FAQ

Bad things do happen to good people. If you are overwhelmed with debt, to file bankruptcy may be a wise choice. While our law firm specializes in bankruptcy, we can assist you with non bankruptcy options, or will refer you if better non bankruptcy options are available. There are multiple reasons to consider bankruptcy as an option such as:

1. Lowering monthly payments on such debts as auto loans, but still be able to retain the vehicles;

2. Getting a fresh start with little or no debt remaining;

3. Reestablishing credit; and

4. Stopping collection activity such as a garnishment and/or repossession.

• More than one month behind on mortgage;

• Behind on a vehicle and unable to catch up;

• Unable to meet your basic monthly expenses, such as groceries, housing, transportation, and utilities, without using credit to make your expenses;

• Taking cash advances, payday loans, title loans or other high interest loans;

• Major loss of an income, or unusually high increase in expenses such as medical bills;

• Tax debt that can’t be paid off within 12 to 24 months;

• Unable to afford to make more than the minimum payments on your debt;

• Losing sleep or suffering extreme anxiety due to worry and stress over money;

• If you have received a notice that your home is going to be foreclosed; and

• If you have received a notice that your car is going to be repossessed.

Bankruptcy can stabilize your finances, and while a bankruptcy filing may decrease your credit score, it is no worse than multiple charge‑offs, repossessions or a foreclosure that continue to be reported to the credit bureaus each month. And since the other types of reporting on your credit bureau report can continue and the reporting of the bankruptcy is only entered as of the date of the filing and discharge, in many cases a person can reestablish his/her credit faster with a bankruptcy filing and a fresh start. In situations where a person has many of the above entries on his or her report, his or her credit score can rise above the pre‑bankruptcy level in a short time after completion of the bankruptcy proceeding.

The timing in filing your bankruptcy is of critical importance for several reasons. Regardless of whether you file a Chapter 13 or a Chapter 7 bankruptcy case, the last six months of income (not counting the month of filing) is extremely important. If you get bonuses on an irregular basis, you may need to file either before or after a bonus in order to maintain your eligibility. Another illustration of the importance of timing is certain rules on the dischargeability of debts arising from cash advances or luxury purchases made immediately before bankruptcy is filed. A bankruptcy attorney knowledgeable in these rules will look at these details and help you determine the most favorable timing for you.

In most cases, the bankruptcy can assist someone in the following ways:

1. Bankruptcy can give your family a chance to start over and regain financial stability.

2. Bankruptcy can allow you and/or your family to repay a portion of your debt and still retain your home, cars, personal property and dignity.

3. Bankruptcy can eliminate most debts, and for many people can eliminate all of their debt.

4. Bankruptcy can stop a foreclosure of your home or other property.

5. Bankruptcy can stop auto repossession and if your auto has been repossessed recently, Bankruptcy may allow us to have your auto returned to you.

6. Bankruptcy can stop a wage garnishment.

7. Bankruptcy can stop IRS or state tax levies.

8. Bankruptcy can stop the termination of utility services.

9. In some cases, bankruptcy can be the fastest way to reestablish credit.

1. The continuance of a court proceeding to determine child custody, visitation, the dissolution of a marriage, the determination of property division in a divorce, the establishment of the amount of child support or alimony, and/or the resolution of a matter involving domestic violence.

2. Collection of child support actions, such as: 1) the interception of a person’s tax refund, 2) the suspension of a persons driver’s license, 3) the garnishment of a pay check, and/or 4) the withholding of up to 50% of social security benefits.

3. The commencement or continuance of a court proceeding of a criminal action or proceeding.

4. The collection of restitution ordered in a criminal proceeding.

Chapter 13 Bankruptcy is often referred to as a "wage earner plan" or a "debt repayment plan".

In Chapter 13 Bankruptcy, the debtor files a “Chapter 13 Plan” with the bankruptcy court agreeing to make the best effort to pay off as much debt as possible over a three to five year period of time. The plan will classify debts in different categories such as secured and unsecured debts. Some debts, such as taxes and secured debts may be paid in full while others may only be paid a portion of the amount owed. In some chapter 13 cases, only secured debt and tax debt is paid and unsecured debt is not paid at all. Upon completion of the chapter 13 plan, the debtor’s obligation to pay most of the debt that is not paid is discharged or wiped out.

The debtor makes a monthly payment to a bankruptcy trustee determined by several factors:

1. What secured loans must be paid to retain automobiles and/or other collateral.

2. If the loan was made to purchase the auto or other collateral, then the age of the loan is a factor that will effect the amount that has to be paid. If he loan is 910 days old or less, the loan has to be paid in full plus interest. If it is more than 910 days old, then the value can be paid with interest and the remaining portion is treated like all other unsecured debt.

3. What taxes must be paid in full (this depends upon the type of taxes and the age of the tax debt).

4. What are the debtor’s income and expense. In other words, how much can the debtor afford to pay?

5. What interest rate must be used on the secured loans (this may vary depending up the status of the secured loan).

In most cases, we are able to reduce the payment to an amount that our clients can afford and our clients can keep their home, autos and other items. In some cases, the liens on certain types of collateral can be avoided, which means that the debtor can keep or retain the collateral without paying the secured loan.

Most unsecured debts remaining at the end of the case are discharged. Some of the exceptions are the remaining portion owed on governmentally insured student loans, child support and alimony, certain debts which were obtained by fraud and a few others will not be discharged in some cases.

Chapter 13, in some circumstances, can offer significant advantages over Chapter 7. The main advantages are:

1. More debts are dischargeable in Chapter 13 than in Chapter 7.

2. Non‑dischargeable back taxes and child support can be repaid through the Plan. In many cases the monthly payment required will be substantially less than the creditor, such as the IRS, was requiring prior to the filing of the bankruptcy. Additionally, many priority debts can be paid without additional interest being added after the petition date and penalties on the outstanding tax debt can be discharged as other unsecured debts.

3. A debtor can keep property in a Chapter 13 which might be lost to the trustee in Chapter 7 provided the debtor pays enough through his plan to creditors that would have been paid by the sale of that asset in a chapter 7.

4. Some secured debts in Chapter 13 are generally reduced to the value of the property involved. This is called cram‑down or strip‑down. For example, if a debtor owes the bank or finance company $15,000.00 but the car which is the collateral for the loan is worth $11,000, the secured creditor will be paid the $11,000.00 plus interest through the plan, provided the auto loan is not a purchase money loan or if it is a purchase money loan, then the auto was purchased more than two years prior to the filing of the case. In most cases, the interest rate will probably be able to be reduced substantially in the chapter 13 plan.

5. A debtor can prevent auto repossessions and home foreclosures, and (in the case of a home foreclosure) repay the delinquency over a period of time. In some cases, a debtor can force a creditor to return an automobile that was repossessed a few days prior to filing the bankruptcy petition.

While Chapter 13 can offer some real advantages to a debtor, there are significant disadvantages as well:

1. Chapter 13 cases now come under greater scrutiny from the court and from the trustee.

2. A debtor in a chapter 13 cannot sell any property without court approval.

3. A debtor in a chapter 13 cannot borrow any money without the chapter 13 trustee’s or the court’s approval.

4. A Chapter 13 case requires a debtor to be “in bankruptcy” for at least three years (in some cases five years), while a Chapter 7 case is normally concluded within four to five months. As a result, the debtor cannot attempt to reestablish his or her credit until the case is closed out.

5. Lump‑sum distributions such as personal injury and worker’s compensation settlements are considered future income and can be considered in the disposable income test and may have to be turned over to the trustee.

Chapter 7 Bankruptcy is often referred to as a "straight" bankruptcy or a "liquidation". In Chapter 7, most of the debtor’s property or assets are protected by law (See explanation of exempt assets below). In rare cases, the bankruptcy trustee will take the unprotected or non‑exempt assets and sell them to use the funds to distribute pro‑rata among the unsecured creditors. In Mississippi, very few debtors in Chapter 7 are required to turn over any property to the trustee. On secured debts, the debtor either reaffirms the debt (continues to make payments), surrenders the property back to the creditor, or redeems the property (making a lump sum payment equivalent to the value of the merchandise).

A debtor has four options on secured debts, where the creditor is holding collateral to enforce the payment of the debt. The most common examples of secured debts are home mortgage loans, automobile purchase loans, seller's or vendor's liens retained at the time of purchase by retailers such as furniture or jewelry stores, loans by finance companies taking such items as vcrs, stereos as collateral.

First, the debtor can reaffirm the debt, meaning that the debtor agrees to keep making payments as if there had never been a bankruptcy filing. On most auto loans and house mortgages, the creditor will require that the entire loan be reaffirmed, the loan be current and that the regular monthly payment be maintained. Most loans secured by household goods (if valid) can be renegotiated, reducing the balance and the monthly payment.

Second, the debtor can “redeem” the collateral by making a one‑time lump sum payment equivalent to the value of consumer goods. For example, if a debtor owes $10,500 on a car and it is only worth $6,000, the debtor can obtain clear title to the car by paying the creditor $6,000. Obviously, most debtors cannot use redemption as a method to retain the collateral. However, many times the collateral’s value is low enough and my clients have enough income to use this power if they file near the time they receive their tax refunds.

Third, the debtor can surrender the collateral back to the creditor. The entire debt will then be discharged, and the creditor cannot collect a deficiency balance following the sale of the item.

Fourth, in some instances, a debtor may avoid the lien, retain the collateral and discharge the debt. If a creditor such as a finance company has a non‑purchase money lien on household goods such as a microwave, lawn mower or furniture, the debtor can avoid the lien pursuant to section 522(f) of the Bankruptcy Code. Items on which the lien can usually be avoided are: appliances (includes outdoor appliances such as lawn mowers, weed eaters, etc.), furniture, wedding and engagement rings, all other jewelry worth less than $200 per item, most televisions, stereos and other electronic entertainment. Items such sports equipment and most firearms and some large ticket items such as lawn tractors cannot have the lien on them avoided. If a lien cannot be avoided, then the debtor must choose one of the other three options described above.

If you have lived in Mississippi less than two years at the time of the filing of a bankruptcy, then where you were living two years prior to the filing may control what you can keep. But for the debtors that have lived in Mississippi for at least two years, an explanation of what can be kept is at: Exemptions in Mississippi.

State and federal laws provide what are called "exemptions" and Mississippi has opted to not allow a debtor to claim federal exemptions. An exempt asset is determined by our state law and allows a debtor to keep certain property up to a particular dollar value. Certain categories of assets such as money in bank accounts, stock, and real property other than the debtor’s home are assets which are considered "non‑exempt assets." In other words, exempt items are protected, which allows the debtor(s) to retain them and non‑exempt items are not protected and can be taken by the trustee to be sold and/or converted to cash for distribution to the unsecured creditors in a chapter 7 bankruptcy proceeding.

If the non‑exempt (non protected) assets have a high enough value to provide for payment of the trustee’s fees and expenses and have money remaining to distribute to the unsecured creditors, the trustee will take these non‑exempt assets, liquidate them to cash, and distribute those assets pro‑rata to the unsecured creditors. Although there is no magic dollar figure, the trustee rarely liquidates any assets unless he can receive at least $3,000.00, after any expenses, from the sale of the non‑exempt assets. To avoid liquidation, a debtor can choose to file a chapter 13., chapter 12, or chapter 11 reorganization.

Each state has a series of laws or statutes that protect certain assets from seizure or garnishment. As a result, many times I refer to exempt assets as protected assets when talking to clients. This makes it easier for my clients to understand. These state exemption laws protect assets from seizure by judgment creditors outside of bankruptcy and protect assets from seizure by a chapter 7 trustee in bankruptcy cases. The reason that a creditor that has a judgment against a Mississippi resident can only garnish 25% of a person’s net pay is because § 85‑3‑4 Miss. Code Ann. limits the garnishment to that amount.

Bankruptcy law allows people that are filing bankruptcy to claim either state exemption laws or the federal exemption laws under 11 U.S.C. § 522(d) provided the state has not opted out. When a state such as Mississippi opts out, the result is that the person filing bankruptcy in Mississippi can only choose the Mississippi exemption laws. The exception comes when a person has moved to Mississippi within the last two years, which is explained below.

As stated in the explanation in Chapter 7, a chapter 7 trustee cannot take assets that are properly claimed as exempt.  In other words, if an asset (such as a car) is exempt, then a person can file a bankruptcy case and keep it if there is no lien on the car and the value of the car and the other items that he/she is claiming as exempt are within the dollar limits set by the statute that allows the vehicle to be claimed as exempt.

If there is a lien on the car, then the debtor can still keep the car provided 1) he/she reaffirms the secured debt and pay the installment loan payments on the debt which is secured by the car as set forth in the reaffirmation agreement, and 2) he/she properly claims the equity (value that exceeds the lien) as exempt and claim of the equity is within the dollar limits of the statute under which the claim of exemption is made.

If you are considering filing a bankruptcy in Mississippi and have moved to Mississippi within the past two years, you will probably be required to use the Federal Exemptions. The state that will control will be the state that you resided for more of the six months prior to the date which is exactly two years prior to filing. At my last review, out of the 49 other states that could control what exemptions you would use, 42 of the states would result in the requirement to use Federal Exemptions and the other 5 states would require the use the state exemptions in those 5 states. Thus, it is important to contact a qualified attorney that can advise you about this problem if you have moved to a different state within the last two years. You can see what you can keep in a bankruptcy if you moved from another state to Mississippi at this link: Federal Exemptions.

If a Debtor has lived in Mississippi for two consecutive years or more, as stated above Mississippi exemptions laws will control what can be claimed as exempt. Although there are a few others, the most commonly claimed exempt assets Mississippi are set forth below:

1. Homestead up to $75,000.00 in equity in real property up to 160 acres. §85‑3‑17 Miss. Code Ann. Example: If your home has a value of $150,000.00 and your mortgage payoff is $100,000.00, then your equity is $50,000.00 and the homestead is exempt or protected.

2. One (1) mobile home, trailer, manufactured housing, or similar type dwelling owned and occupied as the primary residence by the debtor, not exceeding a value of Thirty Thousand Dollars ($30,000.00); in determining this equity after deducting liens. §85‑3‑1(d) Miss. Code Ann.

3. Personal property including the following items up to $10,000.00 in value for an individual and up to $10,000.00 each in value for a husband and wife filling jointly, per §85‑3‑1(a) Miss. Code Ann. , which include the following:

• Household goods, wearing apparel, books, animals, crops, one television, wedding rings and engagement rings (this does not include most electronic equipment and jewelry other than wedding rings unless each item is worth less than $200.00; thus, almost all of our client’s electronic equipment and jewelry can be retained),

• Motor vehicles (which in Mississippi is any vehicle or trailer that requires a tag under Mississippi law, but does not include such items as a dirt bike or 4 wheeler that do not require tags),

• Implements, professional books or tools of the debtor’s trade,

• Cash on hand (note: this does not include money in bank accounts),

• Professionally prescribed health aids, and

• Any item worth less than $200.00 (thus, items such as the second and third tvs, vcrs, computers, stereos and jewelry, etc. worth less than $200.00 not exempt as a household good would still be exempt).

4. Retirement in multiple forms §85‑3‑1(b)(i) Miss. Code Ann., including:

• An annuity, pension, or profit‑sharing or stock bonus or similar plan established to provide retirement benefits for an officer or employee of a public or private employer or for a self‑employed individual;

• An annuity, pension, or military retirement pay plan or other retirement plan administered by the United States; and

• An individual retirement account.

5. Income from disability insurance. §85‑3‑1(b)(ii) Miss. Code Ann. (Note: We use this on all social security disability claims, even SSI claims which are not really disability insurance. To obtain SSI (supplemental security income), one must be disabled, but it is a needs basis program and is not insurance. SSI can also be exempt under Federal Law.

6. Personal injury judgments up to $10,000.00. (Note: The problem here is that the courts have ruled that a personal injury claim that has not been reduced to a judgment is not exempt.) §85‑3‑17 Miss. Code Ann. Thus, this exemption normally cannot be used because when individuals file their bankruptcy petition, they normally have a pending claim, not a judgment.

7. Worker’s Compensation benefits. §71‑3‑43 Miss. Code Ann. 100% of worker’s comp benefits are exempt and protected.

8. Whole life and universal life insurance cash value. (Note: it appears that the amount is unlimited except that the any amount of cash value placed into the policy within the last 12 months that brings the total cash value to greater than $50,000.00 is not exempt.) §85‑3‑11 Miss. Code Ann.

9. Seventy‑five (75%) of all wages and 100% of wages due within the next 30 days after service of a writ. §85‑3‑2 Miss. Code Ann. This exemption is important when a person normally receives a large bonus each year.

10. A state tax refund up to $5,000.00; a federal tax refund of up to $5,000.00 and earned income credit of up to $5,000.00. A husband and wife filing a joint case can exempt up to $5,000.00 each in each category. §85‑3‑1(i), (j) & (k) Miss. Code Ann. Most people think of the entire amount they receive as their tax refund. However, most of the time, part of the refund is actually earned income credit and part of it is a refund of taxes withheld the prior year.

11. Proceeds of insurance and or from the sale of exempt property. This from insurance or the sale of real such as one’s homestead or personal property such as autos or household goods. §85‑3‑1(b)(i) Miss. Code Ann.  This can include payments on a deed of trust on the sale of the debtor’s homestead provided he/she/they were still living there at the time of the sale and they have not purchased a new homestead. The homestead would have to have been a Mississippi homestead originally exempt under §85‑3‑21. Miss. Code Ann. If the proceeds have been received it is critical that these funds have never been co‑mingled with other funds.

12. $50,000.00 of anything not identified above for debtors at the age of 70 or above. This exemption has no limitation on type of property. Thus, if you are 70 or older, you have a $50,000.00 wild card exemption and if a husband and wife are both 70 or older, then both of them have a $50,000.00 wild card exemption. §85‑3‑1(h) Miss. Code Ann.

13. Funds in a health savings account, provided the account was established pursuant to a health savings account program provided in the Health Savings Account Act under Mississippi law. §85‑3‑1(g)

Although there are a few other items which may be exempted under the Mississippi Code, most people filing bankruptcy do not own or hold any exempt assets other than those listed above. The most common non‑exempt assets that the bankruptcy trustee liquidates in chapter 7 proceedings are real property other than one’s homestead, debts owed to the debtors other than those types of debts listed above, personal injury claims or other potential claims or lawsuits in which the debtor holds an interest, and interest in estates.

14. Items exempt under Federal Law. There are multiple items which will be exempt in every state. A few of those are: Student loan funds or grants, FEMA benefits, crop insurance proceeds for farmers, multiple types of retirement accounts, veteran’s benefits, social security benefits and numerous other types of federal benefits.

The Automatic Stay (defined in the glossary) stops all collection activity immediately upon filing a bankruptcy case in almost every instance. Thus, a debtor can stop paying all dischargeable debts that he/she does not intend to reaffirm (such as an automobile loan on a car that the debtor wants to retain). Thus, once the case is filed a debtor does not have to pay the typical unsecured debts as credit card debt, medical bills and signature loans to keep the creditor from collecting the debt.

However, if a debtor does want to keep a particular debt such as the house mortgage or auto loan and he/she intends to reaffirm that loan, then the debtor should continue making payments in a chapter 7 case. In a chapter 13, 12 or 11 case, the plan filed by the debtor’s attorney will set out how the house mortgage or auto loan will be paid.

As a general rule, most unsecured debts will be discharged in a chapter 7 and the portion which was not paid pursuant to the chapter 13 plan will be discharged in a chapter 13. An unsecured debt is a debt where the creditor is not holding any collateral or security to enforce payment of the debt. The most common examples of unsecured debts are credit cards/credit lines, medical bills, and utility bills.

About 3 months after the Chapter 7 meeting of creditors, each debtor will receive a notice in the mail indicating that their debts have been discharged. This discharge, however, will not include secured debts to be reaffirmed, and any non-dischargeable debts (See Above). If a creditor objects to discharge of a debt or other litigation is filed, the discharge may be delayed.

In a Chapter 13 the case is audited after receipt of the final plan payment to make sure that the debts were paid in the manner that was set out in the plan. Afterwards, the trustee sends a notice to the bankruptcy court, which in turn mails a discharge notice to all creditors and the debtor. This usually occurs about 3 months after the last payment is made.

In both Chapter 7 and Chapter 13 cases, each debtor must attend a hearing called “meeting of creditors”. The name implies that all the creditors will attend that meeting. However, only a few of the secured creditors normally attend. The hearings in South Mississippi are usually held in Jackson, Hattiesburg, Natchez, or Gulfport. The location of the meeting depends upon the county in which the debtor resides on the date of filing of the Bankruptcy. Currently, due to COVID the hearings have been converted to be held over the telephone and not in person. At the hearing, the trustee will ask the debtor some basic questions about information in the schedules (papers filed with the bankruptcy petition). In a Chapter 13, the trustee will review the Chapter 13 Plan and determine if payments have been made pursuant to the plan. Secured creditors that attend may inquire as to insurance on the collateral, how they are being treated in the chapter 13 plan or whether or not the collateral will be surrendered in a chapter 7.

The attorney will attend the meeting of creditors with you and we will provide you with the normal questions you will be asked at that meeting.

In some cases (more often in reorganization cases such as chapter 13), a hearing to resolve a dispute will be held and a debtor will be required to attend that hearing. However, most disputes are resolved or settled without the necessity of a hearing. If a hearing is required, then the attorney will help you prepare for that hearing and will also attend the hearing with you.

Provided you have completed your credit counseling session, we can file a bankruptcy on your initial visit with our office by filing an Emergency Bankruptcy Petition. Immediately, we will fax notice to your employer to stop the Tax Levy or Garnishment. If your pay period has already ended for your next pay check, then you may have one more check garnished.  The rest of the documents that must be filed will take around two weeks to complete and must be completed timely so your case will not be dismissed.

At that first appointment, we will go over your assets to make sure that you will not lose anything that you want to keep if you file bankruptcy. We will also try to help you determine if a chapter 7 or a chapter 13 case will be the most helpful to you and help you determine if you qualify for a chapter 7 and how much your plan payment will be if you file a chapter 13 case. Once we have covered all of these things, we can file the emergency petition to stop a foreclosure, a garnishment or and IRS levy if that is what you need.

There are particular situations where a married couple may not need for both spouses to file bankruptcy. Examples are:

• most of the debt is only in one spouse’s name,

• one spouse has filed bankruptcy recently effecting his or her eligibility to file again, or

• one spouse owns property that is not exempt or protected, which would result in losing that property if he or she filed.

However, the income of both husband and wife is considered to determine if the filing spouse is entitled to file a chapter 7 or how long a chapter 13 plan must be and the amount of the plan payment. But the expenses of the entire family will also be considered.

If you are separated from your spouse, you will have not have to provide income information about your spouse’s income to determine if you qualify for a chapter 7. However, his or her income may be considered to determine the length of a chapter 13 plan.

The short answer is no in most cases. Since a credit report is an individual matter, one person can have a very good credit score while his wife’s or her husband’s credit score is very low. When a credit check is performed by a lender or bank or by a department store, the check is performed on one person based upon his or her credit history and his or her social security number. Thus, a bankruptcy by one spouse will not show up on his wife’s or her husband’s credit score.

This is the case even if the married couple have joint debts as long as the non‑filing spouse stays current on his or her debts. However, if there is a co‑signed debt and after one person files, his or her spouse does not pay the debt timely, then that debt is shown as being paid late on the credit report which will adversely effect non‑filing spouse’s credit score.

The most important thing to keeping a high credit score is not over extending one’s monthly payment obligations and paying all debts timely. So many times we find that if a husband or wife is considering bankruptcy, then the couple will be better off by filing jointly to get a fresh start for the both of them. This is especially true since the cost of filing a bankruptcy is usually the same for a husband and wife filing as a couple as it would be for one of them to file by himself or herself.

Another mistake we find people making is assuming that bankruptcy will hurt their credit when that person’s credit is already in very bad shape. For example: multiple finance company loans (by refinancing with the same loan company over and over) and maxed out credit cards have already seriously hurt a person’s credit score and that person does not realize that has happened.

There is a limitation on filing bankruptcy, but the time between bankruptcies depend upon which chapter was filed in the past and which chapter is being filed under this time. Filing between cases also depends upon whether the case was concluded because it was dismissed or because the debtor received a discharge. The time periods go from the date of filing of cases in which a discharge was received runs from the Petition Date (date case was filed) to Petition Date (date the second case is filed). Some of the time limitations between cases that were completed and a discharge was granted are:

A debtor must wait for 8 years between the filing dates of two chapter 7 cases.

A debtor that is granted a discharge in a chapter 13 case, must wait 6 years before filing a chapter 7 case. Again the time period is calculated from the date of filing of the first case to the date of filing of the second case.

A debtor that filed a chapter 7 before can file a chapter 13 at any time after receiving a chapter 7 discharge, but the debtor will only be able to obtain a discharge of his or her debts if the prior chapter 7 was filed more than 4 years prior to the filing of the chapter 13. In some instances, our clients elect to file a chapter 13 case even if they cannot receive a discharge because of a prior filing.

A debtor can file another chapter 13 case if the prior chapter 13 case was filed more than two years before the filing of the second case. Since a discharge is rarely granted in a chapter 13 case in less than 3 years, it is very unlikely that someone would be filing a second chapter 13 case less than 2 years after the prior case was filed.

As stated above, the above rules apply when a discharge has been granted in the prior case. If a prior case was dismissed, there can be a 180 day bar from filing another case in two situations:

The debtor voluntarily dismissed his or her case after a request was made by a creditor to terminate the Automatic Stay. The request is generally called a motion for relief from stay or a motion to lift the automatic stay.

The debtor’s case was dismissed because of his or her refusal to comply with an order of the bankruptcy court.

My staff can help you determine what type of bankruptcy can be filed by you and what relief can be obtained if you have filed a bankruptcy case within the past 8 years.

The amendments to the Bankruptcy Code added a requirement for all individuals that file a bankruptcy case must go through a pre‑bankruptcy credit counseling session. Many people assume that the credit counseling will be a long, drawn out course that takes several days or weeks. However, the session generally lasts approximately one hour and can take less time than that. The session can be completed by telephone or by internet with any one of numerous credit counseling agencies that have been approved to offer the pre‑filing credit counseling course. The primary reason for the pre‑filing session is to make sure that everyone that files a bankruptcy case knows that there are other options that they may want to consider before making the final decision to file. The costs varies.

After filing or pre‑discharge bankruptcy education (sometimes called a Financial Management Course).

The bankruptcy education must be completed before an individual is entitled to receive a discharge in a chapter 7 and in a chapter 13 case. The course generally takes about 2 hours and as in the pre‑filing course, it can be completed by telephone or by internet.

Many clients come into our office with the belief that if they file bankruptcy, then they cannot obtain any credit for seven (7) years. Actually, your ability to obtain credit at any time is normally based upon three (3) factors. Those factors are:

• your ability to repay the loan;

• the creditor's collateral position; and

• your credit history or credit score.

If you have filed a bankruptcy, then your credit score is not going to be high immediately. However, as stated above there are things you can do recover as quickly as possible. Thus, filing a bankruptcy does not mean that you cannot obtain credit at all even immediately after completion of the case. Individuals that show the creditor that they now have the ability to repay a loan can in many cases obtain the credit necessary to purchase a car, but the longer one waits after bankruptcy, provided the borrower is taking the proper actions re‑establishing credit, the lower the interest rate will be.

FHA and VA regulations provide that a person or persons can borrow funds to purchase a home provided that the discharge completing the bankruptcy occurred at least two years prior to approval of the loan and the borrower(s) meet the remaining necessary guidelines to borrow the funds to purchase a home.

A bankruptcy filing is noted by various credit reporting companies. Federal law limits the length of time that this information may be carried on a report to ten (10) years. A bankruptcy shown on a credit report will adversely effect one’s credit. However, many of our clients have found that after filing bankruptcy, they can reestablish their credit over a reasonable period of time by promptly making the payments that they reaffirm, such as their car loans, house mortgage. Many of our clients have found that they can improve their credit score into the high 600s in two years and to above 700 within three years of completing their bankruptcy.

Our attorneys and staff will provide you information on how to reestablish credit by informing you:

• when to check your credit report;

• how to insure that the credit report only has information that it should have on it;

• how to correct incorrect information on the credit report by letter or by internet;

• how to obtain the right type of loans to reestablish credit;

• which types of loans can actually hurt your credit score and why to avoid those types of loans.

This and most of your other questions about bankruptcy can be answered in an appointment with us at no charge. Most of our first appointments take at least an hour because we want to make sure that you have a good understanding of the entire process to help you make the right decision for you. For example, we explain why loans with finance companies that normally charge high rates do not help your credit the same way that a loan from a bank will help.  Thus, we cover how to make loans from banks after bankruptcy so you can build your credit score as quickly as possible.

How difficult is it to improve my credit rating if I elect not to file bankruptcy?

The answer to this question depends upon how quickly you can bring all of your loans and accounts current. If you can do that quickly and bring your balances down on your credit card debt, then you can raise your score rather quickly. However, if your credit card balances remain close to your credit limit and if you continue to pay your debts late, then your credit score will probably continue to fall.

Bankruptcy has its own language. Here is a brief definition of those terms used in the Bankruptcy Code. We have attempted to take much of the legal jargon out of the definitions.

Adequate protection: Payment to a creditor with collateral to protect the value of the creditor’s lien during the bankruptcy proceeding from loss because the collateral’s value will depreciate or lower over time.

Adversary proceeding: A lawsuit filed in the bankruptcy court which is related to the debtor’s bankruptcy case. Examples are suits to determine the dischargeability of a debt, suits against creditors that violate the Automatic Stay.

Assets: Assets are every form of property that the debtor owns. They include tangible assets such as furniture and cars and intangible things such as debt owed to the debtor and the debtor’s the right to sue someone. The debtor must list all of his assets in the bankruptcy schedules.

Assumption of a lease or contract: An agreement to continue performing duties under a contract or lease. Example: If you assume your cell phone contract, you agree to continue paying the monthly charges in exchange for being able to use the service.

Automatic stay: The injunction issued automatically upon the filing of a bankruptcy case which stops almost all collection activity, including phone calls, lawsuits, garnishments, IRS levies, foreclosures and repossessions. See Relief from Stay on terminating the injunction. For example: If a lawsuit, has not been filed, then the creditor cannot file it. If the lawsuit was filed, then it stops and a judgment cannot be take. If a judgment was taken, the creditor start a garnishment. If the garnishment was started before the filing of the bankruptcy, then the garnishment stops.

Avoidance: The Bankruptcy Code permits the debtor to eliminate (avoid) some kinds of liens that interfere with (or impair) an exemption claimed in the bankruptcy. In some cases a lien can be avoided, the debt discharged, and the debtor can keep the asset. In Mississippi, most judgment liens that have attached to the debtor’s home can be avoided if the debtor’s equity in his home is less than $75,000.00. Also, many liens on household goods and business equipment can be avoided. For more, see Lien Avoidance and Lien Stripping.

Avoidance powers: Rights given to the bankruptcy trustee (or the debtor in possession in a Chapter 11 and in certain instances to Debtors in other chapters) to recover certain transfers of property such as preferences or fraudulent transfers or to set aside liens created before the bankruptcy case was filed. More on preferences.

Bankruptcy Code: Title 11 of the United States Code governs bankruptcy proceedings. Bankruptcy is a matter of federal law and is, with the exception of exemptions, which are determined by state law on most assets. When federal bankruptcy law conflicts with state law, federal law controls.

Bankruptcy Estate: The estate is all of the legal and equitable interests of the debtor as of the commencement of the case (the date the case is filed with the bankruptcy court). From the estate, an individual debtor can claim certain property as exempt (protected). If the debtor owns assets that are not exempt (not protected), then non‑exempt (unprotected) assets can be liquidated or sold in a Chapter 7 to pay the administrative costs and pay a portion of the debts of the debtor. What creditors are paid and in what order is determined by each debts status. For example, priority debts are paid before regular or general unsecured debts such as credit card debt. In a chapter 13 case, the bankruptcy estate also includes future disposable income.

Bankruptcy Mill: A business not authorized to practice law that provides bankruptcy counseling and prepares bankruptcy petitions.

Bankruptcy Petition: A formal request for the protection of the federal bankruptcy laws. (There is an official form for bankruptcy petitions.) The Petition (approximately 3 pages) contains the person or company that is filings basic information, including name, address, etc.

Bankruptcy Trustee: A private individual or corporation appointed in all chapter 7, chapter 12, and chapter 13 cases to represent the interests of the bankruptcy estate and the debtor’s creditors. See chapter 7 trustee, chapter 12 trustee and chapter 13 trustee to see what the duties are for each of them.

Chapter 7: The most common form of bankruptcy, a Chapter 7 is sometimes called a “straight bankruptcy” and sometimes called a liquidation proceeding. Chapter 7 is available to individuals, married couples, partnerships, limited liability companies (LLCs) and corporations. More in Bankruptcy Information.

Chapter 7 Trustee: A person appointed in a chapter 7 case to represent the interests of the bankruptcy estate and the unsecured creditors. (The trustee’s responsibilities include reviewing the debtor’s petition and schedules, liquidating the property of the estate, and making distributions to creditors. The trustee may also bring actions against creditors or the debtor to recover property of the bankruptcy estate.)

Chapter 11: A very complex bankruptcy proceeding, which is a reorganization proceeding in which the debtor may continue in business or in possession of its/his/her property. A confirmed Chapter 11 plan provides for the manner in which the claims of creditors will be paid in whole or in part by the debtor. Generally, a trustee is not appointed in Chapter 11 cases. Thus, the debtor has the same duties and responsibilities as a trustee.

Chapter 12: A simplified reorganization plan for family farmers or commercial fishermen whose debts fall within certain limits. Corporations, etc can qualify as family farmers or family fishermen. In many ways, a Chapter 13 case is similar to a Chapter 13 case, but a debtor can pay his/her/its plan payments seasonally instead of monthly.

Chapter 12 Trustee: A person appointed to administer a chapter 12 case. (A chapter 12 trustee’s responsibilities are similar to those of a chapter 7 trustee; however, a chapter 12 trustee has the additional responsibilities of overseeing the debtor’s plan, receiving payments from debtors, and then paying payments creditors as required by the plan after the plan has been approved by the Court.)

Chapter 13: The simplest of the reorganization type of bankruptcy cases. A repayment plan for individuals with debts falling below statutory levels which provides for repayment of some or all of the debts out of future income over 3 to 5 years. More in Bankruptcy Information

Chapter 13 Trustee: A person appointed to administer a chapter 13 case. (A chapter 13 trustee’s responsibilities are similar to those of a chapter 7 trustee; however, a chapter 13 trustee has the additional responsibilities of overseeing the debtor’s plan, receiving payments from debtors, and then paying payments creditors as required by the plan after the plan has been approved by the Court.)

Charged Off: This is an accounting term that means the creditor does not expect to collect on the debt. Just because a debt has been charged off does not mean that the creditor can no longer collect the charged off debt.

Claim: A creditor’s assertion of a right to payment from a debtor or the debtor’s property. The claim is asserted by filing a “proof of claim.” In most cases, if a creditor does not file its proof of claim timely, then that creditor will not be paid.

Collateral: The property which is subject to a lien. A creditor with rights in collateral is a secured creditor and has additional protections in the Bankruptcy Code for the claim secured by collateral. The measure of the secured claim is the value of the collateral available to secure the claim: it is possible to have a lien on property that is subject to a senior lien or liens such that the security available to pay the claim is really without value to the junior creditor. The general rule with respect to liens is “First in time, first in right.”

Complaint: The first or initial document in a lawsuit that notifies the court and the defendant of the grounds claimed by the plaintiff for an award of money or other relief against the defendant. Although complaints are filed in all courts, a complaint is filed in Adversary Proceedings to start the lawsuit filed in a bankruptcy case.

Confirmed: A plan of reorganization in Chapter 11, 12 or 13 approved by the court and binding on the parties is said to be confirmed. Unless there is an order directing payments to a creditor prior to confirmation, most creditors are not paid until the plan has been confirmed.

Confirmation: The court order which makes the terms of the plan for repayment of debts in a Chapter 11, 12 or 13 binding. The terms of the confirmed plan replace the prepetition rights of the debtor and creditor.

Consumer Bankruptcy: A bankruptcy case filed to reduce or eliminate debts that are primarily consumer debts, such as credit card debt, medical debt, personal loans and auto loans.

Consumer Debt: Debts incurred by an individual for personal, family or household purposes. Taxes are not consumer debts and neither are business loans. The means test only applies to those with primarily consumer debt.

Contingent: Used to describe debts that are not fixed in right at the time, but are dependent on some other event happening to fix the liability.

Conversion: Cases under the Code may be converted from one chapter to another chapter; for example, a Chapter 7 case may be converted to a case under Chapter 13 if the debtor is eligible for Chapter 13. Even though the chapter of the Code which governs it changes, it remains the same case as originally filed.

Creditor: The person or organization to whom the debtor owes money or has some other form of legal obligation.

Debt Relief Agency: Another new term created by the 2005 amendments to the Bankruptcy Code. The Code requires all law firms and other entities that provide bankruptcy assistance for pay are Debt Relief Agencies, and that the firm or company must state in any advertisement that the firm or company is a Debt Relief Agency. Apparently, this was done to stop misleading advertising by some that made it appear that the firm or company helped people with debt consolidations without mentioning that what was being done was the firm or company was filing chapter 13 debt reorganizations instead.

Debtor: A person who has filed a petition for relief under the Bankruptcy Code. A person includes an individual, a partnership, a limited liability company (LLC), or a corporation. Thus, any of these entities can be a Debtor.

Debtor in Possession: In a Chapter 11 case, the debtor usually remains in possession of its assets and assumes the duties of a trustee. The debtor in possession is a fiduciary for the creditors of the bankruptcy estate, and owes them the highest duty of care and loyalty.

Deed: A legal document used to transfer real property (land) from one person or entity to another. The two most common deeds are called a warranty deed or a quitclaim deed. Both transfer the seller’s interest in the real property (land) but only the warranty deed gives a warranty to the purchaser that the seller has good title to the real property (land).

Deed of Trust: A legal document used to create a lien on real property (land) in Mississippi. In some states, the instrument is called a mortgage. Many of our clients mistakenly believe that a deed of trust is a deed that transfers the property to someone else.

Defendant: An individual (or business) against whom a lawsuit is filed.

Denial of Discharge: Penalty for debtor misconduct with respect to the bankruptcy case or creditors as a whole. The grounds on which the debtor’s discharge may be denied are found in 11 U.S.C. 727. When the debtor’s discharge is denied, the debts that could have been discharged in that case cannot be discharged in any subsequent bankruptcy. The administration of the case, the liquidation of assets and the recovery of avoidable transfers, continues for the benefit of creditors.

Discharge: The legal elimination of debt through a bankruptcy case. When a debt is discharged, it is no longer legally enforceable against the debtor, though most liens which secure the debt will survive the bankruptcy case. Example: An auto loan which is not reaffirmed is discharged. If the Creditor has not take actions to allow the repossession of the auto before discharge, then that creditor can repossess the auto after discharge but it cannot seek to collect the debt.

Dischargeable Debts: Debts that can be eliminated in bankruptcy. Certain debts are not dischargeable in any bankruptcy proceeding and others cannot be discharged except by the filing of a Chapter 13 case. Child support, alimony, most taxes, most student loans and criminal restitution are examples of debts which cannot be discharged in any bankruptcy case.

Dismissal: The termination of the case without either the entry of a discharge or a denial of discharge; after a case is dismissed, the debtor and the creditors have the same rights as they had before the bankruptcy case was commenced. Dismissal is the penalty for many minor infractions of bankruptcy procedures under the 2005 amendments. Examples: Failure to file the all tax returns for the prior 4 years will result in dismissal of a Chapter 13 case and failure to supply copies of pay stubs for wages received in the 60 days prior to filing will result in dismissal of any case filed by individuals or a husband and wife filing jointly.

Domestic Support Obligation: Debts for alimony, maintenance or support owed to child, spouse or governmental entity that paid for the support of the child or spouse. A new term introduced by the bankruptcy amendments of 2005.

Emergency Filing: A bankruptcy case filed either without schedules or with incomplete schedules sometimes called a Skeletal Filing or a Face Sheet Filing. Since it usually takes a week or two to complete the schedules, an Emergency Filing may be necessary to stop a foreclosure, stop a garnishment or tax levy, or have a repossessed auto returned to the debtor.

Equity: The value of a debtor’s interest in property that remains after liens and other creditors’ interests are considered. (Example: If a house valued at $100,000 is subject to a $45,000 mortgage, there is $55,000 of equity.)

Executory Contract or Lease: Generally includes contracts or leases under which both parties to the agreement have duties remaining to be performed. Examples of these are: Cell phone contracts, leases, and a contract with an attorney handling a lawsuit for the debtor. (If a contract or lease is executory, a debtor may assume it or reject it.)

Exempt: A description of any property that a debtor may prevent creditors from recovering. In other words the property is protected from creditors or a bankruptcy trustee from taking the property.

Exempt Property: Property that is exempt (protected) is removed from the bankruptcy estate and is not available to pay the claims of creditors. The debtor selects the property to be exempted from the statutory lists of exemptions available under the law of his state. The debtor gets to keep exempt property for use in making a fresh start after bankruptcy. More on Exemptions in Mississippi under Bankruptcy Information.

Exemptions: Exemptions are the lists of the kinds and values of property that is legally beyond the reach of creditors or the bankruptcy trustee. The debtor in bankruptcy keeps the exempt property. What property may be exempted is determined by state and federal statutes, and varies from state to state. More on Exemptions in Mississippi under Bankruptcy Information.

Family Farmer: An individual, individual and spouse, corporation, limited liability company (LLC) or partnership engaged in a farming operation who meet certain debt limits and other statutory criteria (such as more than 50% of the debtor’s income must be derived from farming) for filing a petition under chapter 12.

Family Fisherman: An individual, individual and spouse, corporation, limited liability company (LLC) or partnership engaged in a commercial fishing operation who meet certain debt limits and other statutory criteria (such as more than 50% of the debtor’s income must be derived from fishing) for filing a petition under chapter 12.

Fiduciary: One who is entrusted with duties on behalf of another. The law requires the highest level of good faith, loyalty and diligence of a fiduciary, higher than the common duty of care that we all owe one another. The debtor in possession in a Chapter 11 is a fiduciary for the creditors, owing loyalty to the creditors and not the shareholders of the debtor. Other examples of someone that has fiduciary responsibilities to others are: executors of estates, guardians appointed by courts, and attorneys with respect to their clients.

Fraudulent Transfer: A transfer of a debtor’s property 1) made with intent to defraud or 2) for which the debtor receives less than the transferred property’s value. In then second instance, the transfer does not have to be made with an intent to defraud to constitute a fraudulent transfer under the Bankruptcy Code.

Fresh Start: The characterization of a debtor’s status after bankruptcy, i.e., free of most debts. (Giving debtors a fresh start is one purpose of the Bankruptcy Code.)

General Unsecured Claim: Creditor’s claim without a priority for payment for which the creditor holds no security (or collateral). If the available funds in the estate extend to payment of a portion of the general unsecured claims, the claims are paid pro‑rata.

Indemnify: To guarantee against any loss which another might suffer. In bankruptcy, it is used to describe the undertaking of one spouse in a divorce to assume certain debts of the marriage and to see that the other spouse is not forced to pay. This is sometimes called a “hold harmless” clause.

Insider (of individual debtor): Any relative of the debtor or of a general partner of the debtor; partnership in which the debtor is a general partner; general partner of the debtor; or corporation of which the debtor is a director, officer, or person in control.

Insider (of corporate debtor): A director, officer, or person in control of the debtor; a partnership in which the debtor is a general partner; a general partner of the debtor; or a relative of a general partner, director, officer, or person in control of the debtor.

Involuntary Transfer: A transfer of a debtor’s property without the debtor’s consent. The taking of a lien by court action (judgment lien) or as authorized by state or federal laws (statutory lien). Examples of statutory liens are Federal Tax Liens and state tax liens that can be placed upon all property of a person simply by filing the lien in the courthouse of the county where property owned by the person is located.

Joint Administration: A court‑approved mechanism under which two or more cases can be administered together. (Assuming no conflicts of interest, these separate firms or individuals can pool their resources, hire the same professionals, etc.)

Joint Petition: One bankruptcy petition filed by a husband and wife together.

Lien: An interest in real or personal property which secures a debt; the lien may be voluntary, such as a mortgage (deed of trust) on real property or the security interest retained by a bank or lender on an automobile. The lien may also be involuntary, such as a judgment lien or tax lien.

Limited Liability Company: An company that is formed under state laws to operate as a business in that state and possibly others. You normally see this abbreviated as LLC. An LLC can be taxes as a corporation, partnership or if it is solely owned as a sole propritorship. Just as a corporation, an LLC can sue, be sued or file bankruptcy.

Liquidated: A debt that is for a known number of dollars is liquidated. An unliquidated debt is one where the debtor has liability, but the exact amount of that liability is unknown. Tort (such as auto accident injuries) claims are usually unliquidated until a trial fixes the amount of the liability of the tortfeasor.

Liquidation: A sale of a debtor’s property by a Chapter 7 Trustee or a Chapter 11 Debtor with the proceeds to be used for the benefit of creditors.

Means Test: Added to the Code in 2005, the means test is intended to screen out those filing Chapter 7 who are supposedly able to repay some part of their debts. The test is found in Official Form B22a. Debtors who fail the means test may convert their case to another chapter of bankruptcy. More about how the means test works.

Meeting of creditors: The debtor must appear at a meeting with the trustee to be examined under oath about income, expenses, assets and debts. Creditors are invited but seldom attend. The meeting is sometimes called the 341 meeting, after the section of the Bankruptcy Code that requires it. See 341 Meeting.

Motion to Lift the Automatic Stay: A request by a creditor to allow the creditor to take an action against a debtor or the debtor’s property that would otherwise be prohibited by the automatic stay. A motion to lift the automatic stay is generally filed when a debtor is not making the payments on a secured loan, or by failing to make payments required by the Plan, or the debtor has allowed the insurance on a creditor’s collateral such as a car or home. See Relief from Stay.

No‑asset Case: A chapter 7 case where there are not enough non exempt assets available for the trustee to consider liquidating the assets and distribute funds to unsecured creditors. In Mississippi more than 95% of chapter 7 cases are no‑asset cases.

Nondischargeable Debt: A debt that cannot be eliminated in bankruptcy. Nondischargeable debts remain legally enforceable despite the bankruptcy discharge. The Code’s list of nondischargeable debts is found at 11 U.S.C. 523(a). All of the debts listed in 523(a) are nondischargeable under chapters 7, 11 and 12, but some of those same debts can be discharged in a Chapter 13 case. More on differences in chapter 7 and 13.

Objection to Discharge: A trustee’s or creditor’s objection requesting that the court deny the debtor or debtors from receiving a discharge.

Objection to Exemptions: A trustee’s or creditor’s objection to a debtor’s attempt to claim certain property as exempt. If he trustee or creditor is successful, then the trustee will be able to liquidate the property and use the funds to pay creditors of the debtor.

Oversecured Claim: A debt which is secured and the value of the collateral is greater than the amount of the debt.

Perfection of Lien: When a secured creditor has taken the required steps to perfect his lien, the lien is senior to any liens that arise after perfection. A mortgage (deed of trust) is perfected by recording it in the land records in the office of the Chancery Clerk of the county where the land is located; a lien in personal property is perfected by filing a financing statement (UCC1) with the secretary of state; a lien on a car, truck, or mobile home is protected by placing the lien on the title to the vehicle or mobile home. An unperfected lien is valid between the debtor and the secured creditor, but may be behind liens created later in time, but perfected earlier than the lien in question. An unperfected lien can be avoided by the trustee. See Purchase Money Lien for an exception to the requirement to file anything to perfect liens on furniture and appliances.

Personal property: Assets, such as cars, stock, furniture, debt owed to the debtor etc., that is not real estate or affixed to real property. In other words, if buildings and items attached to buildings and land are real property. Everything else is personal property.

Petition: The document that initiates a bankruptcy case. The filing of the petition constitutes an order for relief and institutes the automatic stay. Events are frequently described as “prepetition”, happening before the bankruptcy petition was filed, and “post petition”, after the bankruptcy was filed.

Petition Date: The date on which the bankruptcy petition was filed. Most issues in the bankruptcy case are determined by the Petition Date.

Plan: A debtor’s detailed description of how the debtor proposes to pay creditors’ claims over a fixed period of time. Plans are filed in chapter 11, 12 and 13 cases.

Plaintiff: A person or business that files a formal complaint with the court. In bankruptcy cases, this is done in adversary proceedings.

Post‑petition Transfer: A transfer of a debtor’s property made after the commencement of the case. If the transfer is done without approval of the court, then the trustee or the debtor may be able to set the transfer aside pursuant to 11 U.S.C. §549.

Pre‑bankruptcy Planning: The timing of the filing of a bankruptcy case and/or the arrangement (or rearrangement) of a debtor’s property to allow the debtor to take maximum advantage of exemptions. (Pre‑bankruptcy planning typically includes converting nonexempt assets into exempt assets.) A person has to be careful to insure that his/her pre‑bankruptcy planning does not cross over the line to bankruptcy fraud.

Preference: A transfer to a creditor in payment of an existing debt made within certain time periods before the commencement of the case. Preferences may be recovered by the trustee for the benefit of all creditors of the estate pursuant to 11 U.S.C. §647. In some instances, the debtor may recover transfer of exempt assets. The time limit is normally 90 days except for transfer to insiders, which is one year.

Pre‑petition: Claims: Debts owed by the debtor or other claims against the debtor which arose before the commencement of the bankruptcy case, that is, before the filing of the bankruptcy petition (Petition Date). Generally only pre‑petition debts may be discharged in a bankruptcy proceeding. (One exception are debts that were incurred post‑petition, but before a case was converted from one chapter to another.)

Priority: The Bankruptcy Code establishes the order in which claims are paid from the bankruptcy estate. All claims in a higher priority must be paid in full before claims with a lower priority receive anything. All claims with the same priority share pro rata. Claims are paid in this order: 1) costs of administration 2) priority claims and 3) general unsecured claims. Secured claims are paid from the proceeds of liquidating the collateral which secured the claim.

Priority claims: Certain debts, such as unpaid wages, spousal or child support (domestic support obligations), and taxes are elevated in the payment hierarchy under the Code. In a chapter 7 liquidation, priority claims must be paid in full before general unsecured claims are paid. It is not uncommon for there not be enough funds to pay the priority claims in full in the few times that a chapter 7 liquidation occurs in Mississippi.

Proof of claim: The form filed with the court which sets out the reason the debtor owes money to the creditor. The creditor should attach to the official form documents which establish or prove the validity of the claim.

Property of the estate: As of the Petition Date, the property that is not exempt and belongs to the bankruptcy estate. Property of the estate is usually sold by the trustee and the claims of creditors paid from the proceeds. In chapter 12 and 13 and individual 11 cases, property of the estate also includes future income.

Purchase Money Lien: A lien created on an item in which the funds used to purchase the item are the funds that are secured by the lien. Example: The contract used to purchase a car, truck, furniture or appliances generally includes a promise to pay the funds not paid at the time of purchase and also takes a purchase money lien on the items purchased. If the purchase money lien is on furniture, appliances, electronic entertainment equipment, then the creditor does not have to file a UCC1 or financing statement to perfect its lien. See Perfection of Liens.

Reaffirm: When a debtor chooses to waive the discharge as to a debt, then the debtor reaffirms that debt. Generally, the parties to the reaffirmed debt have the same rights and liabilities that each had prior to the bankruptcy filing. For example, the debtor is obligated to pay and the creditor can sue or repossess the collateral if the debtor doesn’t pay. In a some cases, a debtor may reaffirm only part of the debt provided the creditor and debtor agree on the terms of the agreement.

Reaffirmation Agreement: An agreement by a chapter 7 debtor to continue paying a debt after the bankruptcy, usually for the purpose of keeping collateral or mortgaged property that would otherwise be subject to repossession or foreclosure.

Real Property: All land together with builings, structures, fences, etc. which are attached to the land and along with equipment that has become a part of the land such as light fixtures to a house or a well pump on the land.

Relief from the Stay: A creditor can ask the judge to lift the automatic stay and permit some action against the debtor or the property of the estate. (See Motion to Lift the Automatic Stay.) If the motion is granted, the moving party (but no one else) is free to take whatever action the court permits

Schedules: The debtor must file the required lists of assets, liabilities, income and expenses to commence a bankruptcy case, collectively called the schedules.

Secured Debt: A debt backed by a mortgage, pledge of collateral, or other lien which gives the creditor the right to pursue specific pledged property upon default. The lien can be the result of a voluntary agreement or an involuntary lien such as a judgment or tax lien. Generally a secured claim must be perfected under applicable state law to be treated as a secured claim in the bankruptcy.

Statement of Financial Affairs: A series of questions the debtor must answer in writing concerning sources of income, transfers of property, lawsuits by creditors, etc. (There is an official form a debtor must use which must be filed in every bankruptcy proceeding.)

Statement of Intention: A declaration made by a chapter 7 debtor concerning plans for dealing with secured debts. The options in the Statement of Intent are for the debtor to 1) reaffirm a debt, 2) surrender the collateral, or 3) Redeem (which means pay the secured creditor the value of the collateral in one lump sum to retain the collateral and discharge the remainder of the debt.)

Tangible Personal Property: Physical articles (things) such as a animals, cars, furniture or equipment. Tangible property is distinguished from intangible property such as stock, rights, patents, copyrights and franchises.

Till Rate: The interest rate that will be used to pay on secured claims in Chapter 13 Plans. The U.S. Supreme Court held that in chapter 13 cases, the method to determine what interest rate will be paid on secured claims should be set at the Wall Street Journal Prime Rate plus a risk factor and that most courts use a risk factor between 1.0% and 3.0%. Till v. SCS Credit Corp., 541 U.S. 465 (2004) As of the date this entry was made in this Glossary, a Till Rate of 5.0% is used as the presumptive rate in chapter 13 cases in Mississippi.

341 Meeting: A meeting of creditors at which the debtor is questioned under oath by creditors, a trustee, examiner, or the United States trustee about his/her financial affairs.

Trustee: The court appoints a trustee in every Chapter 7, Chapter 12 and Chapter 13 case to review the debtor’s schedules and represent the interests of the creditors in the bankruptcy case. The role of the trustee is different under the different chapters which are described in this glossary.

United States Trustee: An officer of the Justice Department responsible for supervising the administration of bankruptcy cases, estates, and trustees, monitoring plans and disclosure statements, monitoring creditors’ committees, monitoring fee applications, and performing other statutory duties. Many times this is abbreviated in the following manner: UST.

Undersecured Claim: A debt which is secured and the value of the collateral is greater than the amount of the debt. The excess or unsecured portion may be treated differently than the secured portion in Chapter 11, 12 and 13 plans of reorganization.

Unliquidated Claim: A claim upon which the debtor has liability, but the exact amount of that liability is unknown. Tort (such as auto accident injuries) claims are usually unliquidated until a trial fixes the amount of the liability of the tortfeasor.

Unsecured Debt: A debt is unsecured if there is no collateral that is security for the debt. Common examples of unsecured debt are: most credit card debt, medical bills, and signature loans.

Unsecured Claim: A claim on a debt on which a creditor holds no collateral such as a mortgage or lien.

Voluntary Transfer: A transfer of a debtor’s property with the debtor’s consent. The granting of a lien on property by a mortgage (deed of trust) or a security agreement on an automobile or other property can also be considered a voluntary transfer.

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