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Can I File A Bankruptcy In Mississippi Because Of My Covid-19 Bills?

On Behalf of | Nov 2, 2021 | Bankruptcy

Many people believe that there is a special “medical” bankruptcy for someone with too many medical bills. However, there isn’t a special bankruptcy filing or bankruptcy chapter solely for medical bills.

Likewise, there is not a special bankruptcy case for debts incurred because of COVID-19. Yet, you might qualify for a Chapter 7 bankruptcy case if you have been out of work because of the pandemic, even though you might not have qualified for Chapter 7 before the COVID-19 shut down.

In this article we discuss:

  • Qualifying for Chapter 7 Bankruptcy in Mississippi
  • Chapter 7 Means Test
  • How Can COVID-19 Help Me Qualify for a Chapter 7 Bankruptcy?
  • Can a Chapter 13 Case Help with COVID-19 Debts?

Qualifying for Chapter 7 Bankruptcy in Mississippi

The purpose of filing for bankruptcy relief is to receive a bankruptcy discharge. The bankruptcy discharge gets rid of your legal liability to repay a debt. When you file for Chapter 7 relief, you must meet income qualifications to receive a bankruptcy discharge.

The income qualifications are designed to ensure that people who can afford to repay some of their debts file under Chapter 13 instead of Chapter 7. A Chapter 7 bankruptcy case is designed for people who do not have any money after paying bills and living expenses to repay unsecured debts.

The Chapter 7 Means Test calculates your current monthly income and your disposable income. If you meet the income requirements, you are eligible for a discharge under Chapter 7.

What Is the Chapter 7 Means Test?

The Chapter 7 Means Test averages your household income for the six months before filing bankruptcy. The current monthly income is multiplied by 12 to calculate your median annual income.

Your median annual income is compared to the income of a household of your size in Mississippi. If your median income is lower than the median family income in Mississippi, you should qualify for a bankruptcy discharge in Chapter 7.

The median income is updated periodically to adjust the amounts based on current income data for each state. For example, as of the date of this article, the most recent data are dated May 15, 2021. For Chapter 7 cases filed on or after May 15, 2021, the median income figures for families in Mississippi is:

  • One person – $45,317
  • Two people – $54,584
  • Three people – $58,459
  • Four people – $71,528

For each additional person in the household, you add $9,000 to the total for four people.

If your income exceeds the median family income, you could still qualify for Chapter 7 if your disposable income below a certain amount. Your disposable income is the amount of money you have each month after deducting allowable monthly expenses from your current monthly income.

How Can COVID-19 Help Me Qualify for a Chapter 7 Bankruptcy?

If you have been out of work because of the pandemic, your income is likely to have decreased substantially. Even if you have just returned to work, your current monthly income is based on the average income for the past six months. Therefore, you may qualify for Chapter 7 because of the decrease in your family income.

However, you must work quickly to file for bankruptcy under Chapter 7 if you have returned to work. Your average monthly income may increase each month as you earn more income from work than you earned from unemployment or other sources during the COVID-19 shut down.

Many people incurred a great deal of debt as they struggled to pay living expenses during the shutdown. Individuals who were diagnosed with COVID-19 might have incurred substantial medical debts as they fought to recover from the virus.

Medical bills, credit card debt, personal loans, and most other unsecured debts are dischargeable in a Chapter 7 bankruptcy case. Therefore, if you qualify for Chapter 7, you could get rid of all these debts without paying any more money to the creditors.

You could be debt-free if you do not owe secured debts, such as a car loan or a mortgage. If you want to give up your vehicle or home in Chapter 7, you can voluntarily surrender the property without worrying about owing any money to the creditor, even if the creditor does not recover the entire debt when it sells the asset.

What If I Don’t Qualify for Chapter 7? Can a Chapter 13 Case Help with COVID-19 Debts?

Yes, a Chapter 13 case might be the best way for you to recover from COVID-19 debts.

Many homeowners deferred mortgage payments during the pandemic shut down. However, those mortgage payments will not become due. Therefore, many people may face foreclosure because of the COVID-19 pandemic.

Even though you might be back to work full-time, it can be impossible to resume regular mortgage payments and catch up on past-due mortgage payments. If your mortgage lender is unwilling to restructure the mortgage note, you might lose your home.

Filing Chapter 13 stops a foreclosure. All of the mortgage payments you missed during the COVID-19 pandemic are included in your Chapter 13 repayment plan. You have 60 months to catch up on the past-due mortgage payments to save your home from foreclosure.

If you are struggling with your car loan payments, you can also include those payments in your Chapter 13 plan. Depending on how long you have had your car loan, you might be able to reduce the interest rate or even reduce the amount you owe on the secured loan.

Credit card debts, personal loans, and other unsecured debts you might have incurred during the pandemic or fell behind on payments because of the pandemic are also included in your Chapter 13 plan. However, those creditors may receive as little as one penny on the dollar, depending on the amount of your disposable income. When you complete your Chapter 13 plan payments, the remaining amounts owed to unsecured creditors are discharged.

Some debts are not dischargeable in bankruptcy, such as recent tax debts and student loans. The student loans are deferred during your Chapter 13 plan. Tax debts are included in the plan and spread out over 60 months.

Are You Struggling with Debts You Cannot Pay Because of COVID-19?

You are not alone. The pandemic caused financial problems for millions of Americans. Many people continue to struggle with the financial crisis caused by COVID-19.

Filing a bankruptcy under Chapter 7 or Chapter 13 might be the best debt relief option to get you back on your feet. Depending on your situation, you could get rid of debts in bankruptcy without paying any more money to your creditors. A Madison bankruptcy lawyer can review your financial situation during a free appointment and explain your options for eliminating debts you cannot afford to pay.

Contact Our Madison Bankruptcy Attorney for a Free Consultation

At Saxton Law, PLLC, we understand the stress and frustration caused by debt problems. Our legal team is here to help you find an affordable solution to your debt problems.

Call our office 601-255-0813 now or schedule your free consultation online with a bankruptcy attorney in Madison, MS. You may also find answers to your bankruptcy questions by reading the bankruptcy articles and blogs on our website.