Many people will end up filing for bankruptcy before the end of 2019, and research suggests many of those will come from the South. Mississippi has one of the highest divorce rates in the country, with 4.25 bankruptcies occurring for every 10,000 residents, compared to the national average of 2.5 for every 10,000.
Bankruptcy can help you get your finances back on track in the long run, but there is no guarantee a court will approve your bankruptcy in the first place. You have to set yourself up for success, and that requires ensuring you avoid these common mistakes too many Mississippi residents make right before filing.
1. Paying friends or family members
You may think you will do the right thing by paying back loved ones who loaned you money in the past. However, this looks incredibly suspicious to judges. It comes across like you want to conceal certain assets by giving them to other people. While it is a noble thought, you should delay paying back people until the court approves your bankruptcy filing.
2. Taking money out of your 401(k)
You may think it is a good idea to take funds out of your retirement accounts to pay off some creditors before filing. There are two reasons why you should avoid this. First, the bankruptcy code forbids favoring one creditor over another. Additionally, your retirement accounts are exempt from bankruptcy proceedings. Therefore, you do not have to worry about losing any funds in these accounts when you file.
3. Running up credit card debt
When bankruptcy is on the horizon, many people do not see the harm in making some extravagant purchases on their credit cards. For the most part, you cannot discharge debt racked up in the previous 90 days before filing. Therefore, you will still owe the money once the bankruptcy is over. Additionally, creditors can contest such purchases, and it could jeopardize your ability to get a bankruptcy in the first place.
Statistics show that older people are filing for bankruptcy at higher rates than ever before, in Mississippi and across the country. According a 2018 report by the Consumer Bankruptcy Project, more than 10% of people who filed for bankruptcy protection in 2016 were 65 years old or older; this was a significant increase over the number in 1991.
The elderly population of the country also grew over that time span, but only by 2.3%. There are a number of economic and social factors contributing to the rise in elder bankruptcy. People are living longer, and they need more medical care in their later years. The cost of medical care has been increasing for decades.
Additionally, many people 65 and older have little or no personal savings and cannot rely on a company pension or 401(k) plan. They are also increasingly in debt, with nearly half of Americans at least 75 years of age carrying debt by 2016 compared to only about 20% in 1989, according to a survey of consumer finances by the U.S. Federal Reserve. Approximately 800,000 households made bankruptcy filings in 2016, including an estimated 133,000 senior citizens.
People in Mississippi who are struggling to pay for life necessities or pay down debts might want to schedule a consultation with an attorney. An attorney who practices bankruptcy law might be able to help by suggesting options to reduce or eliminate debt or by examining the client’s financial situation and negotiating settlements with creditors. An attorney might help themprepare for bankruptcy by guiding them through pre-bankruptcy counseling in advance of filing a petition.
A person in Mississippi who has an open Chapter 13 bankruptcy may be able to get a vehicle loan, but there are several steps that must be taken to do this. Moving ahead without getting the approval of the court puts the bankruptcy itself in jeopardy. The person could also face a lawsuit from creditors, and the vehicle could be repossessed.
The first step is going to a dealership and talking to the special finance manager. If the manager agrees, the person can choose a car, and a sample buyer’s order is created. This form should include such information as the monthly payment, the interest rate and the maximum term. The form should say that the person will purchase this car or a similar one. The reason for this is that if the car sells before the process is complete with the court, the person would have to start the process all over again unless “or similar” is included on the form.
The next step is to take the form to the trustee. The trustee must agree that the person has a good reason for purchasing the vehicle and that it is within the debtor’s budget. The motion is sent to the court and creditors. If there are no objections, the person is allowed to proceed with the purchase.
As this process demonstrates, filing for bankruptcy does not mean a person is never able to take out a loan or build credit again. A bankruptcy filing can clear the way for a person to start fresh financially. A person who is struggling with debt may want to talk with an attorney about eligibility for a Chapter 13 bankruptcy. It is necessary to have an income above a certain level. The person must also be able to work out a repayment plan with creditors.
People in Mississippi who are struggling to pay off their debts might consider bankruptcy as an option to reduce or eliminate them. For most individual filers, there are two options when it comes to filing bankruptcy: Chapter 7 and Chapter 13. It is important to know the differences between the two options as one or the other may be better for the petitioner in a particular case.
Chapter 7 bankruptcy is sometimes referred to as liquidation bankruptcy because it involves the liquidation of the petitioner’s assets in order to pay off as much debt as possible. At the conclusion of a successful Chapter 7 bankruptcy, any unsecured debts will be wiped out, and the petitioner may be able to keep important assets like a home, vehicle or tools used for work. In order to qualify under Chapter 7, the person must pass the means test, which begins with a comparison of the person’s income to the state’s median income. If the person’s income is at or below the statewide median, he or she is free to file for Chapter 7. There are cases in which people with higher incomes may also be able to file for Chapter 7.
Those who are unable to file Chapter 7 bankruptcy may be able to file under Chapter 13. Chapter 13 bankruptcy is sometimes called reorganization bankruptcy as it involves the reorganization of debts so that the petitioner can afford to pay them over a period of three or five years.
An attorney with experience practicing bankruptcy law may help individuals who are having trouble keeping up with debts and expenses. An attorney might be able to negotiate with creditors or draft and file a petition to begin bankruptcy proceedings. An attorney may also help the client understand the means test for Chapter 7 or represent the client during the required meeting of creditors.
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.
