If you are considering filing for personal bankruptcy you have likely looked into a Chapter 7 bankruptcy. A Chapter 7 petition for relief through bankruptcy takes many steps, including discharge.
What is discharge? Discharge is defined by the United States Courts as the process that “releases individual debtors from personal liability for most debts and prevents the creditors owed those debts from taking any collection actions against the debtor.”
Essentially, this means the debt is forgiven.
Can any type of debt get discharged? Note the above definition states “most debts.” There are certain types of debt that do not qualify for discharge through bankruptcy. It is important to carefully consider the role dischargeability will play in your bankruptcy petition before moving forward.
Examples of debt that generally do not qualify for relief include child support, alimony, tax debts and student loans. The failure to allow for discharge of student loan debt is a contentious issue. In some cases, an individual can overcome this general rule. Discharge of student loans may be available if the applicant can establish the loan results in an “undue hardship.”
In order to establish undue hardship, the applicant must meet a three part test. The test includes a review of the applicant’s income, duration of the repayment period and whether or not the individual has made a good-faith effort to repay the loans.
There are also some cases where a creditor may file a complaint objecting to the discharge. These cases are not often successful. Examples of success are present when the creditor can establish that the person seeking relief through bankruptcy has kept fraudulent records or committed perjury during the bankruptcy process.
The term bankruptcy is likely a familiar one, but did you know that there are many different types of bankruptcy? One of the more common types used for individuals is Chapter 7. The following provides more information on this type of bankruptcy:
Putting together a petition for relief requires completion of an application as well as submission of various schedules and paperwork. A failure to properly complete this petition can result in a denial of relief. As such, it is wise to seek legal counsel. An attorney experienced in handling Chapter 7 bankruptcy cases can provide assistance throughout the application process and help better ensure you receive the relief you need.
If you are giving some thought to filing for bankruptcy, you may be wondering about the bankruptcy means test, and what it means and entails. Essentially, the bankruptcy means test determines whether you will be able to move forward with a Chapter 7 bankruptcy, if preferable, or if your only option is to file for Chapter 13 bankruptcy.
There are benefits and drawbacks associated with both types of bankruptcy filings, but determining which bankruptcy process to follow is an important first step in regaining control over your finances.
What the bankruptcy means test involves
If you undergo a bankruptcy means test, the first step involves determining whether your household income over the last six months falls below the median income in place in Mississippi. If you have lost or taken on a new job within the last six months, you can expect that the income changes will factor in when determining whether you can proceed with a Chapter 7 bankruptcy. If your income falls below the median threshold in place in Mississippi, you automatically pass the test and can move on with your Chapter 7 filing.
If you do not pass the means test during the first step, the second step involves gathering documentation regarding all expenses you had in the last six months. Once you take into account expenditures for food, rent, medical bills and so on, any money left over is disposable income that you should reasonably be able to put toward your debt. If your amount of disposable income is below a particular level, you may still be able to proceed with a Chapter 7 bankruptcy.
If you really want to file for Chapter 7 bankruptcy but you do not pass the means test, you may wait six months and then try again. If you cannot wait another six months to file, your best bet may be to proceed with a Chapter 13 bankruptcy.
Filing for bankruptcy in Mississippi is typically a difficult decision with plenty of forethought. However, filing bankruptcy can also be a financial silver lining to much of the stress and gloom that may have permeated the filing person’s life.
As explained by the Mississippi Bar, two main options Mississippi residents have when deciding to file for bankruptcy are the Chapter 7 and the Chapter 13 bankruptcy filing. The former is when the person agrees to liquidate assets to help pay the debts while the latter involves a payment plan to pay off the debts, usually at a lower amount.
Chapter 13 benefits
One benefit of a Chapter 13 that is not available under Chapter 7 is that if the filing debtor had a cosigner on any of the debt, that cosigner may be able to receive protection under the Chapter 13 filing. In addition, gaining credit back may be easier in some instances because the creditor who sees the Chapter 13 filing on the debtor’s credit report will understand that the debtor paid more of the debt back than if there was a Chapter 7 filing.
Chapter 13 eligibility factors
To be eligible for a Chapter 13 bankruptcy discharge, the filing person must have less than a quarter of a million dollars in unsecured debt. Unsecured debt includes that derived from credit card use and medical bills.
There must also be less than three-quarters of a million owed on the secured debt. Secured debt includes such loans as a home mortgage and an auto loan.
The filing debtor must have a reasonably steady income that indicates he or she can likely pay at least part of the debts in a three-to-five-year period. If the debtor has no income, he or she will likely not be able to successfully file for a Chapter 13.
Payment plan
Essentially, the filing person will propose a payment plan that uses his or her disposable income each month to pay creditors. As noted, the duration of the payment plan is typically between three and five years. Disposable income includes that which remains after the debtor satisfies basic living requirements, such as food, housing and other necessary bills.
On the down side, Chapter 13 has a higher failure rate because sometimes the debtor finds he or she is unable to fulfill the payment plan.
All types of debt could be weighing you down: credit card bills, medical payments, student loans and mortgage payments, to name a few. To avoid bankruptcy or to keep your house during bankruptcy, one option you might want to consider exploring is mortgage modifications. Are they relatively easy to get, or is being granted one a rarity?
The good news is that many people easily get a mortgage modification, but as with anything, such a move can come with downsides.
Pros and cons of a mortgage modification
The disadvantages of a mortgage modification include your mortgage possibly being reset for a 40-year period, meaning that if you had, say, 18 years’ worth of payments left, you may turn out to have 40 years’ worth at the end. Your credit score might also take a hit, although not as bad as a foreclosure mark.
The advantages include a lower monthly payment, especially for the first few years, and such a modification can help get you through a distressing time in your life. You can file for bankruptcy, and through this reorganized debt plan be able to stay in your house.
Ease of getting one
Now to the heart of the matter: Who can most easily get a modification? Generally, those who qualify show financial hardship yet demonstrate sufficient income to make the new payments. Hardship examples could be illness, death of a spouse or job loss. Applicants must be behind on their payments or about to become behind. If you are seeking a modification in bankruptcy, the fact that many of your debts are being eliminated or reorganized should show you have some increased capacity to make payments.
Some lenders have their own departments and programs for loan modification, so you can check online on your lender’s website or contact it to find out. Otherwise, there are programs such as Freddie Mac Flex Modification that may be able to help. Also, if you have no hardship to show to your lenders, they may offer you a refinance since you might not qualify for a modification.
