As many across Mississippi know, when bills pile up one unexpected problem can cause significant financial issues that do not simply go away with time. It could be high credit card bills to pay for a mechanical issue on your vehicle or a medical expense that could not wait, but it has taken your budget from tight to unmanageable and now the family home is at risk of foreclosure.
Filing for bankruptcy may be an option that can help. As ProPublica explains, personal bankruptcy is typically handled through a Chapter 7 or Chapter 13 filing, and there are different benefits and protections offered by each method.
In a Chapter 7 filing, also know as liquidation, the person who owes money, the debtor, agrees to have their property taken and split up to pay off their debts. The caveat for this is that in order to have their assets repossessed, the debtor must meet a certain legal limit on the amount of assets they have–if their assets are below the legal limit they cannot be taken. Debtors do not meet this asset limit in 95 percent of cases, so the debtors can have their unsecured debts, like credit card and medical debts, wiped out without losing their assets. If you do not meet the legal limit, then you have the option of giving up your home and having the debt wiped away or to continue to pay your mortgage and keep your home. Debtors who file for Chapter 7 have their debts clear 96 percent of the time.
On the other hand, a Chapter 13 filing often does not wipe away all debt, and instead, puts a payment plan in place at a renegotiated rate over a period of three to five years. Unsecured debts like medical or credit card bills are typically included in the payment plan at a lower rate. Between 2008 and 2010, debts were discharged for 41 percent of Chapter 13 cases filed. However, filing for Chapter 13 gives debtors who are behind on their mortgage a chance to repay their lender because when a case is filed it stops the foreclosure process.