Overwhelming debt: Mississippians can eliminate or reorganize

When faced with a problem, the solution is usually either to wipe out the cause of the problem or plan a new way of tackling the challenge. When it comes to personal bankruptcy, the options are very similar. A Mississippi resident faced with overwhelming debt has several means of getting back on his or her financial feet. Usually, the two main options are Chapter 7 bankruptcy or Chapter 13 bankruptcy.

While there are things to consider before filing for bankruptcy, it's important to know how each process helps an individual's financial situation. Chapter 7 is often known as liquidation bankruptcy, and can potentially wipe out all or most of an individual's debts. However, not everyone can declare this type of bankruptcy. A debtor's income must qualify and the debtor must also have expenses that are more than his or her income. In addition, Chapter 7 is most appropriate for those who don't have equity-laden assets with which they're unwilling to part.

Chapter 13, on the other hand, restructures debt to make it more manageable. Debtors must make a repayment plan to obtain debt relief in a realistic, achievable manner. Debts left over at the end of the plan can often be eliminated.

Those considering bankruptcy should keep in mind that there are some debts that can't be wiped out during proceedings. These include some obligations to the state, such as taxes, as well as legal obligations towards family members, such as alimony and child support. Finally, most student loans are not currently dischargeable in bankruptcy. Nevertheless, bankruptcy can still be an effective solution for taking charge of one's overall debt situation in a proactive manner, whether that manner involves elimination or reorganization.

Source: Credit.com, "Will bankruptcy wipe out all of my debt?" Gerri Detweiler, April 18, 2014

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