A medical emergency or a costly car repair can begin a Mississippi resident’s slide into debt. A survey from CreditCards.com showed that various emergencies, medical bills, auto repairs and daily expenses resulted in one-third of respondents leaning on their credit cards too much. On the whole, the nation has accumulated over $1 trillion in credit card debts according to WalletHub.
In the second quarter of 2019, consumers added another $35.6 billion to their card balances. Analysts at WalletHub expect consumers to incur a total of $70 billion in extra credit card debt by the end of the year.
The financial pressures evident in these figures have resulted in long-term debt for many people. According to CreditCards.com, over one-third of people carrying credit card balances have been doing so for a minimum of two years. Many of them owe more on their cards than they possess in savings.
Sometimes individuals manage to pay their credit card bills by reducing expenses and reforming their spending habits. In some cases, however, financial difficulties prove overwhelming. A person unable to increase income or reduce expenses might want legal advice about debt management. An attorney might provide information that might allow a client to renegotiate a loan payment or settle an outstanding debt for a lower amount. An attorney’s intervention might gain the client more time to pay a debt. This might prevent repossession or wage garnishment. Chapter 7 bankruptcy might also be a viable option. This involves the liquidation of the debtor’s non-exempt assets with the proceeds being used to pay off creditors. The remaining balance of most unsecured obligations would then generally be discharged.
Many people living in Mississippi are aware that bankruptcy is one option for debt relief. However, national statistics show a decline in bankruptcy cases in recent years.
While reasons for the decline are not entirely clear, many attorneys have put forth some ideas. Some have noted that the reasons why individuals file for bankruptcy in the first place have been mitigated. Unemployment numbers are down, which means people have more income they can apply toward debt. In addition, the Affordable Care Act has provided people with health insurance coverage, possibly reducing high levels of medical debt.
Other reasons for low bankruptcy rates may be less encouraging. Some debtors simply cannot afford the fees and court costs required to file for bankruptcy. Furthermore, many people carry student loan debt, which is very difficult to discharge in bankruptcy. As a result, individuals with significant debt burdens may feel as though there is no reason to bother filing for a discharge of their debts.
Still, bankruptcy remains an effective way for some people to cope with unmanageable debt. In cases where debt can’t be discharged, bankruptcy might provide some relief by granting automatic stays against collection activity. In a Chapter 13 bankruptcy, debts can be repaid as part of a three- or five-year repayment plan. This could make it easier for someone to regain their financial footing.
Individuals who are considering bankruptcy may benefit from consulting with an attorney. The lawyer could review the client’s circumstances and make suggestions regarding debt management options, including Chapter 7 and Chapter 13 bankruptcy.
Mississippi had the fourth highest per-capita rate of personal bankruptcies in the nation in 2018, and the data suggests that more than two-thirds of them were filed because of overwhelming doctor and hospital bills. Comprehensive health insurance provides protection against spiraling medical debt, but many Americans find themselves without this crucial coverage each year after going through a divorce or losing their jobs. A recent study conducted by University of Missouri and University of Denver researchers reveals that individuals are twice as likely to file a Chapter 7 or Chapter 13 bankruptcy after going without health insurance for just two years.
The researchers made this discovery after analyzing data on 12,500 bankruptcies from the Bureau of Labor Statistics. Millions of Americans currently have health insurance because of the Affordable Care Act, but the future of the landmark 2010 law is uncertain. Attorneys from 18 states filed a legal challenge to the ACA after Congress voted to eliminate the individual mandate. If the litigation is successful, up to 20 million Americans could lose their health insurance.
More than half of Americans polled by the Kaiser Family Foundation said that financial concerns had led them to cancel or put off a visit to a doctor or dentist in the last year, and many of them were enrolled in a health plan. More than a third of the insured respondents said that they had difficulty making copayments or meeting their deductibles.
The nation’s bankruptcy code was written to give people who are struggling to make ends meet the opportunity of a fresh start, but individuals with unmanageable financial situations are often reluctant to take action because of the myths surrounding debt relief. Attorneys with experience in this area may help dispel these myths and explain how Chapter 7 or Chapter 13 bankruptcy offers an escape from overwhelming debt. Attorneys ma also explain that the automatic stay issued when a bankruptcy is filed requires lenders to immediately cease their collection efforts.
One of the main concerns for people in Mississippi who are considering bankruptcy is how long the filings will stay on their credit report. Depending on the type of bankruptcy filed and the other specific facts of the case, the filing might be listed on a person’s credit report for up to 10 years. There are two main types of bankruptcy for individual filers, Chapter 7 and Chapter 13, and each of them has different impacts on the filer’s credit report.
Filing for bankruptcy under Chapter 7 will eliminate most personal debts, including those from medical bills, personal loans and credit cards. Any debts that are discharged via Chapter 7 bankruptcy will be noted on the person’s credit report, and the bankruptcy itself will be listed as well for a period of 10 years from the date of the filing. A Chapter 7 may negatively impact a person’s credit score by as much as 200 points, but it will also eliminate debts.
A Chapter 13 bankruptcy, also sometimes called a wage earner’s bankruptcy, will be listed on the person’s credit report for seven years. This type of bankruptcy is designed for people who have regular income and earn too much to file for Chapter 7. Over the course of three or five years, a Chapter 13 petitioner will pay back creditors according to a payment plan approved by the bankruptcy court.
People in Mississippi who are struggling to pay down debts might want to schedule a meeting with a lawyer. A lawyer who practices bankruptcy law may help by examining the client’s circumstances and suggesting options to reduce or eliminate debts. A lawyer may help the client complete pre-bankruptcy counseling and other requirements or represent the client during the meeting of creditors or other official proceedings before the bankruptcy trustee.
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.
