To properly assess the impact of credit card debt in Mississippi, it’s important to compare debt levels with income levels. There is often a disparity in the American South. According to a study by CreditCards.com, however, New Mexico is the state most burdened by credit card debt. Massachusetts residents were the least burdened by such debt. The median income in New Mexico is $46,744 while the median income in Massachusetts was $77,385.
Residents in both states owed roughly the same to credit card companies, but New Mexico residents took nearly twice as long to pay down their balances. It took roughly 18 months for households to repay an average balance of $8,323. Households in Massachusetts took about nine months to repay an average balance of about $8,000. This assumes that a family was putting aside 15 percent of its earnings to repay money owed to creditors.
Differences in income also meant that the states such as Maryland or Virginia with the highest overall balances were not among those with the heaviest debt burden. American households as a whole average about $7,000 in credit card debt, according to a report from NerdWallet. To keep debt in check, individuals can choose to use a debit card or pay for items with cash. It may also be possible to transfer balances to a credit card with 0 percent interest.
Individuals who are going through financial challenges may find relief through bankruptcy. Bankruptcy could allow a person to retain assets or avoid having them liquidated as part of the debt repayment process. This means that a debtor may keep a home or equity in a home until a bankruptcy case is over. Furthermore, creditors may generally not engage in a repossession or a foreclosure until a case is closed.
Often, difficult financial situations seem to snowball. Various types of debt accumulate and become increasingly harder to get rid of.
If you owe federal or Mississippi state taxes, it is important to know ways to handle them. Some people assume tax debt just goes away after filing for bankruptcy, while others may have heard bankruptcy can never discharge tax debt. Both of these assumptions are wrong. The best way to handle tax debt can vary depending on your situation.
How bankruptcy handles taxes
Your bankruptcy may discharge income tax debt you owe on returns due at least three years or filed at least two years prior to your bankruptcy filing. Generally, you need to file a return before your tax debt can qualify for a discharge; sometimes, filing a late return may help in this regard.
As a rule, bankruptcy will not address tax debt you incurred through fraud or evasion. It will also not eliminate any taxes other than income taxes.
If you do obtain a discharge for tax debt, it will mean you will no longer need to repay it (other than what is part of a Chapter 13 plan). The IRS will not be able to garnish your wages or take other actions. However, if the IRS or state tax authorities placed a tax lien on your property prior to your bankruptcy, the lien will remain in place. The only way you will be able to sell that property would be to pay the tax debt that underlies the lien.
Other options
You may also consider some other ways to manage your tax debt. Both the IRS and the Mississippi Department of Revenue may allow you to make a repayment plan. You can also ask for the reduction or elimination of some penalties.
Mississippi residents and others are on pace to amass $4 trillion in collective consumer debt by the conclusion of 2018. That would be an increase of $1 trillion over the past five years alone. The increase is attributed to both revolving debts and others like student and auto loans that have a fixed end date. Revolving debt has increased 22 percent since 2013 while student and auto loan debt has increased by 30 percent in the same time period.
Credit card interest rates are hovering between 16 and 17 percent on average, and that number could go up. This is because the Federal Reserve is planning on increasing interest rates up to four times in 2019. In 2018, Americans who have credit card balances have paid more than $100 billion in interest and other fees. Cumulatively, Americans owe $1.04 trillion in credit card debt, and this figure is expected to rise 5 percent in the last month of 2018.
The 5 percent increase was an estimate by LendingTree based on holiday sales figures. Americans have $2.9 trillion in non-revolving debts, but that figure does not account for outstanding mortgage balances. Those who are struggling to repay their credit card or other debts may be able to get help from a credit counseling service.
Those who are in the midst of financial challenges may be able to overcome them by filing for bankruptcy. In some cases, individuals may keep property like a house or car while they follow through with a repayment plan. In others, nonexempt assets may be liquidated in an effort to repay creditors. In either scenario, debtors are generally given a stay of creditor contact. This means that creditors are prohibited from taking steps to repossess an asset or contact a debtor about it.
Anyone in Mississippi or any other state must wait for eight years before filing for Chapter 7 bankruptcy again. This means it’s not possible to file for this same type of bankruptcy, which is popular because it wipes out most debt within months of the initial filing and approval, until the eight year period is up. Technically, there aren’t limits on how many bankruptcy cases someone can file, but there are limitations on when this type of protection can be sought after a previous bankruptcy was successfully filed and completed.
With Chapter 7, the eight-year limit between filings is pretty much set in stone. If a debt holder wishes to go from Chapter 7 to Chapter 13, however, it’s possible to file for Chapter 13 bankruptcy after Chapter 7 is discharged. The stipulation is that four years from the initial Chapter 7 filing date must have passed first. Going from Chapter 13 to Chapter 7 requires a six-year wait after a Chapter 13 debt is discharged.
However, it is possible for a debtor that started off with Chapter 13 to file for Chapter 7 earlier if they’ve paid off 70 to 100 percent of their unsecured debt. The debtor must also prove they’ve made their best effort to stick to their repayment plan. In some instances, the court may extend the period that another bankruptcy can be filed by an individual if a previous bankruptcy was “dismissed” but not “discharged.” A court may also issue what’s termed a 180-bar to prevent refiling if a debtor fails to follow court orders or commits bankruptcy fraud.
An attorney generally recommends that debtors consider a fresh financial start with bankruptcy only as a last resort. If a Chapter 7 filing was already completed and debt issues still exist, a lawyer may suggest considering Chapter 13 if a client isn’t able to wait eight years to file for Chapter 7 again. An attorney may also be able to help a debtor in the middle of a Chapter 13 bankruptcy convert to Chapter 7 if they aren’t able to keep up with the repayment plan.
In Mississippi and throughout the nation, fewer people are defaulting on their credit card debt balances. This is according to the S&P/Experian Consumer Credit Default Composite Index. However, debt levels for U.S. consumers are increasing. If a cardholder does not make payments on a card balance for six months or more, the debt may be charged-off. This can have a profound impact on a person’s credit score as well as on his or her ability to get another card in the future.
Damage to a credit score begins as soon as the first payment is missed. Missing a single payment could make it harder to get a loan because it will result in a lower credit score. Of course, having a poor credit score or history doesn’t mean that a person can’t get a credit card. As economic conditions improve and defaults drop, lenders tend to allow a wider range of people to obtain credit.
The interest rates of credit cards tend to be higher than those charged by home and auto lenders. The average interest rate is 17 percent, but it could go up to 30 percent after a missed payment. Generally speaking, those with better credit scores get better interest rates. To avoid a credit default, it is important to not charge more than what can be repaid at the end of the month.
Filing for bankruptcy may be ideal for those looking to overcome financial challenges. For instance, it may be possible to have credit card and other unsecured debt balances discharged. This could happen in a matter of weeks in a Chapter 7 case. Those looking to retain property during a bankruptcy may benefit from a Chapter 13 debt reorganization. During the repayment period, creditors are barred from taking most collection actions.
