For some debtors in Mississippi, waiting to file for bankruptcy could lead to many more financial issues. The Notre Dame Law Review released a report that found that the longer people waited, the more likely their assets would be depleted.
People may want to delay a bankruptcy filing because they feel obligated to pay off their debts or want to avoid what they see as a stigma. The report identified a point at which people began to struggle to afford basic necessities or faced things such as debt collection lawsuits. It found that those who waited at least two years past that point to file bankruptcy had a median debt to income ratio that was 40 percent higher compared to those who filed earlier.
Experts advise that there are several points that may indicate it is time to file. For example, it’s a problem when one is paying off debt with more debt. Another indicator is when a person’s debts reach 40 percent or more of their income. People who are foregoing basics such as medical care to pay off debts may also want to consider bankruptcy.
It’s important to note that not all debts can be discharged in bankruptcy. While medical and credit card debts can be discharged, student loans and some other types of debts are not eligible.
An attorney may be able to discuss various debt relief options with a client. Chapter 7 bankruptcy is generally for debtors whose income is below a certain level. People might be able to exempt certain necessary assets in a Chapter 7 bankruptcy. On the other hand, Chapter 13 bankruptcy allows debtors to pay creditors over a period of several years while keeping some important assets.
It is not uncommon for individuals in Mississippi and other states to have debt. In 2018, Americans held more than $1 trillion in combined credit card debt balances. Individuals may also have personal loan, payday loan or medical debt to contend with in addition to mortgages or student loan balances to pay down. To help a person better handle his or her finances, it can be a good idea to list all the debts he or she has.
Ideally, a person will list the balances on those debts, the interest rate charged by a creditor and when each payment is due. This can make it possible to develop a strategy to pay down the debt in a timely manner. Listing the interest rates for each debt can help debtors figure out how much it is truly costing them. By knowing the due date of each payment, it reduces the odds that payments are made late.
Late payments can have negative consequences on a person’s credit score and history. There could be options for those who can’t make a payment on time such as deferring a student loan payment. Other lenders may be amenable to alternate payment arrangements as they would rather get some of their money now as opposed to getting nothing.
Debtors who are having financial challenges may be able to overcome them by filing for bankruptcy. This may put a stop to a foreclosure or repossession as well as postpone a lawsuit or other collection actions. An attorney may explain the process of filing and inform a person whether they are eligible for a Chapter 7 bankruptcy. Chapter 7 may be preferable for those with few or no assets as debts may be discharged in a matter of weeks.
It is possible for Mississippi residents to get financing for a car while in Chapter 13 bankruptcy. However, the process may take longer and be more difficult than for people who are not in bankruptcy. The first step is to find a lender and dealer. If finding a lender is not possible, the next step is to look for a subprime dealership. They specifically work with lenders whose specialty is people with bad credit.
The dealer will create a buyer’s order once the terms of the loan have been agreed upon and the vehicle has been chosen. This must then be submitted to the trustee along with paperwork that includes an explanation of why the vehicle is needed. A trustee is not likely to approve a luxury vehicle, so making the right choice is important.
The information in the Motion to Incur Additional Debt that the trustee files with the court will also be sent to creditors. Creditors have the option to object, but this is not an automatic rejection. The debtor would have to attend a hearing. A debtor receives an Order to Incur Additional Debt if the court approves the loan. This then must be taken to the dealer. If the loan is not approved, a debtor can try with a different car or try again later.
Some people may be reluctant to file for bankruptcy because they are afraid it will ruin their credit. However, this is not necessarily the case. Bankruptcy does damage a person’s credit, but so does unmanageable debt, and it is possible to rebuild credit after a bankruptcy. Furthermore, a Chapter 13 bankruptcy, which involves creating a payment plan to repay creditors over several years, can make it possible to keep some assets such as a house.
For people in Mississippi struggling with unrepayable debt, bankruptcy can be a way out from financial disaster. However, the types of debt that can be wiped away in bankruptcy vary depending on the type of bankruptcy a person pursues. In addition, some types of debts are almost always dischargeable while some types of debt are notoriously difficult to discharge.
Most consumers who file for bankruptcy pursue either Chapter 7 or Chapter 13 bankruptcy, both of which help people to find a new financial lease on life after debt. Only people who make below a certain income, usually the state median, can file for Chapter 7 bankruptcy. Under this type of filing, a person’s assets are liquidated while the funds are distributed to creditors to satisfy the debt. Some assets are exempt from liquidation, including those necessary for life such as a car or tools used on the job. After this process, remaining debt that is qualified for discharge will be fully released, and creditors will need to stop their attempts to collect these debts.
Chapter 13 bankruptcy is different because debt is restructured rather than instantly discharged. People enter a new period of repayment of the restructured debt, and after that payment period is over, qualifying debt could also be discharged. In general, mortgages, auto loans, personal loans, medical bills, credit card debts, unpaid utility bills and similar debts can be discharged in bankruptcy. Student loans are the most difficult type of debt to discharge along with child support and spousal support or government fines.
People struggling with debt can often be eligible for Chapter 13 bankruptcy regardless of their income level. When considering options to escape from the spiral of personal debt, people may consult with a bankruptcy lawyer for advice on the type of bankruptcy that is best to pursue in each individual circumstance.
Your Mississippi bankruptcy is over and the court gave you your discharge papers. Congratulations! Now that you have your financial feet on the ground, it is time for you to begin your post-bankruptcy life. You likely learned so much during the past months that you can start afresh to establish and build your credit and responsibly manage it.
Reestablishing your credit, however, is the final of five things you should do. Here are all five.
1. Keep your bankruptcy paperwork
Do not be tempted to discard all the paperwork you collected during your bankruptcy. At the very least, you will need the following documents in the future:
Keep these and your other bankruptcy documents in a safe place. Even better, scan them and put them in a file folder on your computer desktop. That way you have electronic copies whenever you need them.
2. Get your credit reports
You may not be aware of it, but all three major credit reporting agencies give you a free report each year. Get all three after about three months to give your bankruptcy dust time to settle. Review each one carefully, making sure that none of your discharged debts appear on any of them. Likewise check to see that no collection agency now has one or more of your discharged debts. The last thing you need is to once again begin receiving harassing phone calls, emails or snail mails demanding payment for debts that your bankruptcy discharged.
3. Establish a budget
Before you roll your eyes at the thought of budgeting, you need to recognize that establishing a budget and sticking to it are two of the most important things you can do for yourself in your post-bankruptcy life. This is the only way you can ensure that your monthly household income can cover your monthly bills.
Unless you are one of those unusual people who keeps your hardcopy bills after you pay them, you probably will need to estimate the amount of at least some of your monthly bills at first. On the other hand, if you have online accounts or do online banking, you can find out how much you paid on each bill each month. If you can discover this, total each bill’s last six payments and divide by six. This will give you a realistic average of how much you spend each month for each bill. Do not forget to determine a monthly average for those bills, such as insurance, for which you pay an annual or semiannual premium.
4. Establish an emergency savings account
While budgeting is one of the most important things you can do, even the best budget seldom makes provision for those emergency situations that invariably arise when you can least afford them. If your air conditioner stops working or your car needs its transmission fixed, you need cash to pay for the repairs. Open a new emergency savings account into which you place any money left over at the end of each month, no matter how small the amount.
5. Begin rebuilding your credit
Once you have your monthly bills in hand, it is time to start reestablishing your credit. Not only does a credit card come in very handy when even your emergency savings account cannot cover an unexpected expense, some businesses, particularly online businesses, refuse to take anything other than a credit card.
Now that your bankruptcy wiped out virtually all your debts, you can apply for a new credit card. Admittedly, you may have to settle for a prepaid one or one with a low credit limit. In addition, you likely will pay a higher than usual interest rate. Nevertheless, getting one credit card and paying it off each month is a great way to reestablish your credit.
For all practical purposes, your bankruptcy gives you the opportunity for a financial “do over.” By following the above five steps, you undoubtedly will discover that this time you can face and overcome whatever financial issues arise in the future.