There are several types of bankruptcy but only two have general application to individuals. A Chapter 7 bankruptcy is referred to as liquidation. The person filing (or frequently a married couple filing jointly) turns all property he or she owns to a Trustee who disposes of that property and pays debts to the extent possible. The debtor (person filing) then starts with a clean slate. However, not all property is lost because, in Mississippi, you are allowed to keep certain “exempt” property. Exempt property includes a home, up to $ 75,000.00 in value over the mortgage, personal property having a value of $ 10,000.00 or less, and a qualified retirement account (IRA, 401(k), etc., with certain limitations).
The other form of bankruptcy generally used by individuals is the Chapter 13, which is generally known as the “wage earner” bankruptcy. There your debts may not be completely eliminated. You may be required to pay a portion of the debts through a plan with a maximum life of five years.
The type of bankruptcy a debtor may take is controlled by your income and also by what you are trying to achieve. The only way to determine if bankruptcy is the right thing for you and which type is available to you is to talk with an attorney. He or she will need a thorough picture of your income, assets and debts.
There are other types of bankruptcy such as “reorganization” which is usually for a business but is occasionally used by individuals. There are also special bankruptcy chapters for farmers and municipalities.