Recently, my colleague, Mr. Grant McNutt, posted an excellent article discussing bankruptcy exemptions in Alabama. As he noted in his article, a bankruptcy exemption is the value of certain property owned by a debtor in bankruptcy which property cannot be touched by creditors or a bankruptcy trustee. Simply put, “exempt” property is property which the debtor will keep and which cannot be taken by his or her creditors or a bankruptcy trustee to pay his or her debts.
When one is contemplating filing a bankruptcy case, a most important determination to be made is what property will be claimed as exempt. As a consumer debtor’s attorney, I am always looking to maximize the amount and type of property to claim as exempt for my clients. I want my clients to come through the bankruptcy process retaining as much property as is legally possible and properly claiming the exemptions is the primary way to accomplish this goal. Exactly what property is “exempt” varies from state to state. The Bankruptcy Code has a list of all property which is considered “exempt” for bankruptcy purposes. However, some states have “opted out” of this list. This means that, in those “opt out” states, one must look to the law of that state, and not the Bankruptcy Code itself, to determine which property is or is not exempt. The State of Mississippi is an “opt out” state. So, when a bankruptcy case is filed in Mississippi, the laws of the State of Mississippi determine what property will be exempt.
Mississippi Real Property Exemptions
In Mississippi, the primary residence or domicile of a debtor, is exempt up to a total of $75,000.00 in equity of that residence. For example, suppose a debtor files a bankruptcy case in Mississippi and owns a home with a fair market value of $180,000.00. But, there is an outstanding mortgage on the home in the amount of $125,000.00. This means that there is $55,000.00 in equity in the home and, since that amount is less than $75,000.00, all of that equity is exempt.
On the other hand, suppose that the fair market value of the home is $180,000.00 and the outstanding mortgage amount is only $40,000.00. This means that there is $140,000.00 in equity and this amount significantly exceeds the $75,000.00 limit. In such a case, one possible outcome is that the home is sold and $75,000.00 of the $140,000.00 must be paid over to the debtor with the balance to go to creditors. But this is not the only possible outcome. In such a circumstance, a reputable and competent consumer bankruptcy counsel would likely be able to save the home from such a sale.
Mississippi Personal Property Exemptions
In addition to the exemptions for real property, Mississippi law allows for exemptions of personal property. The general exemption allows for up to $10,000.00 per person of most types of personal property to be claimed as exempt. The debtor gets to choose this property subject to certain limitations. A mobile home is considered personal property and has its own exemption of up to $30,000.00 in equity. Certain other types of personal property have their own exemptions as well. Mississippi also has a “wildcard” exemption of up to $50,000.00 which can be added to the $10,000.00 exemption for Mississippi residents aged 70 and older. Federal and state tax refunds are exempt up to $5,000.00 each. Earned Income Credit (EIC) amounts are also exempt up to $5,000.00.
The knowledgeable consumer bankruptcy counsel will evaluation the exemptions in every case to maximize the exemptions available to each debtor. In some instances, this determination may even determine if a Chapter 7 or Chapter 13 case is to be filed for a debtor. In any event, the proper analysis of and timely claiming of exemptions is crucial to the success of any bankruptcy case.
If considering filing for bankruptcy contact one of our offices today for a free consultation of your financial situation.