Debtors in Mississippi may consider bankruptcy when they can no longer handle their debts. Debtors commonly file Chapter 7, a type of bankruptcy that liquidates assets to pay creditors. Certain debts get discharged, and the individuals start fresh. Not all debtors qualify for Chapter 7, so Chapter 13 bankruptcy gives them another option.
Basics of Chapter 13
Chapter 13, often called reconstruction or reorganization bankruptcy, is intended for debtors who don’t meet the requirements for Chapter 7. After the debtors files a petition, the court devises a manageable financial plan for them to repay creditors.
The debtor pays a trustee assigned by the court who divides payment among creditors. The courts usually give the filer three to five years to pay the debts. It may take three or four months to start the process.
Reasons to file Chapter 13
Filing for Chapter 13 has benefits over other types of bankruptcy. Unlike Chapter 7, Chapter 13 bankruptcy allows debtors to keep their homes and catch up on payments to avoid foreclosure. A co-signer will not usually be held liable under a co-debtor stay.
The debtor’s business can commonly remain in operation as long as the person generates enough income to pay debts. Debtors may sell assets for any price, and their unsecured debts freeze, meaning interest cannot be added.
Who should file Chapter 13?
Debtors often choose Chapter 13 bankruptcy when they have debts that they want to pay but don’t want to lose assets or don’t qualify for Chapter 7. They likely struggle to afford essentials and want to stop creditors from calling. Filers for Chapter 13 bankruptcy need to have a steady income and unsecured debts of $394,725 or less. An unemployed person may qualify if they can show other income.
While it is possible to handle Chapter 13 bankruptcy without legal assistance, the laws can be complex. An attorney may be able to increase a filer’s chances of success.