Credit card debt leads to numerous people filing for bankruptcy every year. Mississippi has one of the highest bankruptcy rates in the United States, with roughly 361 people out of every 100,000 having to file for bankruptcy every year.
Filing for bankruptcy can be a viable option for many people to get their lives in order. However, there are actions many take directly before filing that significantly jeopardize the process. Therefore, before applying for bankruptcy, you should make sure you have not recently done the following.
Running up credit card debt even more
When some people decide they will file for bankruptcy, they figure they have nothing left to lose. They make a ton of purchases on their credit cards because they assume the courts will instantly forgive the debt. Most of the time, any credit card purchases made within 90 days of filing will not qualify for forgiveness. The court may then require you to pay off a significant portion of the debt even after the bankruptcy is over.
Transferring property to friends and family
Bankruptcy may require you to relinquish certain assets. In an attempt to avoid this, some people transfer certain items over to friends and family members so the court does not find them. This is illegal. It can derail the bankruptcy process, so make sure to be completely transparent with all the assets and debts you own.
Taking money out of your retirement accounts
Some try to take money out of their 401(k)s or other retirement accounts to either pay off creditors or stash some of it away. The bankruptcy code states you cannot pay off a creditor because it shows you favor one over another. If the plan is to hide the funds, then it is an unfounded fear. Bankruptcy does not impact retirement accounts, so you do not have to worry about losing those funds.
Far too many people in Mississippi struggle with credit card debt on an ongoing basis. When it is difficult to make ends meet, many people turn to credit cards to cover the gaps. Of course, it can then be even harder to keep up with existing expenses while trying to pay back the credit card bills. Credit card companies also urge customers to take on more debt. However, by keeping some tips in mind, people can help to resist these advances.
Across the country, consumer revolving debt, including credit card debt, stands at $1.037 trillion. Many credit card companies’ tactics inspire people to increase their debt burden, but that can come with a significant cost to consumers. Credit card rewards programs bill themselves as ways to benefit consumers for using the card. Sometimes, they can be a good choice, so long as people have the money to pay off the bill at the end of the month. But some programs can help people rack up debt; for example, one program allows people to buy a plane ticket now, but obtain the miles to cover it later through card purchases. If a customer doesn’t rack up miles, however, he or she will have to pay to buy the miles on credit.
In other cases, people may get in trouble due to late payments. After someone is more than 60 days late on a payment, a credit card issuer can apply a penalty rate to that person’s entire balance. This means that an APR can skyrocket to 29.99 percent across the board, making the debt even more difficult to surmount.
Consumers are often looking for debt relief, especially when their financial situation becomes unsustainable. A bankruptcy lawyer might be able to help people to review their options to move forward toward a new financial future, including personal bankruptcy or other negotiated alternatives.
People paying off debts in Mississippi often stop using credit cards and switch to making purchases with cash. Although this is an appropriate way to tackle debt, careful use of credit cards does help people maintain their credit ratings. Credit cards that offer reward points provide consumers with multiple advantages when paid in full every month.
An active credit card account that’s in good standing could help a person secure a low interest rate when financing a car or home. This benefit emerges after cultivating an excellent credit history on the same account over the long term.
To build a good credit history, a person should take care to not use over 30 percent of the available credit at any time. The full balance also needs to be paid on time every month. The development of a budget could help someone prevent overspending that would interfere with paying off his or her bill every month. Once a budget has been mastered, a person could then route regular expenses through the credit account in order to earn rewards. This regular monthly activity would also promote a good credit score because credit bureaus calculate scores based on the use of credit as well as the length of credit history.
A job loss or medical crisis, however, could undermine the budget of even a very careful person with good credit history. When bills start to go unpaid, interest rates and penalties add up quickly. If a resolution to financial challenges does not appear possible in the future, a person could consider tackling the problem head-on with a bankruptcy filing. An attorney could supply specific information to a person about qualifications and protection from creditors. A lawyer could also prepare the lengthy financial disclosures for the court to pursue the discharge of debts.
Part of a credit card agreement is that the Mississippi cardholder will pay back charges, plus fees and interest. In some cases, though, credit card companies have incentives to lower the amount outstanding, or they realize it won’t be worth it to pursue the cardholder with collections efforts. For people who are going through serious financial hardship, it may seem impossible to get out. If it is approached correctly, debt settlement can be a way to satisfy these types of obligations.
Some debt settlement companies give poor advice at times, though, like advising clients not to communicate, pay or work with creditors. This can be a dangerous tactic, and most cardholders will get more out of calling their credit card companies directly or asking an attorney to communicate with creditors on their behalf.
Debt settlement can harm a person’s credit score, because the credit reporting agencies are notified that the obligation has been settled for less than the amount owed. The cardholder’s credit score suffers for up to seven years before the note comes off. In some cases, the Internal Revenue Service may demand that taxes are paid on the amount of credit card debt forgiven. If the amount forgiven is at least $600, the taxpayer will usually be required to pay taxes. Tax liability may be reduced, though, if the debtor is insolvent.
An attorney might be able to help people in Mississippi who are struggling to pay down debts. Debt settlement may be an option for some. Debt restructuring, consolidation or filing for bankruptcy may make sense for others. An attorney might be able to provide advice regarding the different debt reduction or elimination options available.
Your parents worked hard all their lives to save for a retirement that would ensure their comfort in their golden years, as well as to build a nice nest egg for their children and grandchildren to enjoy after they are gone. It would break your heart to discover they were victims of scammers who are determined to separate them from the assets they spent a lifetime building. Unfortunately for many residents of Mississippi and elsewhere, there are many financial scams that target the elderly and the vulnerable.
According to the National Adult Protective Services Association, about one out of every 20 senior citizens in the U.S. is a victim of financial scams or of people they know and trust. Your parents may have been intelligent and financially savvy throughout their lives, but sophisticated cons and declining mental acuity can make them easier targets in their senior years. The following scams are common against the elderly and the mentally vulnerable:
Sadly, many of these cons can drain your parents’ savings and retirement accounts before you can intervene. If you worry that your parents may become targets of financial scammers or dishonest relatives, you may wish to explore legal options.
