Debt repayment timing can answer question of bankruptcy

Two of the most common questions surrounding bankruptcy are whether or not a person should file in the first place and, if so, what type of bankruptcy he or she should declare. One extremely important consideration when it comes to personal bankruptcy in Mississippi is the matter of timing. There are countless other factors, of course, that should go into such a serious decision. Nevertheless, the timing of debt repayment and the filing itself is of the utmost importance in answering bankruptcy-related questions.

If a person needs to make a large purchase in the near future, such as a home or a car, filing for bankruptcy can impede that process due to its effect on credit scores. Nowadays, credit scores are also used for less significant matters such as determining rental and utility deposits. Still, for someone with a modest income, having a bankruptcy on a credit report can make these expenses more formidable.

However, personal bankruptcy is often the only way some Mississippians can eliminate debt. Chapter 7 bankruptcy can wipe out overwhelming debts, such as medical bills and massive credit card statements. This type of bankruptcy will liquidate many of a person's assets, unlike Chapter 13 bankruptcy which allows a filer to keep many of their personal assets in exchange for entering into a repayment plan. Both Chapter 7 Bankruptcy and Chapter 13, though, can be sensible options for a person whose debt is so huge they cannot expect to pay it off within five years.

The five-year mark is important because, under Chapter 13, a repayment plan is formed whereby the filer makes a manageable payment towards debt. These repayments usually continue for five years and then the debt may be eliminated.

Both types of bankruptcy offer the chance for a fresh start for someone whose debt far outpaces their ability to repay. If a resident finds that his or her debt will take more than five years to tackle, it may be wise to seek professional legal guidance in order to start improving the situation.

Source: The Los Angeles Times, "Consider filing bankruptcy if debt repayment would take five years," Liz Weston, July 6, 2014

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