How Chapter 7 Bankruptcy Works In Arkansas
For most people, the goal of Chapter 7 bankruptcy is to wipe out as much debt as possible. In legal terms, this is called having your debts discharged.
In exchange for your bankruptcy discharge, you must be willing to turn over any of your property that is not exempt under bankruptcy law. The bankruptcy trustee in charge of your case will liquidate the property to pay as much as possible to your creditors; thats why Chapter 7 is often called liquidation bankruptcy.
This article covers:;
- debts you owe under a divorce or separation agreement
- fines, penalties, or criminal restitution payments, and
- any debts related fraud youve committed or injuries youve caused.
In addition, you often cant discharge debts that are secured by a particular piece of property. For example, if you have a car loan, the lender may be able to repossess your car. If you have a home loan and cant show that your home is exempt under bankruptcy law, the lender may have the right to foreclose your mortgage.
Find Out If You Qualify For Bankruptcy
To qualify for Chapter 7 bankruptcy, you must show that you dont have enough income to repay your creditors a reasonable amount. You can do this by:
- proving that your income is below the Arkansas median income for your household size, or
- comparing your income to expenses under a complex formula called the bankruptcy means test to show that you cant pay.
If your income is above the median income for your state and family size and the means test shows you have enough disposable income to make reasonable payments to your creditors, you may still qualify to file under Chapter 13. To qualify for chapter 13, your debt must be under the limit set by the bankruptcy code and you must be current on your tax filings for the last four years.
To take the means test, you can use our free means test calculator.
Fill Out Bankruptcy Forms
It is then time to fill out your bankruptcy forms. The forms necessary to file bankruptcy vary by state, so you should get in touch with your local bankruptcy court to get the forms and ask about the requirements.
Alternatively, get in touch with our Jackson, MS bankruptcy attorneys to know more about the necessary forms in Mississippi and to let us help you file them.
Bankruptcy forms will typically ask you about your finances, including expenses, debts, and past transactions. You will also have to get into detail about your current debts.
Learn The Basics Of Bankruptcy
Bankruptcy is a legal proceeding created to give people a fresh start after financial disasters. If you’ve explored your alternatives and can’t see a way out from under your debt, bankruptcy may be the right solution for you.;
There are two main types of bankruptcy for individuals: Chapter 7 and Chapter 13. Chapter 7 can wipe out most of your debts in a matter of months in exchange for giving up all of your property that the bankruptcy law does not protect.
Chapter 13 takes three to five years. During that time, you repay some or all of your debts under a payment plan approved by the bankruptcy court. Its often used by people who are behind on mortgage payments and want to use Chapter 13 to catch up. Most folks who file for bankruptcy prefer to file for Chapter 7 if they qualify, because you can get out from under lots of debt in a matter of a few months.
What Are Bankruptcy Exemptions
Specific states have certain exclusions that are enacted by congress as federal bankruptcy exemptions for filers. These exemptions will determine what you are able to retain throughout and after Chapter 7. In a Chapter 13 situation, the exemptions will determine what amount you will have to pay certain financial institutions in your repayment plan.
- Property you own and occupy to $75,000, but cannot exceed 160 acres. You may claim a former residence if you are over 60 and married or widowed. Sale proceeds are also exempt. A mobile home may qualify for exemption if you own land on which it is located. May file homestead declaration. Married couples can double only if they are living in separate residences.
- Mobile home up to $30,000. State health savings plans. Tax-qualified 529 education savings plans, including those under the Mississippi Prepaid Affordable College Tuition Program. Proceeds from exempt property. Tangible personal property of the following items up to a cumulative total of $10,000: any item worth less than $200 each, clothing, furniture, appliances, 1 radio and 1 television, 1 firearm, 1 lawn mower, linens, china, crockery, kitchenware, and personal effects of the debtor and dependents , and items acquired as antiques), books, animals, crops, motor vehicles, cash on hand, health aids.
- Personal injury judgments up to $10,000.
- Homeowners insurance proceeds up to $75,000 .
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Choosing The Right Bankruptcy Chapter For You In Mississippi
Most people file either Chapter 7 or Chapter 13. If you don’t know the differences between the two, you’re not alone. The short explanation below and our handy Chapter 7 versus 13 chart will help clear things up.
Chapter 7 bankruptcy.Chapter 7 is often a bankruptcy filer’s first choice for several reasons. It’s quickit only takes a few months to complete. And it’s cheapyou don’t pay anything to creditors. It works well for those of us whose property consists of the essential items needed to live and work.
People with more assets could lose them, however, especially if they own unnecessary luxury items. For instance, you might have to give up your RV, baseball card collection, or timeshare in the Bahamaseven your house or vehicle if you have too much equity in it or you’re behind on the payments. Unlike Chapter 13, Chapter 7 doesn’t have a payment plan option for catching up on late mortgage or car payments. So you could lose your home or car if you’re behind when you file.
Caution for businesspeople. Be sure to learn about the ins and outs of small business bankruptcies. The principles discussed apply to consumers only.
What Are The Federal Bankruptcy Exemptions
Although most states require bankruptcy filers to use state-specific bankruptcy exemptions, Mississippi law allows you to use either state or federal exemptions. However, you must choose one or the other you cannot use parts of both. If you choose to use federal exemptions when you file for bankruptcy, then you may keep:
- $23,675 of equity in your primary home. This is the homestead exemption; you can use it to protect residential real estate as long as you live there. However, this does not extend to investments in rental properties.
- Your vehicle up to a value of $3,775.
- Jewelry valued up to $1,600.
- Household items worth up to a total of $12,625, as long as no single item is worth more than $600. This includes furniture, appliances, clothes, animals, books, etc.
- Tools for your work, including books, valued up to $2,375.
- A total of $12,625 in loan value, dividends or life insurance policy interest.
- All health aids.
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Filing Chapter 7 Bankruptcy In Mississippi: Can I Keep My Home
As mentioned above, many people can protect their property when they file for Chapter 7 bankruptcy protection. Some states allow debtors to use federal bankruptcy exemptions or state bankruptcy exemptions, without mixing or matching. In Mississippi, however, you must use the Mississippi bankruptcy exemptions.
Thats good news, in general. Mississippis homestead exemption, for example, is more general than the federal one. But how does it work?
Determining whether you can keep your home and file for bankruptcy is usually a fairly simple equation. First, determine home equity . Next, youll need to meet with a bankruptcy attorney to determine which states exemption laws will apply to your case. Note: A recent move may impact which states exemptions apply. State law varies as to how much home equity a debtor can retain while filing bankruptcy.
Mississippi bankruptcy laws allow $75,000 of equity in property owned and occupied by the debtor to be claimed as exempt, meaning the bankruptcy trustee cant touch it. If the debtor is over 60 and married or widowed they may claim a former residence as exempt. Like many states, Mississippi limits the size of the homestead to be protected to 160 acres or less. Mississippi bankruptcy laws also allow the proceeds from the sale of a home to be exempted pursuant to the limitations described above.
Here are a few other popular bankruptcy exemptions in Mississippi.
Are You Eligible For Chapter 7 Bankruptcy In Mississippi Take The Bankruptcy Means Test To Find Out
TheChapter 7 bankruptcy means test can determine if a Mississippi petitioners income level and expenses are eligible to file for a Chapter 7 bankruptcy. The formula is designed to prevent individuals from Chapter 7 bankruptcy if they make enough money to pay down unsecured debts. If an individual does not qualify for Chapter 7 as determined by the Means Test of Mississippi, he or she may be able to file for a Chapter 13 bankruptcy to repay a fraction of the accrued debt.
Taking the Chapter 7 means test does not necessarily entail that an individual has to be impoverished to be able to file for a Chapter 7 bankruptcy. An individual who qualifies for a Chapter 7 bankruptcy in Mississippi may still have a high income if he or she has high car and/or mortgage payments, high taxes, and/or other expenses.
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Attend Your 341 Meeting
The 341 meeting, or meeting of creditors as it is sometimes called, takes place some 20 to 40 days filing Chapter 7 bankruptcy in Mississippi. The court will notify you and all of your creditors of the date, time, and location of your 341 meeting. The most important part about this meeting is to show up and have an acceptable form of identification and proof of your social security number with you. Once the trustee checks you IDs, you will be placed under oath and asked to answer some questions about your financial situation in general and your Mississippi bankruptcy case in particular. As long as you prepare just a little bit and take a moment to thumb through your bankruptcy forms, the meeting will not be nearly as stressful as it sounds. Of course, it is called a meeting of creditors because your creditors will be invited to attend and can even ask you questions. That is not what normally happens. In a typical Chapter 7 bankruptcy in Mississippi, the meeting will be over after about 5 to 10 minutes with no creditors making an appearance.
How Are Trustees Paid
Bankruptcy Code § 326 says that a trustees compensation is based upon a percentage of the property of the estate that is administered by the trustee. As a result, there is a financial incentive for a trustee to maximize the property of the estate. Consequently, discussions or disputes with a Chapter 7 trustee will mostly focus on what is property of the estate.
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Do You Have To Go To The Court
Generally, in a bankruptcy case, the creditors meet in person. But since were in the middle of the COVID-19 pandemic, currently these hearings are being held over the telephone.
Before the pandemic, the courts used to hold the hearings in person. There are many places throughout the state where the courts hold these hearings, but common places include:
If you hire a bankruptcy lawyer, they will attend the 341 meetings of creditors with you. The trustee will be leading the meeting and will call all of the debtors, one at a time, to answer some simple questions, including:
The purpose of the meeting is for the trustee to verify your identity and determine if there are any assets that can be liquidated. The trustee will review your bank statements, tax returns and bankruptcy papers prior to the meeting. Their aim is to verify if you qualify for chapter 7 bankruptcy.
Additionally, you will need to bring your drivers license and social security card so that the trustee can inspect them. If your meeting is over the phone, then your bankruptcy lawyer will inspect your ID and vouch for your identity on the call.
Chapter 13 Bankruptcy Allows Repayment Over A Period Of Time
When a person faces bankruptcy because of personal debts, the two main options are Chapter 7 and Chapter 13. The difference between the two is the liquidation of assets to settle the debts versus a payment plan to pay the debts .
Approximately 20 percent of all consumer bankruptcy filings fall under Chapter 13. Known as wage earner’s bankruptcy, Chapter 13 allows a debtor with a steady income to pay all or part of the debts over a period of time, usually three years but as long as five. It is usually filed by people who are past due in the home mortgage or car payments.
To qualify for Chapter 13, the debtor must have less than $250,000 in unsecured debt and less than $750,000 in secured debts . A person with debts greater than these must file under Chapter 7 or, in some cases, Chapter 11.
When filing under Chapter 13, the debtor submits to the bankruptcy court a proposed payment plan that applies all of his or her disposable income to paying the creditors. Disposable income is the monies available after the expenses of shelter, food, and other necessities are met.
The plan is usually sent to the person’s creditors for review. If they find the plan acceptable and the court approves the plan, it becomes effective. Normally, the debtor sends a set monthly amount to a court-appointed trustee who distributes it to the creditors. This is usually accomplished by the debtor’s employer’s withholding the payment and forwarding it to the trustee.
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Bankruptcy Exemptions Under Chapter 13
Bankruptcy exemptions work differently in Chapter 13 bankruptcy than they do in Chapter 7. In Chapter 7, the bankruptcy trustee appointed to your case will sell your non-exempt property to pay your creditors. Under Chapter 13, the trustee wont sell your non-exempt propertybut the value of that property will be used to determine how much you must pay your creditors under your repayment plan. Either way, your creditors get the value of your non-exempt property.
Bankruptcy exemptions may include at least some of the equity in your home, your car, and personal property such as your clothes and household goods. Exemptions are determined by state law; some states have their own exemptions, while others allow you to use the exemptions provided by the federal bankruptcy code.
For more information on Arkansas law, see the Exemptions section of this website.
Print Your Bankruptcy Forms And Bring Them To Court
Once you have prepared your bankruptcy forms, you will need to print them out for the court.You must print them single-sided. The court wonât accept double-sided pages.
You will also need to sign the forms once they are printed.
Most bankruptcy courts require just 1 copy of the petition, but some courts like thebankruptcy court in Manhattanrequire 4 copies. So call your local bankruptcy court to find out how many copies you will need to bring.
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How Bankruptcy Works In Mississippi
In most respects, filing for bankruptcy in Mississippi isn’t any different than filing in another state. The bankruptcy process falls under federal law, not Mississippi state law, and it works by unwinding the contracts between you and your creditorsthat’s what gives you a fresh start.
But Mississippi’s laws come into play, too, in a significant way. They determine the property you can keep in your bankruptcy case. You’ll also need to know other filing information, which we explain after going over some basics.
Unsecured & Secured Debts
The most common type of debt that people can get rid of in bankruptcy is unsecured debts.; Unsecured debts are debts that do not have collateral, such as medical debts, credit cards, and payday loans.;;
There are certain types of unsecured debts that cannot be wiped out in bankruptcy such as child support, alimony, taxes, student loans and a few others that are less common.;
Secured debts, on the other hand, are a little more complicated. Secured debts are defined as any debt that is secured by a property usually with a lien.; Common examples are home mortgages and auto loans.;;
Now it is possible to eliminate secured loans as well in chapter 7. But you would have to surrender or return the collateral to do so.;
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How Do I Find A Bankruptcy Lawyer
To protect your property and get a fresh financial start, you can find a local Mississippi bankruptcy attorney today.
Note: State laws are always subject to change through the passage of new legislation, rulings in the higher courts , ballot initiatives, and other means. While we strive to provide the most current information available, please consult an attorney or conduct your own legal research to verify the state law you are researching.
Ways To File For Bankruptcy
In order to file bankruptcy in Mississippi, the individual must go to the Mississippi Bankruptcy County Court. The filing process is not hard to accomplish. Any individual that is filing for bankruptcy under Chapter 13 will be paying off the loans they owe to the creditors. The processes might take close to three to five years to complete, but it is well worth it. Filing bankruptcy under Chapter 7 will be the quickest way of filing for bankruptcy as it takes about 40 to 45 business days. Both methods of bankruptcy are useful under different circumstances. Filing bankruptcy is a hard decision to make, but being under a load of debt can still ruin your credit rating.
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