Bankruptcy helps debtors in Mississippi get relief from certain debts so they can start fresh financially. However, not all bankruptcy types work the same. The type of bankruptcy you use will depend on several factors.
Chapter 7 bankruptcy converts non-exempt assets into liquid to pay creditors. Non-exempt assets commonly include second vehicles, family heirlooms, valuable artwork, stocks, bonds and jewelry. Businesses or individuals who file this kind of bankruptcy usually have passed the phase to restructure debts.
Creditors get paid based on “absolute authority,” which determines the order of debts to pay first. A trustee sells assets and divides proceeds among creditors. Debtors may file multiple times, but they must wait 180 days after the last discharge.
Chapter 11 may be filed by anyone, including individuals and joint ventures. However, it’s mostly used by businesses since it is the most expensive. Chapter 11 attempts to reorganize debts using a court-ordered plan. The Small Business Reorganization Act of 2019 added provisions to make filing easier for small businesses. These included giving them more flexibility to restructure debt and raising debt limits.
Unlike in Chapter 7, the debtor doesn’t have to meet a certain income limit. It involves a trustee, but instead of selling assets, this individual supervises them. Debtors may voluntarily file or be ordered to file by creditors. A debtor does not get absolved of the debt under Chapter 11, but they will pay it off using future income.
Chapter 7 bankruptcy commonly works for many debtors, but laws can be complex even for simple cases. Not following the required steps could halt the process or get the case dismissed. An attorney may be able to help guide a debtor through the process.