Debtors in Mississippi who have significant debt and who have a lower income or no income may benefit from a Chapter 7 bankruptcy. However, they should carefully consider their financial situation and the impact that bankruptcy will have on their credit before filing.

Chapter 7 bankruptcy, which is the most frequently filed bankruptcy, is a liquidation bankruptcy as it uses the proceeds from the sale of secured property, such as a vehicle or home, that exceeds the exemption threshold to pay back creditors. Filing and being discharged from a Chapter 7 bankruptcy is a process that can take only three to six months; in comparison, a Chapter 13 bankruptcy will take three to five years to be completed.

Debtors who are considering Chapter 7 bankruptcy should be aware that the bankruptcy will remain on their credit report for as long as a decade from the time they file. Filing for bankruptcy will also lower their credit score; however, they may find that the negative effect on the credit score will lessen as time goes on.

A means test has to be conducted in order for debtors to qualify for a Chapter 7 bankruptcy. Debtors will use this test to determine if their income is low enough for them to file. Their household income will have to be less than their state’s median income for a household of an equal size. The means test will deduct certain monthly expenses, like a vehicle or mortgage payments, from any current monthly income to determine the disposable income.

A bankruptcy attorney may assist clients with financial challenges and determining if a Chapter 7 bankruptcy is the best option to resolve their financial situation. Assistance may be provided for completing the means test and filing the necessary legal paperwork to begin the bankruptcy process.

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