Research from CompareCards.com found that credit card debt may be a bigger problem than student loans for many millennials in Mississippi and around the country. Among those who participated in the study, 67% reported having credit card debt while only 36% had student loan debt. It found that among individuals in this age group who had credit cards, only 13% had no debt. Furthermore, about a quarter of respondents said that they would die in debt regardless of how old they currently were.
Among those who made such a claim, 16% had an annual household income of $100,000 or more. Women were more likely than men to say that they would likely pass away still owing money to creditors. However, the average millennial respondent said that he or she would be out of debt by age 49. Parents who had children under the age of 18 were more likely to have credit card debt compared to those who had no children at all.
Across all groups, 70% of respondents who owed money to a credit card company had at least one other debt. Financial professionals recommend that those who are in debt take any action necessary to pay it down. In many cases, putting even a few extra dollars a month toward a debt can make it more manageable in the long run.
Individuals who are experiencing financial difficulties related to credit card or other types of debt may want to consider bankruptcy. Filing for bankruptcy may entitle a person to an automatic stay of creditor contact. This means that a debtor won’t receive phone calls or letters related to an outstanding balance. Other benefits of bankruptcy could include extra leverage to negotiate new home or auto loan terms or the ability to discharge certain unsecured debts quickly.
Studies show finances as a strong catalyst for divorce in today’s society. For those in severe financial strains, bankruptcy may be a beneficial consideration.
However, both divorce and bankruptcy have specific protocols that can affect each other. It is important to understand the implications of bankruptcy during divorce.
Filing type matters
Whether filing a Chapter 7 or a Chapter 13 bankruptcy, filing as a couple or as a single party is an important consideration. A joint filing is usually beneficial for those who share a large number of assets or have certain high-value assets. On the other hand, if a couple shares minimal or smaller assets, an individual filing may be sufficient. However, both parties must understand what the bankruptcy filing means for them. In certain cases, if one party files for bankruptcy as an individual, the filing may alleviate that party’s responsibility for a debt, but it does not eliminate the debt completely. Therefore, the other party may still have to pay the debt.
The time at which the bankruptcy and divorce coincide play a strong party on either process; in fact, it can determine if either process is feasible. For example, if a couple is in the middle of a divorce, a bankruptcy must approve a request for bankruptcy. Should the party receive an approval, the divorce process must cease until the completion of the bankruptcy. In cases where a divorce decree is already in place, the bankruptcy process may require a modification to that decision, considering that the bankruptcy will alter the recipient’s income.
While these aspects play a major part in deciding if a bankruptcy during divorce is proper or feasible, they are not the only things to think about. Before embarking upon a bankruptcy, it is important to fully understand how it affects you and possibly those connected to you.
Despite its many benefits, bankruptcy, unfortunately, comes with a negative connotation, which may make you hesitant to file. You want to try to protect your reputation with both loved ones and future creditors. As you have explored other options, one you may have looked at is debt settlement.
Debt settlement services are very alluring because they promise to eliminate most of your debt, so you pay pennies on the dollar. They say they will talk to creditors and take care of everything for just a simple fee. Can you trust these services if you want to avoid bankruptcy?
The risk is high
The bad news is that in most cases, these promises are too good to be true. While there certainly are reputable debt settlement companies, most take advantage of your situation to put money in their pockets. You are more likely to go further into debt than to get out of it. Watch out for companies that do any of the following:
Even legitimate companies may only be able to do so much. Creditors may not be willing to work with them and do not have to agree to any negotiations. Your credit will take a bigger hit, and you may even find yourself facing a lawsuit.
Does this mean your only choice is to file for bankruptcy? Not necessarily. There may be other options that could work for you, such as credit counseling or debt consolidation. However, it is also important to remember that bankruptcy is not a bad route. It stops creditor harassment, protects certain assets, eliminates most debts and puts you back on the road to financial security.
Many women in Mississippi are struggling with costly credit card debt, even more than men in the state. Of course, people in general have accumulated significant debt associated with revolving consumer credit. According to one study, total credit card debt has hit its second-highest point following the financial crisis of 2008. In one quarter in 2018 alone, people accumulated another $30 billion in consumer debt. Still, women have shown more anxiety about their credit card balances than men. One study said that over one-fourth of women participants were not confident that they could pay off their cards compared to 14% of men.
One factor is the generally lower incomes that women have. Women have 80% of the median annual income of men, which means that women may have greater struggles in getting out of credit card debt. While the median salary for a woman is $41,554, the median for a man is $51,640. In addition, 20% of men said that they had only paid their credit card balances in full once or never in the last six months. Over 30% of women said the same, meaning that they are accumulating larger amounts of interest charges as a result.
Other experts drew attention to the number of single mothers providing for their children. Single moms may be more likely to turn to credit cards to cover expenses for their children and may also struggle to make up the money to pay off their bills. They may also be less able to take on additional work to make more money due to the cost of childcare.
People of all backgrounds are struggling with creditor calls, costly fees and other aspects of insurmountable credit card debt. They may wish to consult with an attorney about their options for debt relief, including credit counseling, debt consolidation or personal bankruptcy.
For many people in Mississippi who are struggling to pay down debts, filing for bankruptcy is a viable option to improve their financial position. During the peak of the recent financial downturn, almost 1.6 million bankruptcies were filed. The majority of those filings were made by consumers. The total number of annual filings dropped to under 800,000 by the time ten years had passed. People who have credit card debt may be able to get a fresh start via bankruptcy.
If the person is in a position where he or she has a lot of debt and does not own major assets like a home, a bankruptcy filing can clean the slate. As part of the bankruptcy process, petitioners are required to complete finance classes. These classes, which are taken both before and after the bankruptcy, can provide education, information and perspective that can be useful to the person going forward.
As many as two-thirds of all bankruptcies are filed because the person has medical debt. Going through divorce is also a common catalyst for bankruptcy filings. It’s a misconception that people who file for bankruptcy have to give up all of their assets. In a Chapter 7 bankruptcy, the filer may have the opportunity to reaffirm certain debts and keep assets like a home or a car.
Individuals who have questions about the bankruptcy process might want to schedule a meeting with a lawyer. A lawyer who has experience practicing bankruptcy law may be able to help by examining the client’s debts and income and suggesting options to reduce or eliminate outstanding debts. A lawyer may be able to help by drafting and filing the petition to begin the bankruptcy case, by communicating with the bankruptcy trustee on the client’s behalf or by ensuring the client completes necessary counseling and other requirements.