Many working people living in Mississippi struggle with their finances. Living paycheck to paycheck, they find it difficult to get ahead of crippling debt. If an emergency strikes, such as a family illness or job loss, they may have difficulty affording food, utilities and shelter.
Some employers are aware of the situation and are working to offer financial planning benefits to their workers. These companies have contracted with third-party companies to provide benefits such as financial counseling, student loan repayment options, emergency loans and medical bill advocacy.
In many cases, these services offer real help. If financial counselors determine that a loan is a good idea, they can provide education to employees about the risks and benefits of borrowing. In some cases, these programs also offer paycheck deduction options that can help ensure on-time repayment and lower the risk of credit damage and late repayments.
However, there are limits to how effective financial assistance programs can be. While they may represent a solid alternative to bankruptcy, there are situations in which a person’s debt is simply out of control. Unless the employee receives a significant wage increase or comes into a large amount of cash, he or she is unlikely to ever complete paying off the debt.
In such cases, bankruptcy might be a good option. Both Chapter 7 and Chapter 13 offer ways for financially insolvent individuals to resolve their debts and move forward in reestablishing their finances. Someone considering bankruptcy might benefit from consulting with an experienced attorney who could explain various debt relief options.
Debtors in Mississippi who have significant debt and who have a lower income or no income may benefit from a Chapter 7 bankruptcy. However, they should carefully consider their financial situation and the impact that bankruptcy will have on their credit before filing.
Chapter 7 bankruptcy, which is the most frequently filed bankruptcy, is a liquidation bankruptcy as it uses the proceeds from the sale of secured property, such as a vehicle or home, that exceeds the exemption threshold to pay back creditors. Filing and being discharged from a Chapter 7 bankruptcy is a process that can take only three to six months; in comparison, a Chapter 13 bankruptcy will take three to five years to be completed.
Debtors who are considering Chapter 7 bankruptcy should be aware that the bankruptcy will remain on their credit report for as long as a decade from the time they file. Filing for bankruptcy will also lower their credit score; however, they may find that the negative effect on the credit score will lessen as time goes on.
A means test has to be conducted in order for debtors to qualify for a Chapter 7 bankruptcy. Debtors will use this test to determine if their income is low enough for them to file. Their household income will have to be less than their state’s median income for a household of an equal size. The means test will deduct certain monthly expenses, like a vehicle or mortgage payments, from any current monthly income to determine the disposable income.
A bankruptcy attorney may assist clients with financial challenges and determining if a Chapter 7 bankruptcy is the best option to resolve their financial situation. Assistance may be provided for completing the means test and filing the necessary legal paperwork to begin the bankruptcy process.
Data published by credit reporting agency Equifax indicates that people in Mississippi and across the country owe $13.5 trillion in total consumer debt. Of that debt, more than $1 trillion is owed by people between the ages of 18 and 29. This debt is primarily made up of student loans, but it also includes credit card debt, mortgage debt, auto loans and other types of consumer debt. The last time people in this demographic owed over $1 trillion was just before the 2008 financial crisis during the fourth quarter of 2007.
The data was gathered and put out by Equifax and the Fed Consumer Credit Panel of New York. People between the ages of 30 and 39 owe $2.9 trillion. The demographic owing the most in consumer debt is people between 40 and 49, who owe a total of $3.4 trillion. Those between the ages of 50 and 59 are not far behind, owing $3.2 trillion, according to the data.
People over 70 years of age have roughly the same amount of outstanding debt as young people between 18 and 29 at $1 trillion. People between 60 and 69 owe around $2 trillion. The type of debt affecting the most borrowers is student loan debt, which more than 44 million people carry. The U.S. Secretary of Education has said there is a student loan debt crisis. Some research indicates that 40 percent of those with student loan debt might default by the year 2023.
Individuals who are struggling to pay their debts might want to schedule a consultation with a lawyer. An attorney with experience practicing bankruptcy law may examine the facts of the person’s situation and suggesting options to reduce or eliminate debt. Filing for Chapter 7 or Chapter 13 bankruptcy triggers an automatic stay, suspending collections efforts by creditors.
Many people across Mississippi struggle to support themselves and their families financially, and if you count yourself among them, you may be sorting through your options and trying to figure out if a bankruptcy filing might give you the fresh start you desire. While, in many cases, filing for bankruptcy can be a great way to get your affairs in order so you can start to dig your way out of debt, your credit will most definitely take a hit after doing so.
There are, however, certain efforts you can make to help rebuild your credit after bankruptcy, which, over time, can help you raise your credit score and otherwise get back on your feet financially. Just what types of actions can you take after a bankruptcy filing to help raise your credit score?
Consider a secured loan
A secured loan is something you may be able to obtain through a local bank or credit union, and it can help boost your credit score if you stay current on all necessary payments associated with it. There are two primary kinds of secured loans. The first involves putting down a deposit and then borrowing against that money you have on deposit, while the second type involves placing money in a savings account you can access once you have made all required payments.
Consider a secured credit card
A secured credit card, meanwhile, can help you build your credit in a manner similar to a traditional credit card, but you need to fund the credit card yourself by putting down a deposit. There are typically high fees and interest rates associated with secured credit cards, though, so view this option as a temporary fix, rather than a long-term solution.
While these are two effective methods of rebuilding your credit on your own, you may also be able to do so through other methods that involve enlisting the help of others. For example, you may be able to have a close friend or family member co-sign on a loan or credit card to help you rebuild credit after bankruptcy.
Bankruptcy may be an option for Mississippi residents who have been overwhelmed by substantial debt. However, filing for bankruptcy can have a long-term impact on their credit. Before filing, they should consider several factors to decide whether it is the best option for them.
Debtors may want to try to negotiate a settlement with their creditors, who generally prefer obtaining a settlement rather than having the debt discharged in bankruptcy. Debtors may find it easier to negotiate a settlement if they are a few months behind on their payments, as creditors might not be inclined to reduce a debt if the payments are current.
Some debtors may benefit from credit counseling, particularly if they have been unable to reach a settlement with their creditors. With the assistance of credit counselors, it may be possible to get lower monthly payments and interest rates.
Lenders and creditors who have received judgements against debtors can be begin garnishing the wages of those debtors. If this occurs, filing for bankruptcy stop the wage garnishment and can even help debtors get some of the money that was garnished returned to them.
Medical bills that are not covered by insurance is another factor to consider in determining whether bankruptcy is the best way to resolve debt. Medical bills are the one of the main causes of bankruptcy because even with health insurance, people find it very difficult to pay those bills. By filing bankruptcy, people with substantial medical bills can pay them off using a 3-to-5-year payment plan or have them completely discharged.
A bankruptcy attorney may evaluate the financial circumstances of a client’s situation and may recommend filing a certain type of bankruptcy to stop wage garnishment. Assistance might be provided with developing a multi-year payment plan to resolve credit card debts and medical bills.
