Like many Mississippi residents, you have some debt. It can be challenging enough taking care of your usual bills every month. The last thing you need is another debt added to the pile. However, one day you get a collection notice in the mail for a debt you don’t recognize. You are sure you didn’t make this purchase, so why are you receiving a bill for it? Even worse, why are you being taken to collections for it?
This is, unfortunately, not an uncommon scenario. Countless people receive bills for unfamiliar purchases, which can spark uncertainty and panic when they start receiving collection notices or harassing phone calls. Can you get this debt taken off your record? Will it affect your credit score? How can you get the harassment to stop?
The U.S. Federal Trade Commission explains that an unfamiliar debt may be a case of mistaken identity, or you could be the unwitting target of a scammer who is hoping you won’t question the charges and will pay up. Regardless of the reason, you can take the following steps to protect your credit and dispute a debt you don’t believe is yours:
You might feel tempted to just throw away collection notices for a debt you’re sure doesn’t belong to you. However, if you fail to address the issue, the harassment is unlikely to stop, and even a false debt may impact your credit score.
At the end of March 2018, there was a total of $1.4 trillion in student loan debt, according to the New York Fed. Across America, there are 44 million people – many of whom live in Mississippi – who have student loan debt, and it is highly unlikely that it can be discharged according to current bankruptcy laws. However, there is support for new rules that may make it easier to get rid of this type of an obligation in a bankruptcy proceeding.
Under proposed legislation, the definition of undue hardship would be broadened. To have student loan debt discharged, the borrower must show that being required to make payments would constitute an undue hardship. The Department of Education has asked for public comment about this issue as it believes that current rules are discouraging some debtors from filing for bankruptcy. There is no set definition of what an undue hardship is, which means that criteria are applied on a case-by-case basis.
Generally speaking, a person must pass the Brunner test to determine if he or she faces an undue hardship. To pass, an individual must show that paying the debt precludes him or her from maintaining a basic lifestyle for the next several years. The applicant must also show that an effort was made to make student loan payments prior to filing for bankruptcy.
Those who are experiencing overwhelming debt that can’t be repaid quickly may benefit from filing for bankruptcy. Doing so may allow a person to get a stay from creditor collection calls and letters. It may also make it possible to have student loan or other debts discharged in part or in full.
When people in Mississippi file for bankruptcy, the court issues an automatic stay that prohibits creditors from continuing to seek payment. Although issues like multiple bankruptcy filings could interfere with the immediate issuance of an automatic stay, the court order typically becomes effective as soon as debtors file their bankruptcy paperwork and lasts until the discharge of debts. Creditors might initially violate the stay in the first couple of weeks after a filing because they have not yet processed the notice about a bankruptcy. Unless evidence shows that creditors willfully violated a stay, they will likely avoid legal consequences unless they persist with collection efforts.
Since debtors could expect to receive letters and telephone calls right away a bankruptcy filing, they should be ready to provide their case number and bankruptcy court information. Debtors should keep records of contact with creditors so that they can show that they provided notice to creditors about the stay. The court also mails official notices to all creditors, and attorneys can alert creditors to the stay for their clients as well.
Creditors that might repossess a vehicle or advance a foreclosure case could be held liable by a court if they seize property during a bankruptcy. A court will require the return of repossessed property and the payment of damages to the debtor if applicable.
A person concerned about mounting debts and missed payments could seek out the representation of a bankruptcy attorney. A legal review of the person’s debts and income could provide insights about which chapter of bankruptcy to file. A lawyer could take action to inform creditors about a filing as soon as possible and challenge those that defy the automatic stay. With legal support, a person might prepare bankruptcy disclosures completely and stop repossession.
Some Mississippi consumers may be paying more than they have to in credit card interest rates because of a prevalent myth. Many people believe that carrying a balance is a way to build credit, but financial experts say this is not the case.
A report from Creditcards.com found that more than one-fifth of cardholders carried a balance as a way to build their credit. However, this is not one of the criteria used to determine a credit score. In fact, carrying a balance can hurt a person’s credit if the balance is creeping up toward the card’s limit.
A balance on a credit card can damage an individual’s finances in other ways as well. Interest rates may be 16 percent or higher, so some experts say that even if the belief that carrying the balance were true, the additional costs would not offset the benefit of the boost. Paying a bill on time is much more important although more than 40 percent of people reported that they had made a late payment. The most common reason for a late payment is forgetfulness followed by a lack of money to make it. Experts say the best way to use a credit card is to pay it off in full on time each month.
Unfortunately, some people may be carrying a credit card balance not because they hope to build their credit but because they are unable to pay it off. People who are struggling may want to talk to an attorney about debt relief and whether it might be time to file for bankruptcy. While bankruptcy does damage a credit score, so does falling more and more behind on bills, and once the bankruptcy is discharged, a person can begin rebuilding credit once more.
When many people think about the prospect of filing for bankruptcy, one of their primary concerns may be how the filing will affect their financial future. There are many tales of bankruptcy causing financial ruin and the difficulty of rebuilding a solid financial foundation.
Many of the stories that circulate about bankruptcy ruining your finances are actually not based in fact. The truth is that a bankruptcy filing may actually be the most positive step you can make, depending on your particular situation.
How a bankruptcy filing can help
If your debt is overwhelming you and you cannot make your monthly payments on various obligations, your accounts are likely in the hands of collection agencies. The collection agencies’ job is to pursue you aggressively in order to collect on the debts. In addition to this persistent hassle, your credit rating continues to decline for each payment you miss. Ignoring the problem of severe debt does not make it go away, and in fact, worsens the situation.
At this point, it might seem like a bankruptcy filing can only make a bad situation worse. However, filing for bankruptcy can do several things to get the process moving for an improved financial picture. Filing for bankruptcy prevents collection agencies from continuing to contact you for payments. In addition, it halts the late payments on your accounts as you move through the filing process, so your credit record does not continue to deteriorate. In short, a bankruptcy filing signals that you are taking action to resolve the issue.
How to take action
One of the first steps towards taking action to resolve your debt situation is to begin to inform yourself about your options. There are two types of bankruptcy filings that you may consider: Chapter 7 and Chapter 13. The right kind of debt relief for your particular situation depends on the types of debt you currently hold. Consumers typically have loans for cars and homes, and debt also comes in the form of medical bills, taxes and student loans. Not all types of debt are eligible for discharge under a bankruptcy, so it is important to understand what debts you can actually get rid of in a bankruptcy filing.
Taking the first step towards a brighter financial future will likely require some difficult decisions and some hard work. However, the benefits of getting the process started will pay off in the long run, so you can start rebuilding a debt-free life.
