Before you decide whether filing bankruptcy in Mississippi is right for you, you may want to consider alternatives to filing Chapter 7 or Chapter 13.
Are you facing a financial hardship and need to make a decision whether bankruptcy is the right option for you?
Have you wondered if filing Chapter 13 bankruptcy in Mississippi is the best way to get rid of your debt problems? Filing Chapter 13 bankruptcy in Mississippi can give you the debt relief you need to recover after a financial crisis.
That said, filing Chapter 13 is a big decision. You are committing to a bankruptcy repayment plan that could last for up to five years. This is why understanding the bankruptcy differences and understanding your Chapter 13 plan payment is crucial to making the most informed decision. Let’s get started.
What is a Chapter 13 Bankruptcy Discharge?
The main goal of filing bankruptcy in Mississippi is to obtain a bankruptcy discharge. A discharge is a legal term used for debt forgiveness in bankruptcy. Creditors cannot take any actions to collect a discharged debt. While most unsecured debts are eligible for a discharge in bankruptcy, there are a few debts you cannot get rid of in bankruptcy such as:
- Most tax debts
- Most student loans
- Child support
- Judgments related to drunk driving accidents
- Most debts owed to the government
You can get rid of some income tax debts, and some debtors qualify for a hardship discharge from student loans. If you owe these debts, you may want to talk to a bankruptcy lawyer about whether you are eligible for a discharge of those debts.
Calculating Chapter 13 Plan Payments in Mississippi
Your Chapter 13 plan payment in Mississippi depends on your unique financial situation, which is why you can take a Mississippi Chapter 13 Plan Payment calculator below that you can use to estimate your Chapter 13 plan payment.
Means Test Mississippi
How Does the Means Test Impact My Bankruptcy Case? The Means Test was introduced when Congress revised the Bankruptcy Code in 2005. The test calculates and compares your income to the average median income of other households in Mississippi.
The Mississippi Bankruptcy Means Test was intended to help prevent bankruptcy fraud by restricting Chapter 7 cases to individuals who did not have sufficient disposable income to repay any of their unsecured debts in a Chapter 13 case.
All debtors (individuals filing for bankruptcy relief) must complete the Means Test when filing Chapter 7 bankruptcy in Mississippi, except for business entities. The income restrictions for a Chapter 7 bankruptcy imposed by the Means Test also do not apply if the person’s debts are primarily business debts.
How is the Means Test Calculated?
Calculating CMI and Median Income
The first section of the Means Test calculates your current monthly income or CMI. Your CMI is based on household income for the past six months. All income, even the income earned by a non-filing spouse, must be included when calculating CMI. Social Security Act income, such as SSDI, SSI, and retirement income, is not included in the Means Test.
Your annual median income equals CMI multiplied by 12. The Means Test compares your annual median income to households in Mississippi of the same size. If your annual median income is above the median income in Mississippi, you “fail” the Means Test and may need to file under Chapter 7. However, there still might be hope for filing Chapter 7 in Mississippi, even if you fail the median income test.
Below is a chart with the current bankruptcy median income figures for Mississippi. The figures for the Means Test are revised every few months to reflect current income levels in the United States. Always make sure you use the most current Means Test information when calculating your income for bankruptcy.
Calculating Disposable Income for the Means Test
The second section of the Means Test calculates your disposable income. Disposable income is the money you have available after paying your ordinary living expenses each month. That money can be used to pay your unsecured debts.
Unsecured debts include, but are not limited to:
- Credit card debts
- Personal loans
- Income taxes and other taxes
- Student loans
- Personal judgments
- Medical bills
- Old debts owed to landlords and utility companies
- Collection accounts
Disposable income is calculated by subtracting your living expenses from your current monthly income. However, the living expenses you may deduct could be limited.
Some living expenses are based on the number of people living in your home and the national standards for necessary living expenses. These expenses include food, clothing, housekeeping supplies, personal care products and services, and some miscellaneous expenses.
National standards also apply to out-of-pocket health care expenses, rent, utility, and transportation expenses. The national standards are also updated every few months, so make sure you use the correct table when calculating the maximum amount allowed for these living expenses.
Other living expenses that are deducted from CMI include:
- Mortgage payments
- Car loan payments
- Payroll taxes and mandatory contributions to retirement accounts
- Court-ordered domestic support payments
- Percentage of charitable giving
- Childcare expenses and school expenses
- Term life insurance and disability insurance premiums
Other expenses might be included, but you may need to justify why those expenses are necessary and reasonable.
Why is disposable income important when filing bankruptcy in Mississippi?
If you failed the median income test for a Chapter 7 bankruptcy in Mississippi, you could qualify for Chapter 7 if your disposable income is negative or very low. Also, disposable income is used in Chapter 13 cases to calculate how much money you are required to pay to unsecured creditors through your Chapter 13 plan.
Mississippi Bankruptcy Exemptions
A bankruptcy exemption is a legal term used to identify property that you can keep in a bankruptcy proceeding. The exemption protects equity in the property from being used to repay unsecured debts.
Federal bankruptcy exemptions are listed in the Bankruptcy Code. However, not every state allows debtors to use federal bankruptcy exemptions. In some states, debtors must use state-specific bankruptcy exemptions. In other states, debtors can choose between federal and state bankruptcy exemptions.
Understanding Mississippi Bankruptcy Exemptions
Mississippi requires that debtors who have lived in the state for at least 730 days use the state bankruptcy exemptions. If you have not resided in Mississippi for at least 730 days before filing bankruptcy, the state law where you resided for the better part of 180 days before the 730-day residential requirement governs the bankruptcy exemptions you may use when filing bankruptcy in Mississippi.
Bankruptcy exemptions in Mississippi are generous compared to other states. For example, a debtor may claim up to $75,000 in equity in a home that does not exceed 160 acres. Debtors can claim up to $10,000 in equity in personal property, which includes a vehicle, personal property, household furnishings, tools of the trade, prescribed health aids, and cash. Joint debts can double the exemption amount in jointly owned property.
Other exemptions available in Mississippi bankruptcy cases include:
- Most pension and retirement accounts have unlimited exemptions
- Up to $10,000 in personal injury proceeds
- Income from workers’ compensation and disability insurance is exempt
- Life insurance proceeds when the contract prohibits using the proceeds to pay creditors
- Disability benefits
- Most public benefits
- A wildcard of up to $50,000 in any property for debtors over 70 years of age
Mississippi bankruptcy exemptions can be found in Title 85 of the Mississippi Code. Exemption amounts are subject to revisions, so always check for the current amounts with the Secretary of State or the Mississippi Legislature.
You must consider bankruptcy exemptions carefully when filing bankruptcy in Mississippi. In the next section, we discuss how bankruptcy exemptions impact a filing under Chapter 7 and Chapter 13.
Chapter 7 vs. Chapter 13 Bankruptcy in Mississippi
Deciding between Chapter 7 vs. Chapter 13 can be complicated. There are many factors to consider. You may want to consult with a bankruptcy lawyer if you are unsure which chapter of bankruptcy is right for you.
Filing Chapter 7 in Mississippi
A Chapter 7 bankruptcy case is used to discharge unsecured debts that you cannot afford to pay. For example, if you face a wage garnishment in Mississippi, a Chapter 7 bankruptcy may be able to help.
That said you may want to take a wage garnishment calculator to help you estimate how much the garnishment will be.
You must meet the income requirements to qualify for a bankruptcy discharge under Chapter 7. Businesses that file under Chapter 7 are closed and liquidated.
If you meet the income requirements for Chapter 7, you might be able to get rid of your unsecured debts that eligible for discharge in four to six months after filing your Chapter 7 petition. However, Chapter 7 cases are liquidation cases. A Chapter 7 trustee could seize property and sell it to pay your unsecured creditors.
As we discussed above, bankruptcy exemptions protect some of the equity in your property. If exemptions cover all equity in your assets, the Chapter 7 trustee should abandon the assets and declare a no-asset case. That means you keep all your property while getting rid of your unsecured debts.
Debts that have collateral may be discharged in Chapter 7, but the lien is not canceled. If you want to keep your home, car, or other property used to secure a lien, you need to continue paying the creditor. You can surrender the property to get out of the debt. Because you are in Chapter 7, the secured creditor cannot try to collect money from you even if the sale of the asset does not pay the loan amount in full.
You can also check the debt statute of limitations in Mississippi to see if your debt can be pursued by creditors as well.
Filing Chapter 13 in Mississippi
A Chapter 13 bankruptcy case involves restructuring your debts in a bankruptcy plan. If your annual median income is over the Mississippi median income, the plan must be calculated based on 60 payments. Debtors whose incomes fall below the median income may qualify to file a 36-month Chapter 13 plan.
The amount of a Chapter 13 plan depends on several factors, including:
- The amount required to catch up your mortgage payments;
- Whether you owe back taxes, alimony, or child support;
- The amount of your unsecured debts;
- Whether the plan is for 36 months or 60 months (payment plan similar to debt settlement);
- How much you owe on your car loan; and,
- Whether you have nonexempt equity in assets.
With a Chapter 13 case, you can avoid foreclosure to keep your home. You may also restructure your car loan to make your car payments more affordable. Please note that it is a monthly payment plan. So, if you face unemployment in Mississippi, you may want to contact your attorney right away to understand your options.
In addition, you may consider taking an unemployment calculator to estimate how much your weekly benefit will be.
In a Chapter 13 bankruptcy, the Chapter 13 trustee does not liquidate assets. If any of your assets have equity that is more than the allowed exemption, your plan payment may increase slightly, but you get to keep the asset.
One downside to a Chapter 13 case is that you cannot incur new debts or sell valuable assets without court permission during the Chapter 13 case. However, when you complete the Chapter 13 plan, the remaining amounts owed to unsecured creditors are forgiven. Most Chapter 13 debtors only pay a small percentage toward their unsecured debts. Therefore, you can get rid of thousands of dollars in debt for pennies on the dollar.
What is the cost to file bankruptcy in Mississippi? The cost to file bankruptcy in Mississippi is $313 for a Chapter 13 bankruptcy and $338 for a Chapter 7 bankruptcy, but that does not include attorney fees.
Mississippi Bankruptcy Credit Counseling and Debtor Education Courses
Each debtor who files for bankruptcy in Mississippi must complete two bankruptcy courses. The courts must be completed through an agency or company approved by the United States Trustee’s Office.
The Credit Counseling Course must be completed within 180 days before filing your bankruptcy petition. The course is designed to give you information about filing bankruptcy in Mississippi. It also helps you calculate your household budget and analyze your debts to determine if you have alternatives to filing bankruptcy.
The Debtor Education Course must be completed after you file your bankruptcy case. This course teaches you how to manage your finances, create household budgets, improve credit ratings after bankruptcy, and use credit wisely. If you fail to complete the Debtor Education Course, you will not receive a bankruptcy discharge.
Both bankruptcy courses are available online and by telephone for a small fee. In some cases, debtors might be eligible to waive the fees for the bankruptcy course. Check with the agency you choose about how to request a waiver of the fee.
Bankruptcy Courts and Trustees for Mississippi
Mississippi is divided into two bankruptcy districts.
Southern District Mississippi
The U. S. Bankruptcy Court for the Southern District of Mississippi has two divisions.
The courthouse for the Jackson Division is located at 501 East Court Street in Jackson, MS. The courthouse for the Gulfport Division is located at 2012 Fifteenth Street in Gulfport, MS. There are also two other courthouse locations in Hattiesburg and Natchez. Your filing division and hearing location are based on your residence.
A debtor might find the Bankruptcy Basics Video Series on the court’s website helpful when preparing to file bankruptcy in Mississippi.
Northern District Mississippi
The U. S. Bankruptcy Court for the Northern District of Mississippi has three divisions. The county of your residence determines whether the Greenville, Oxford, or Aberdeen division handles your bankruptcy case. The court locations for the Northern District are:
- Aberdeen Division – The Thad Cochran U.S. Courthouse located at 703 Highway 145 North in Aberdeen, MS.
- Oxford Division – The federal building is located at 911 Jackson Avenue in Oxford, MS.
- Greenville Division – The federal building is located at 305 Main Street in Greenville, MS.
The Aberdeen Division is the primary location for the Northern Division.
Bankruptcy Trustees in Mississippi
Each bankruptcy district has Chapter 7 and Chapter 13 trustees assigned to cases in those divisions. For the Southern District, there are four Chapter 7 trustees and four Chapter 13 trustees. The Northern District has three Chapter 7 trustees and two Chapter 13 trustees.
You do not have a choice of which trustee is appointed to your case. The trustees are not employees of the bankruptcy court of the United States Trustee’s Office. They are private trustees working under the supervision of the United States Trustee’s Office.
Alternatives to Filing Bankruptcy in Mississippi
In some cases, a person might have several options for getting rid of debts. Filing bankruptcy is just one of those options.
Before you decide whether filing bankruptcy in Mississippi is right for you, you may want to consider alternatives to filing Chapter 7 or Chapter 13.
Some alternatives to explore include:
- Working with a credit counselor via Debt Management
- Mississippi Debt Relief
- Debt Consolidation