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Filing for Mississippi Chapter 7 bankruptcy won't cost your home

It only takes a few rough weeks or a single accident to put the average American in financial trouble. Whether it's a car accident that results in medical bills and loss of a job or a sudden lay-off at work, when something happens to you financially, the problems can quickly grow out of control.

After you miss a payment on a line of credit, for example, you'll get hit with fees, as well as potentially needing to pay a higher penalty interest rate on your balance. Soon enough, you can't make the minimum payments and creditors start calling. If you're considering Chapter 7 bankruptcy to end collection attempts and get a fresh start, you're probably wondering if you'll lose your house. After all, the bank often liquidate certain assets to repay creditors.

The law protects some of your assets in Chapter 7 bankruptcy

Chapter 7 bankruptcy, also called straight bankruptcy, allows people in debt to discharge certain debts if they meet requirements. After passing a means test and financial review, people approved for Chapter 7 bankruptcy have their unsecured debts discharged, which stops any further attempt at collection.

In some cases, however, before the courts will discharge your debts, they will order the liquidation of certain assets to repay as much of the debt is possible. Mississippi law allows people to exempt up to $10,000 of certain kinds of personal property. It also creates a homestead exemption which protects a certain amount of equity in your home.

Mississippi homeowners can exempt up to $75,000 in equity

The amount outstanding on your mortgage is a debt, not an asset. However, the amount you have paid toward the principal on your mortgage is an asset. The courts allow residents who qualify for Chapter 7 bankruptcy to exempt up to $75,000 in equity in their primary residence or homestead.

Any amount of equity under $75,000 is protected from sale or seizure by the courts. If you have more than $75,000 in home equity, however, the additional amount may end up liquidated to help repay some of your debts prior to discharge. That remaining $75,000 in equity will still be there to help you rebuild financially after bankruptcy proceedings.

Bankruptcy can offer you a fresh start financially

You shouldn't have to spend months or years afraid to answer the phone or worrying about having your paycheck garnished over an old debt. For those with substantial medical bills or credit card debt, Chapter 7 bankruptcy may be the best way to resolve debt issues and move forward with life.

Bankruptcy requires careful compliance with laws, but it can benefit you immensely. Instead of worrying about old financial mistakes, you can instead start to focus on the future.

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