Mississippi Debt Settlement: An Alternative To Bankruptcy
As of my knowledge cutoff in 2021, the total state government debt of Mississippi was approximately $4.8 billion, according to the State Budget Solutions report. This includes both general obligation bonds and revenue bonds. In terms of per capita debt, Mississippi had a state government debt of approximately $1,602 per person. In 2021, Mississippi had a relatively high bankruptcy rate compared to other states in the US. According to data from the US Courts, there were 15,337 bankruptcy filings in Mississippi during the 12-month period ending on June 30, 2021. Of those filings, 13,882 were for Chapter 7 bankruptcy, which is often referred to as “liquidation” bankruptcy. This type of bankruptcy allows individuals to discharge most of their unsecured debts, such as credit card debt and medical bills, but may require the sale of non-exempt assets to pay off creditors. There were also 1,408 filings for Chapter 13 bankruptcy, which is often referred to as “reorganization” bankruptcy. This type of bankruptcy allows individuals to restructure their debts and create a repayment plan over a period of three to five years
Bankruptcy Laws in Mississippi
Bankruptcy in Mississippi is governed by federal law, specifically the United States Bankruptcy Code. Mississippi has its own bankruptcy court, which is part of the Fifth Circuit Court of Appeals. Here are some key aspects of bankruptcy law in Mississippi:
- Types of Bankruptcy: Individuals and businesses in Mississippi can file for Chapter 7, Chapter 11, or Chapter 13 bankruptcy, depending on their circumstances. Learn More about the 3 main types of bankruptcy
- Exemptions: Mississippi has its own set of exemptions that determine which assets are protected from seizure by creditors during bankruptcy. These exemptions include homestead exemptions, which protect a certain amount of equity in a person’s primary residence, as well as exemptions for personal property such as vehicles, household goods, and retirement accounts.
- Means Test: In order to qualify for Chapter 7 bankruptcy in Mississippi, an individual must pass a means test, which compares their income to the state median income for their household size. If their income is below the median, they may qualify for Chapter 7. If their income is above the median, they may still be able to file for Chapter 7, but they will need to demonstrate that they have little or no disposable income.
- Credit Counseling: Prior to filing for bankruptcy in Mississippi, individuals are required to complete a credit counseling course from an approved provider. This course helps individuals understand their options for debt relief and develop a plan for managing their finances.
- Automatic Stay: When a person files for bankruptcy in Mississippi, an automatic stay goes into effect, which prohibits creditors from taking any further collection actions against the debtor. This gives the debtor time to restructure their debts or discharge them entirely, without the constant pressure of collection efforts.
Considering Business Bankruptcy in Mississippi? Keep These Things in Mind
Here are some key things to keep in mind when considering business bankruptcy in Mississippi:
- Explore all options: Bankruptcy should be considered as a last resort. Before filing for bankruptcy, explore all other options such as renegotiating payment terms, selling assets, or obtaining financing from alternative sources.
- Type of bankruptcy: The type of bankruptcy that a business can file depends on their situation. A Chapter 11 bankruptcy is designed for businesses that want to reorganize their debts and continue operating, while a Chapter 7 bankruptcy is designed for businesses that want to liquidate their assets and cease operations.
- Consult an attorney: Bankruptcy law can be complex and it’s important to have the guidance of an experienced bankruptcy attorney. A bankruptcy attorney can help you understand your options, assess your financial situation, and guide you through the bankruptcy process.
- Automatic stay: Filing for bankruptcy triggers an automatic stay, which prohibits creditors from taking any further collection actions against the debtor. This can give a business breathing room to reorganize or liquidate without the pressure of ongoing collection efforts.
- Impact on credit: Bankruptcy can have a significant impact on a business’s credit score and ability to obtain financing in the future. However, it may also be the best way for a struggling business to get a fresh start.
- Plan for the future: It’s important to have a plan for what comes after the bankruptcy process is complete. Whether it’s reorganizing and continuing operations or shutting down the business, having a clear plan can help ensure a smooth transition and minimize disruption for employees and stakeholders.
Are All Debts Discharged in Bankruptcy?
While bankruptcy can provide significant relief for many types of debt, there are certain debts that are not typically discharged in bankruptcy. Here are some examples:
- Certain taxes: Some taxes may be dischargeable in bankruptcy, but others, such as recent income taxes, may not be. In general, taxes that are less than three years old, or that were not filed on time, are not dischargeable.
- Student loans: Most student loans are not dischargeable in bankruptcy, unless the debtor can prove that repaying the loans would cause an undue hardship.
- Child support and alimony: Debts related to child support and alimony are not dischargeable in bankruptcy.
- Debts obtained through fraud: Debts obtained through fraud or misrepresentation are not dischargeable in bankruptcy.
- Fines and penalties: Fines and penalties imposed by government agencies, such as traffic tickets or criminal fines, are not dischargeable in bankruptcy.
- Debts incurred after bankruptcy: Any debts incurred after the filing of bankruptcy are not dischargeable.
How Bankruptcy in Mississippi Affects Your Credit Score and Your Ability to Get a Loan in the Future
Filing for bankruptcy in Mississippi can have a significant impact on your credit score and ability to obtain credit in the future. When you file for bankruptcy, it is typically listed on your credit report for up to 10 years. A bankruptcy filing can cause your credit score to drop significantly, as it signals to lenders that you have struggled with managing your debts in the past. The exact impact on your credit score will depend on a variety of factors, including your current credit score, the type of bankruptcy you filed for, and how much debt was discharged. In terms of obtaining credit in the future, a bankruptcy filing can make it more difficult to qualify for loans, credit cards, and other forms of credit. If you are able to obtain credit, you may be subject to higher interest rates and less favorable terms.
Does Bankruptcy Eliminate Tax Debts?
Bankruptcy can affect tax debts in Mississippi, but the specifics depend on the type of tax debt and the type of bankruptcy filing. Generally, tax debts are classified as either priority or non-priority claims in bankruptcy. Priority claims are typically related to recent income taxes, while non-priority claims are related to other types of taxes, such as payroll taxes. In Chapter 7 bankruptcy, priority tax debts cannot be discharged, meaning you will still be responsible for paying them after your bankruptcy case is over. However, non-priority tax debts may be discharged if they meet certain conditions, such as being more than three years old and having been assessed at least 240 days prior to filing for bankruptcy. In Chapter 13 bankruptcy, both priority and non-priority tax debts are generally treated as part of your repayment plan. You may be required to pay off all or a portion of your tax debts over a period of three to five years, depending on your income and other factors. While bankruptcy can help with some tax debts, it may not eliminate all tax debts.
Will You Lose Your Home or Car in Bankruptcy in Mississippi?
Whether you will lose your home or car in bankruptcy in Mississippi depends on several factors, including the type of bankruptcy you file and the amount of equity you have in your property. In Chapter 7 bankruptcy a trustee may sell some of your assets to pay off your debts. However, Mississippi has exemptions that may allow you to protect some or all of your property, including your home and car, from being sold to pay creditors. For example, Mississippi has a homestead exemption that allows you to protect up to $75,000 of equity in your primary residence. Mississippi also has a vehicle exemption that allows you to protect up to $10,000 of equity in one motor vehicle. In Chapter 13 bankruptcy, you may be able to keep your home and car as long as you continue to make payments on your mortgage and car loan. In fact, Chapter 13 bankruptcy can provide an opportunity to catch up on missed mortgage or car payments while keeping your property. It is important to note that if you have a significant amount of equity in your home or car, it may be subject to liquidation in Chapter 7 bankruptcy.
Statute of Limitations for Collections in Mississippi
In Mississippi, the statute of limitations for collections on most types of debt is three years. This means that creditors and debt collectors generally have three years from the date of your last payment or the date of default to file a lawsuit to collect the debt. If the creditor or debt collector does not file a lawsuit within this time frame, the debt is considered time-barred and you cannot be sued for payment. The statute of limitations does not erase the debt or prevent creditors from attempting to collect the debt. They can still contact you to request payment or report the debt to credit bureaus. However, if the debt is time-barred, you have the legal right to refuse payment and can inform the creditor or debt collector that the debt is beyond the statute of limitations. The statute of limitations varies depending on the type of debt. For example, the statute of limitations for written contracts is also three years, but the statute of limitations for judgments is seven years. Additionally, making a payment or acknowledging the debt can restart the clock on the statute of limitations.
Cons of Bankruptcy in Mississippi
Bankruptcy is a legal process that can help individuals and businesses eliminate or repay their debts under the protection of the bankruptcy court. While bankruptcy can offer a fresh start for those struggling with overwhelming debt, it also has some drawbacks and consequences. Here are some potential cons of bankruptcy in Mississippi:
- Credit damage: One of the most significant consequences of bankruptcy is the damage it can do to your credit score. A bankruptcy filing can stay on your credit report for up to ten years and can make it difficult to obtain credit, secure loans, or get approved for a rental application.
- Loss of assets: In some cases, filing for bankruptcy can result in the loss of some assets, such as property, vehicles, and other valuable items. Mississippi has specific exemptions that protect certain property, but not all assets may be exempt.
- Public record: Bankruptcy filings are public record, which means that anyone can access the information. This could potentially impact your employment, housing, or other areas of your life.
- Cost: Filing for bankruptcy can be expensive. In addition to court fees, you may also need to pay for an attorney’s services, credit counseling, and other related costs.
- Emotional toll: The process of filing for bankruptcy can be emotionally draining and stressful, especially if it involves court appearances or negotiations with creditors.
Compare the Pros and Cons of Bankruptcy: Pros and Cons of Filing Bankruptcy
Why People Regret Filing Bankruptcy
While bankruptcy can provide relief from overwhelming debt, there are several reasons why people may regret filing for bankruptcy. Some of these reasons include:
- Credit damage: As mentioned earlier, bankruptcy can have a significant impact on your credit score, which can affect your ability to obtain credit, secure loans, or get approved for a rental application.
- Loss of assets: Depending on the type of bankruptcy you file, you may be required to sell off some of your assets to repay your creditors. This can include your home, car, or other valuable items.
- Public record: As also mentioned earlier, bankruptcy filings are public record, which means that anyone can access the information. This could potentially impact your employment, housing, or other areas of your life.
- Emotional toll: The process of filing for bankruptcy can be emotionally draining and stressful, especially if it involves court appearances or negotiations with creditors. It may also feel like a personal failure or embarrassment for some people.
- Difficulty obtaining credit: Even after the bankruptcy process is complete, it can be challenging to obtain credit or loans. Creditors may view bankruptcy as a red flag and may be hesitant to lend money to someone who has filed for bankruptcy.
- Impact on co-signers: If you have co-signed a loan with someone, such as a family member or friend, filing for bankruptcy could have a negative impact on their credit as well.
What Happens if You Do Not Qualify for Bankruptcy in Mississippi?
If you do not qualify for bankruptcy in Mississippi, it may be because you do not meet the eligibility requirements for either Chapter 7 or Chapter 13 bankruptcy. In this case, you may need to consider other debt relief options, such as debt settlement or debt management. Debt settlement involves negotiating with your creditors to settle your debts for less than the full amount owed. If you do not qualify for bankruptcy, you may need to explore other debt relief options, such as debt settlement. There are some potential benefits to debt settlement over bankruptcy that may make it a more favorable option for some individuals.
- No BK on your credit report: Filing for bankruptcy shows on your credit report for up to 10 years. On the other hand, debt settlement does not show as a bankruptcy.
- Cost: Filing for bankruptcy can be expensive, with filing fees, attorney fees, and other costs adding up quickly.
- Emotional Impact: People report horror stories of the negative emotional impact of BK.
- With a bankruptcy for the rest of their life: Employers or lenders can ask if someone has filed BK for the rest of their life. It is much less likely to be asked if one ever used debt settlement to pay back an agreed to amount.
- Control: With debt settlement, you may have more control over the process and negotiations with your creditors, whereas with bankruptcy, a court will make the final decision.
- Less severe consequences: Filing for bankruptcy can have significant consequences, such as the liquidation of your assets, whereas debt settlement may allow you to negotiate a more manageable repayment plan while keeping your assets.
CuraDebt – An Alternative To Consider
CuraDebt, a professional debt settlement firm, is a great alternative to bankruptcy. We have a team of debt professionals who are ready to help you better understand and potentially eliminate your debts. Contact us today for your free consultation. 1-877-850-3328