The truth about bankruptcy in Mississippi

Financial struggles have plagued many people throughout the country in recent years. Some thought purchasing a home would lead to financial security, only to find themselves upside down owing more for their home than it's currently worth. Others who invested in their education find themselves struggling to pay off loans for degrees that may or may not lead to employment in this difficult job market. Regardless of the reason behind financial struggles, over one million Americans found themselves filing for bankruptcy protection in 2012.

According to the U.S. Courts, bankruptcy is intended to provide consumers a financial "fresh start." This legal process can provide an honest consumer with an opportunity to begin their financial life anew, by removing one's personal liability from specific debts.

Although there was an overall decline in bankruptcy filings in 2012, bankruptcy petitions continue to offer potential relief for those struggling with debt. Even with this decline, many continue to struggle. Over 12,000 residents of Mississippi filed for bankruptcy relief in 2012 alone.

Basics of bankruptcy law in Mississippi

Bankruptcy law is protected by the Constitution, which authorizes Congress to provide a uniform federal law to govern bankruptcy cases. As a result, bankruptcy law is essentially the same from state to state.

Each state has a bankruptcy court for each judicial district. Mississippi is divided into two districts, north and south. Courts within these districts handle all forms of bankruptcy, including those used by individuals.

Individuals generally file for relief under either Chapter 7 or Chapter 13. Chapter 7, also known as liquidation, uses a court supervised procedure to convert certain assets into cash and use that cash to pay off debts. The consumer can keep qualifying assets, such as a home or primary vehicles. Any debts that remain are generally discharged. As a result, the person filing for relief is no longer liable for the debt. Some debts are not discharged, including certain student loans, taxes and child support obligations.

Chapter 13, also known as reorganization, offers a court supervised repayment plan. The plan can span over three to five years. The plan is presented to creditors by the consumer and can allow the consumer to keep assets like a valuable home or car that may not qualify for protection under a Chapter 7 petition.

Those considering relief through bankruptcy should carefully review the pros and cons for their unique situation. If granted, a bankruptcy petition can negatively impact one's credit score. There are many ways to rebuild this score, including getting a credit card and paying it off on time every month.

Determining if bankruptcy is best for your situation can be difficult. If you are considering filing for relief through bankruptcy, contact an experienced bankruptcy attorney to discuss your situation.