Bankruptcy has the potential to give people in Mississippi a fresh start if they are struggling with financial challenges. The need to pay for court fees and legal advice, however, can keep people from pursuing this legal remedy that might wipe out their burdensome debts. The challenge of paying for the process sometimes prompts people to choose Chapter 13 bankruptcy when filing under Chapter 7 could have produced greater benefits.
When debtors have no cash on hand to pay an attorney, they might agree to pay for legal representation as part of a Chapter 13 payment plan. This form of bankruptcy requires a debtor to create a plan for paying down debts over the course of a few years. By bundling legal fees into the agreement, attorneys gain a method for collecting payment. The drawback for debtors, however, involves their frequent inability to complete a payment plan. Failing to finish payments voids their bankruptcy protection and allows debts to return.
With a Chapter 7 filing, debtors generally receive a legal discharge of their qualifying debts. The assistance of an attorney with this process greatly increases the likelihood of a debtor gaining substantial debt relief without a payment plan.
The decision to file for bankruptcy requires a person to consider many variables. An attorney may inform a person about what types of assets could be exempt from liquidation, how to halt collection efforts and how to prevent foreclosure or wage garnishment. An attorney may help organize a person’s financial records for disclosure to the court. This effort might allow a person to avoid mistakes that could cause a court to reject an application. During the process, an attorney might also intervene to protect a person being harassed illegally by creditors.
People in Mississippi who are struggling with debt might hesitate to file for bankruptcy because of certain myths they believe about bankruptcy. There are a number of misconceptions about filing for bankruptcy and what happens to a person’s credit afterward.
The main impact of a bankruptcy on a credit score is the bankruptcy itself. In other words, the score is unlikely to be mitigated by positive information on the credit report. The amount of debt discharged may affect the severity of the drop in credit score. Furthermore, debts that cannot be discharged, such as student loans, will remain on the report. However, it is important to remember that a bankruptcy eventually falls off the credit report. A Chapter 7 bankruptcy remains on the credit report for 10 years. All other information, including a Chapter 13 bankruptcy and things like liens and judgments discharged in bankruptcy, are removed from the report after seven years.
Even while the bankruptcy is still on the report, it is possible to improve the credit score significantly. It is possible to begin rebuilding credit with a secured credit card or a loan and by paying all bills on time. In the end, while bankruptcy represents a short-term hit on a person’s credit, getting free and clear of that debt may allow a person to rebuild a stronger credit record than before.
Another misconception people might have about bankruptcy is that they will lose all their assets. Even in a Chapter 7 bankruptcy, certain assets are exempt, but in a Chapter 13 bankruptcy, a person may be able to keep assets such as a home. Filing for bankruptcy can halt, at least temporarily, actions such as foreclosures, and the person works out a plan to pay creditors over three to five years. This plan must be approved by the court and is supervised by a bankruptcy trustee.
Mississippi readers with credit card debt are not alone. According to a report by WalletHub, in 2017, Americans added the most credit card debt since 2007. Further, the Federal Reserve estimates that the total amount of U.S. credit card balances currently exceeds $1 trillion.
WalletHub reports that Americans added $92.2 billion in credit card debt in 2017. Of that, $67.6 billion was added in the final quarter, which represents the highest one-quarter jump in three decades. The latest numbers are part of a trend. Between 2015 and 2016, U.S. credit card debt increased by $44 billion.
According to experts, one reason for the sharp increase in debt is that charge-offs, or uncollectable debts, are at historically low rates. This means that banks feel more comfortable extending credit to Americans with subpar credit scores. Another reason could be medical expenses. According to the Centers for Medicare and Medicaid Services, Americans were responsible for paying $338 billion in out-of-pocket health care costs in 2015. These costs included deductibles, co=pays, office visits and uncovered medical procedures. Apparently, many people paid for those costs with credit cards. WalletHub reports that 62.3 percent of Americans say health care expenses make up a portion of their credit card debt.
Mississippi residents who are seeking relief from credit card debt may wish to consider filing for Chapter 13 bankruptcy. Under this chapter, consumers repay their obligations over a period of three or five years pursuant to a court-approved plan. Any remaining credit card balance would generally be discharged upon the successful completion of the plan. An attorney can outline the eligibility requirements.
Source: Yahoo Finance, Credit card debt has now reached pre-recession levels“, Brittany Jones-Cooper, March 8, 2018
You have made the difficult decision to file for bankruptcy, but you may still have some misgivings. If so, you are not alone. Countless people in Mississippi and elsewhere who are going through a personal bankruptcy are dealing with negative feelings about their situation, including embarrassment and shame. You may be reassured to learn you do not have to feel this way.
There was a great deal of negative social and professional stigma surrounding bankruptcy in the past that, for the most part, no longer exists today. However, many people still attach a negative connotation to what they see as a last resort. You might feel a number of unpleasant feelings during your bankruptcy process, including the following:
Fortunately, most lenders are aware that bankruptcy has become a necessity for many, especially in today’s financially uncertain times. Many banks or alternative lending companies are willing to offer loans to people recovering from bankruptcy. You can start rebuilding your credit soon after discharging your debts, and you may have learned valuable skills in budgeting, saving and financial planning that can prevent you from having trouble in the years to come.
It is important when recovering from monetary difficulties to let go of any sense of guilt or shame and realize that you have done the best you could to regain your financial footing. While you are going through the bankruptcy process, your attorney should be able to advise you on effective ways to keep moving in a positive direction.
Some people in Mississippi may be struggling to pay off their student loans, but these obligations are generally not dischargeable in a bankruptcy. The total amount of student loan debt in the United States has reached $1.4 trillion carried by 40 million people. In the 1970s, Congress began reducing the ability of borrowers to discharge student loan debt. It is only allowable in cases of “undue hardship”. What this is has never been defined, but courts have traditionally set very stringent guidelines.
On March 1, Federal Reserve chairman Jerome Powell spoke before the Senate Committee on Banking, Housing, and Urban Affairs and said he could not explain why student loans were not dischargeable. However, he said that it was not a change he could make in his position although Congress could address it.
Sen. Brian Schatz asked Powell about the effect the student loan debt could have on the economy. Powell said that on an individual level, it hurt people’s credit ratings and their economic lives over the long term. As for the economy as a whole, he said the amount of debt could hinder growth. Powell is not the first financial expert to express concern about student loan debt. For example, the president of the Federal Reserve Bank of New York has talked about its effect on economic mobility.
While a person may currently be unable to discharge student loans in bankruptcy, restructuring debts under a Chapter 13 bankruptcy might free up enough cash to stay on top of payments. People who are struggling with debt might want to talk to an attorney about how this type of bankruptcy could work for them. Filing for bankruptcy automatically stops any debt-related action against a person including foreclosure. Chapter 13 bankruptcy allows a person to keep some assets and pay off creditors over three or five years.