Making the decision to file for bankruptcy in Mississippi is not one you should make lightly. Nor should you wait too long to file. Though you may have ambivalent feelings about your financial situation and at times feel that things are not as bad as they may seem, waiting too long to take action can make your circumstances more challenging to manage in the short- and long-term.
No one enjoys struggling with debt and receiving constant demands for payment from creditors. Unfortunately, it is a reality for many households across the country. The sooner you seek professional intervention and consider bankruptcy as a solution, the less likely you will fall prey to the pitfalls of delayed action. Here are some common reasons people procrastinate about filing for bankruptcy.
Not enough income
When struggling to make ends meet because of debt, filing for bankruptcy may seem like an additional expense you cannot afford. Though the cost of bankruptcy varies, it is possible to have the costs structured into several payments during your filing. The courts take into consideration the unique circumstances of each filer’s case and use discretion to determine if an installment agreement is beneficial. In cases of extreme financial hardship, they may waive the fees.
Denial of financial circumstances
Pretending like your debts are going to disappear may seem like a good idea because it allows you to stop stressing and enables you to sleep at night. The reality is denial about your finances can make a tough situation extremely worse. Your creditors will continue their collection attempts, which can escalate into collection lawsuits that include wage garnishment, bank account levies, foreclosures and vehicle repossessions. The only way to put an end to debt is to take action, even if that action involves making arrangements to pay your debts or filing bankruptcy to make your circumstances more manageable.
Do not let the shame or embarrassment of debt keep you from doing what is necessary to make things right and get your finances back on track. Many people experience financial issues at some point in their lives. Remember, even some celebrities and the rich and famous are not immune to the pitfalls of debt and have taken advantage of the benefits and protections that bankruptcy offers.
Readers in Mississippi who are struggling to pay down debts might turn to bankruptcy protection for help. Increasingly, people are filing Chapter 7 or Chapter 13 bankruptcy due to medical debts. According to a study by academic researchers, 66.5% of bankruptcy filings occurred for medical reasons. The filers either could not afford to pay high medical bills, or they missed work for medical issues. Approximately 530,000 families file for bankruptcy annually because of medical expenses, illness or injury, according to the research.
There were several other common reasons for bankruptcy filings cited by the study. Foreclosures and unaffordable mortgages were factors in 45% of filings. Living beyond one’s means or spending excessively were factors in 44.4% of filings. Helping relatives or friends contributed to bankruptcy in 28.4% of the instances, student loan debt was a factor in 25.4% of the cases and separation or divorce contributed to 24.4% of the filings.
The percentage of filers who said medical issues contributed to their bankruptcy actually increased following the passage of the Affordable Care Act from 65.5% to 67.5%. One of the co-authors of the research said the reason for the lack of improvement was insufficient health care insurance coverage.
There are as many reasons for filing for bankruptcy as there are those who file for it. People in Mississippi who have debts they cannot repay might want to schedule a consultation with an attorney. A lawyer with experience practicing bankruptcy law might be able to help by examining a client’s financial situation and suggesting options to reduce or eliminate outstanding debts. A Chapter 7 bankruptcy filing may get rid of the person’s debts and still allow him or her to keep important assets. A Chapter 13 filing may result in the restructuring of debts, so a person can pay them down over time.
For many people in Mississippi, student loans have offered a pathway to future career success. Excessive student loan debts, however, have proven burdensome for many people in recent years. Nationwide, outstanding student loan balances will likely hit $2 trillion by 2020. Delinquency or outright default afflicts over one-quarter of student loan borrowers today. Due to the inescapability of these debts, a group of lawmakers has proposed the Student Borrower Bankruptcy Relief Act of 2019.
If passed, the law would clarify the conditions that qualify a borrower for bankruptcy discharge of student loans. A previous reform to federal bankruptcy law installed a vague standard known as undue hardship that could allow someone to gain relief from student loan debt through bankruptcy. The law failed to create a clear definition of undue hardship, which has been left to the whims of judges. Without a clear definition, judges have made inconsistent decisions. In this unpredictable environment, debtors have few options for dealing with student loans that they cannot repay.
The Federal Reserve System chairman has acknowledged that the growing debts among so many people could hobble economic growth. The chairman said they could think of no reason why bankruptcy law should view student loans differently than other consumer debts. Critics of the proposed reform worry that it would make lenders raise interest rates on student loans. Advocates for debtors have countered that a viable bankruptcy option could make lenders more willing to work with debtors trying to catch up their payments.
When debts overwhelm a person, it starts a downward cycle that could result in wage garnishment, repossession and foreclosure. A person confronted by excessive debts may want to ask an attorney for advice. An attorney may help manage a bankruptcy filing for a qualifying debtor and take action to stop harassment by creditors.
If a proposed rule by the Consumer Financial Protection Bureau takes effect, debtors in Mississippi and elsewhere may be hearing a lot less from creditors. The rule would amend the Fair Debt Collection Practices Act to limit debt collectors to seven phone calls to a debtor per week. Debt collectors would also be required to send a written notice containing information about a debt balance and how to dispute it.
There are already a number of limitations placed on debt collectors under the terms of the FDCPA. For instance, they are only allowed to contact debtors during certain hours of the day, and they cannot threaten to sue a person after the statute of limitations to collect the debt has ended.
There will be a public comment period of 90 days regarding the proposed rule. If the rule is passed, it will go into effect a year after it is published.
Filing for bankruptcy may be one way to deal with financial challenges that a person is facing. Doing so may put an end to phone calls from creditors or debt collectors. It may also put an end to collection letters and other attempts to contact a debtor. In many cases, individuals will not lose their property simply for filing a case, and it might be possible to keep it throughout the duration of the case.
An attorney may help a person fill out paperwork and take other steps necessary to file a bankruptcy petition. In addition to filing paperwork, a debtor will likely need to take a credit counseling class. If an individual files for Chapter 13 bankruptcy, he or she will make payments to creditors for up to five years. Any balances remaining at the end of the repayment period may be discharged.
Mississippi residents who are coping difficult financial situations are often reluctant to pursue debt relief because they are worried about what a bankruptcy will do to their credit ratings. While a Chapter 13 bankruptcy will appear on credit reports for seven years and a Chapter 7 bankruptcy will show up for 10 years, how they actually affect borrowing is more influenced by the actions taken after a bankruptcy has been discharged.
Many people are surprised to learn that filing for bankruptcy actually improves credit ratings in many cases. It is widely believed that credit ratings are based solely on payment histories. However, the amount of debt an individual has is another crucial factor in calculating credit scores. When bankruptcies are discharged, the amount of debt is usually reduced and credit scores may actually go up.
Consumers tend to wait until their situations are quite dire and bill collectors are hounding them every day before pursuing bankruptcy. This means that their credit scores are often already badly damaged when they do take action. Bankruptcy offers a fresh start, and lenders may be more willing to extend credit to an individual who has a discharged bankruptcy and fewer obligations than they would to someone who is struggling to bring delinquent accounts up to date.
Attorneys familiar with the nation’s bankruptcy laws could answer questions about debt relief and explain how credit ratings can be rebuilt following financial setbacks. Legal counsel may also point out the differences between Chapter 7 and Chapter 13 personal bankruptcies and dispel many of the debt relief myths that prevent individuals with unmanageable financial situations from taking advantage of debt forgiveness.
