chapter 7 Bankruptcy and individuals, or married couples, must pass a means test to qualify to file a Chapter 7 Bankruptcy petition. If your household income is too high, you (or you and your spouse) may only be eligible for filing a Chapter 13 Bankruptcy. The means test has two parts—part one compares your household income over the last six months with the median household income for a family of your size (you, your spouse, any dependents, and others that live in your household that you do not claim as dependents such as your parents, friends, or other relatives) in the county where you live. If your income is higher than the median household income for your county, you fail part one of the means test and must move on to part two of the means test which considers your secured debt (such as mortgage payments, vehicle payments, taxes, and other deductions) as well as the amount of your unsecured debt. If part two of the means test shows that you could repay at least 25% of your total unsecured debt over a 60-month period, you may also fail part two of the means test. If this is the case, Chapter 13 may be your only option for filing for bankruptcy protection.

Many people mistakenly believe that if you file for Chapter 7 protection that you will lose assets such as your home, vehicles, or bank accounts. This is a common myth and is untrue. In Mississippi, individuals are allowed to exempt (or protect) up to $75,000.00 in home equity and up to $10,000.00 in personal property ($20,000.00 for married couples). Additionally, individuals that are 70 or older are allowed to exempt an additional $50,000.00 in property (real or personal). You are also allowed to exempt your retirement accounts (pensions and 401(k), for example). There are many other exemptions under both Mississippi and federal law that can help people retain assets. To learn about these exemptions, it is imperative that you consult with an experienced Mississippi bankruptcy attorney.

If you are current with mortgage payments or payments on your vehicles or other secured debts, it is very likely that you will be able to retain these assets even if you file for Chapter 7 Bankruptcy. In most instances, your mortgage company or vehicle finance company will send your attorney what is known as a reaffirmation agreement, that, if signed by you and entered with the Bankruptcy Court, legally binds you to keep paying for those debts as if the bankruptcy never occurred. There are benefits and detriments to signing reaffirmation agreements, which will be explained in detail with you, if applicable to your case. Again, you should consult with an experienced bankruptcy attorney to learn about your rights under the bankruptcy code.

If you have assets that are not exempt, or if your property is worth more than state or federal exemptions allow (for example, if you have more than $75,000.00 in equity in your home or have personal property worth more than $10,000.00 (or $20,000.00 for a married couple), your Chapter 7 Trustee may sell (or liquidate) the property to repay your creditors. The Chapter 7 Trustee is a court-appointed person whose main goal is to determine whether you are entitled to a discharge or if there are non-exempt assets that he or she can sell to repay some, or all, of your debt. In most Chapter 7 cases, the Trustee finds no non-exempt assets to sell to repay your debts because Trustees are generally looking for high value, non-exempt items of property that can be marketed and sold quickly. A typical example of non-exempt property subject to seizure by the Chapter 7 trustee is land or a home that you own that you do not live in (i.e.—that is not your homestead property) that has value and can be marketed and sold quickly. If the land or property is not developed, in bad shape or of little value, it is likely that the Chapter 7 trustee will have no interest in taking that property from you. Another example of non-exempt property that a trustee will take are proceeds from the settlement of a personal injury claim (such as a car accident or slip and fall accident) or a class action lawsuit.

Please note that if you are very far behind in payments toward your mortgage or vehicle, the Chapter 7 Bankruptcy will stop a foreclosure or repossession, but the filing of a Chapter 7 cannot guarantee that you can save those assets. If you are very far behind in mortgage or vehicle payments, you may want (or need) to file for Chapter 13 Bankruptcy, which is discussed in more detail on our website.

The entire Chapter 7 process usually takes about four to five months. The Bankruptcy Court’s fee for a Chapter 7 is currently $338.00 and includes the filing fee and administrative fees for administering your case. You will also have to take two classes/courses, either online or by phone. The first class/course is called credit counseling and the second class/course is called debtor’s education. There are several credit counseling providers in the market, but the one GADOW TYLER typically uses costs $11.99 per class/course. There is one mandatory court hearing that you will have to attend, commonly known as the meeting of creditors, which will occur about one month from the date you file your bankruptcy petition. A helpful video related to the meeting of creditors produced by the Unites States Courts is linked below. There may be other hearings that you will need to attend, but these are rare in Chapter 7 filings and the meeting of creditors is usually the only court hearing you must attend.

VIDEO RELATED TO THE MEETING OF CREDITORS:

https://www.youtube.com/watch?v=qLUNckN7SsQ

A Chapter 13 Bankruptcy is commonly referenced as a reorganization of your debts. Chapter 13 differs from Chapter 7 because it is not a liquidation of your unsecured debts, but a plan that you and your lawyer propose to the Court and your creditors to repay your secured debt (such as your mortgage or vehicle loans) and a repayment of your unsecured debts (such as credit cards, medical debts, payday loans and other unsecured loans) at an amount ranging from zero percent (0%) to one-hundred percent (100%), which is largely driven by your income, household size, sources of income, types of debt and your monthly household expenses.

The Bankruptcy Court’s fee for a Chapter 13 is currently $313.00 and includes the filing fee and administrative fees for administering your case. You will also have to take two classes/courses, either online or by phone. The first class/course is called credit counseling and the second class/course is called debtor’s education. There are several credit counseling providers in the market, but the one GADOW TYLER typically uses costs $11.99 per class/course.

There is one mandatory court hearing that you will have to attend, commonly known as the meeting of creditors, which will occur about one month from the date you file your bankruptcy petition. A helpful video related to the meeting of creditors produced by the Unites States Courts is linked below.

VIDEO RELATED TO THE MEETING OF CREDITORS:

https://www.youtube.com/watch?v=qLUNckN7SsQ

Many Mississippians choose to file Chapter 13 Bankruptcy because they are facing foreclosure of their primary residence (or other land that they own) or repossession of their vehicle. The Chapter 13 repayment plan allows an individual or couple to pay their ongoing mortgage payments and their past due mortgage payments (commonly referenced as mortgage arrears) and repay the mortgage company over a three (3) to five (5) year period. In the context of a vehicle, a Chapter 13 Bankruptcy allows for you to completely refinance your automobile loan and usually lowers the interest rate you are paying to your finance company. The current rate of interest paid in a Chapter 13 Bankruptcy for vehicles and other secured debts is 5.25%, but that rate is subject to change and is set by the judges in the Northern and Southern Districts of Mississippi. In addition, if you financed your vehicle more than nine hundred and ten (910) days before filing for bankruptcy and your vehicle is worth less than what you owe, you can pay the value of your vehicle instead of the amount you owe. For example, if you purchased your vehicle more than nine hundred and ten (910) days prior to filing your bankruptcy and you owed $20,000.00 to the finance company, but your vehicle is only worth $12,500.00, you are only obligated to repay the $12,500.00 plus interest to the finance company. In short, the Chapter 13 Plan allows you to implement payment terms that are favorable to you rather than some of the unrealistic terms that your creditors are attempting to impose upon you such as a large, lump sum payment to your mortgage company to stop a foreclosure or a large, lump sum payment to your vehicle finance company to stop the repossession of your vehicle. Similarly, secured debts for furniture or appliances can also be repaid at value in a Chapter 13 Plan. If the debt was incurred more than one (1) year from the filing of the bankruptcy petition, you can pay the value of the furniture or appliances instead of the amount that you owe to the finance company. For example, if you financed a washer, dryer and refrigerator from a local company and you purchased those items more than one (1) year from the day you filed your bankruptcy, if you owe $2,500.00, but the items are only worth $1,000.00, you can repay the $1,000.00 plus interest instead of the $2,500.00.

In addition, if your vehicle has already been repossessed, Chapter 13 can allow you to get your vehicle back and repay the finance company over the three (3) to five (5) year period discussed above. You have an automatic right of redemption to get your vehicle back that lasts ten (10) days after the repossession.

Chapter 13 Bankruptcy also allows for repayment of certain types of debts that are non-dischargeable in a Chapter 7 proceeding, such as child support, alimony and delinquent income or sales taxes. For example, if you are behind in child support payments, the Chapter 13 Bankruptcy can help you propose a plan to pay your ongoing support payments and a smaller payment to repay your past due support. Similarly, if you have delinquent tax payments owed to the IRS or to the Mississippi Department of Revenue, the Chapter 13 Plan can propose to repay these delinquent taxes over a three (3) to five (5) year period. In a Chapter 13, the taxing authorities mentioned above will file a proof of claim that sets forth what must be paid back (commonly known as secured and priority tax debts), any tax debt that is not classified as secured or priority can be discharged just like credit card debt or medical debt.

To be eligible to file for Chapter 13 Bankruptcy, an individual, or married couple, needs to have income sufficient to fund the Chapter 13 Plan, needs to have filed all the tax returns they were required to file for the past four (4) years and have debts under a certain limit as specified by the bankruptcy code. If your debts are over these legally specified limits, you are not eligible to file for Chapter 13 Bankruptcy.

As discussed above, you must include all your debts in your Chapter 13 Bankruptcy, but there is a great deal of confusion when clients are faced with listing debts and proposing for repayment of those debts or the discharge of those debts. There are a few ways that debts are treated in a Chapter 13 Bankruptcy:

First, there are debts that you can repay outside of the bankruptcy proceeding. This may include your ongoing mortgage payment if you are not too far behind on your mortgage payments with the bank or mortgage company. This may also include your ongoing child support or alimony payments if they are already wage withheld by your employer or paid directly by you if you are not behind on ongoing child support or alimony payments. Lastly, if you have a 401(k) loan that is being deducted from your paycheck, this wage deduction will remain the same and not be paid back through the Chapter 13 Plan. If, however, you are behind on mortgage payments, child support, or alimony payments, these debts will most likely have to be repaid through the Chapter 13 Plan.

Second, there are certain secured or priority debts that must be repaid through the Chapter 13 Plan. These debts include vehicle loans, loans secured by furniture or other household goods, taxes owed to the IRS or the Mississippi Department of Revenue (or other taxing authorities) and past due child support. In addition, and as discussed above, if you are behind on your mortgage payments, your ongoing mortgage payments and past due mortgage payments must be repaid through the Chapter 13 Plan.

Third, unsecured debts are paid through the Chapter 13 Plan based upon several circumstances, including, but not limited to, your income, household size, expenses, and your sources of income. Most clients will repay only a portion of their unsecured debts through the Chapter 13 Plan and any remainder will be discharged (or wiped out) upon the completion of your Chapter 13 Plan. You may pay anywhere from zero percent (0%) to one hundred percent (100%) of your unsecured debt in the Chapter 13 Plan based upon your individual or family’s financial circumstances. Examples of these types of debt are credit card debt, medical debt, payday loans, personal loans, vehicle repossession deficiencies and certain types of tax debts.

Although bankruptcy filings are a matter of public record in the federal court filing system (commonly known as the Public Access to Court Electronic Records or “PACER”), it is highly unlikely that anyone in your hometown or community will know that you filed for bankruptcy protection unless you tell them. Bankruptcies used to be published in local newspapers, but that has not been commonplace in quite some time.

Your bankruptcy filing will be reported on your credit report for up to ten (10) years, but you can begin rebuilding your credit almost immediately upon exiting bankruptcy. For example, in a Chapter 7 Bankruptcy filing (that is over in four to five months), most people will immediately begin receiving new credit offers from the major credit card companies. You can begin rebuilding your credit by accepting one of these offers, using the credit card and paying off the balance at the end of each month. You need to remember that you want to use this card wisely and not run up a huge balance that you cannot pay off, so use it to buy necessities such as groceries or gasoline and pay the entire balance at the end of each payment cycle. Beware of credit cards with annual fees and high interest rates. You can also apply for an installment loan from your bank and keep the money in a savings account at the bank. You can also use the savings account as collateral for the loan. Make sure that you make the payments on time. You will pay interest on the loan, but this is also a way to rebuild your credit.

If you are in a Chapter 13 Bankruptcy, which lasts anywhere from three (3) to five (5) years, your credit score will typically be better when you exit bankruptcy than when you entered bankruptcy because some, or all, of your debts will have been paid over the course of the bankruptcy proceeding. To apply for new credit or purchase anything on credit while in Chapter 13 Bankruptcy, you will need permission from your Bankruptcy Judge.

Yes. Once the bankruptcy is filed and the automatic stay is in place, we will notify your payroll department and have all garnishments stopped. In most instances, we can also recover any wages garnished from your paycheck in the ninety (90) days prior to filing the bankruptcy.

Yes. Once the bankruptcy is filed, creditors that you list in your bankruptcy paperwork will be notified by the Bankruptcy Court that the automatic stay is in place and to stop all collection efforts against you. Creditors are no longer allowed to contact you. There may be a one-to-two-week period where some creditors continue to call, but once the case is filed, they are required to work directly with our office.

Married couples can decide to file together or individually; however, it is important to have an experience bankruptcy attorney look over your financial situation and determine if a joint filing is better for you and your family. For example, there may be joint debts owed by both spouses that will not be taken care of properly if only one spouse files for bankruptcy.

The Bankruptcy Court currently charges $338.00 in fees for filing a Chapter 7 Bankruptcy and $313.00 for filing a Chapter 13 Bankruptcy. Since each case and client are different, we offer a free consultation to determine what costs you will pay in addition to the filing fees mentioned above. In Chapter 7 filings, the filing fee and attorney’s fees must be paid in full prior to filing the case. In a Chapter 13 Bankruptcy, what you pay up front in addition to the filing fee varies from client to client. We offer a variety of payment plans to fit each individual client’s needs.

You can file for bankruptcy protection as many times as you want, but there are limits on when you can receive a discharge in a bankruptcy. For example, an individual or married couple can only receive a Chapter 7 discharge once every eight years. You can receive a Chapter 13 discharge every two years, so if you are in a Chapter 13 for five (5) years and receive a discharge, you can re-file Chapter 13 and are entitled to a new discharge. If you have previously filed a Chapter 13 and receive a discharge, you cannot receive a Chapter 7 discharge for four years. All these calculations are based on filing date to filing date (i.e.-the day you filed your bankruptcy). Please note that the Bankruptcy Court does have the power to deter (or punish) people who continuously file for bankruptcy protection (especially Chapter 13 Bankruptcy) by limiting their ability to file another case for anywhere from six (6) months to one (1) year.

Most student loans are excepted from the discharge. There is a way to discharge student loans, but it can be a costly and difficult process. To discharge student loans, a person that files for bankruptcy must file a lawsuit against the student loan company within the bankruptcy. These lawsuits are called adversary proceedings. You must also convince a Bankruptcy Judge that your student loans impose an “undue burden” on you and your family and also pass a three part test as follows: (1) That you cannot maintain, based on current income and expenses, a ‘minimal’ standard of living for you and your dependents if forced to repay the loans; (2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and (3) that you have made good faith efforts to repay the loans. For most Mississippians, parts two and three of the test are the most burdensome to pass.