If you are struggling with overwhelming debt, you may be wondering what options you have. Bankruptcy is often a viable choice for people who have no other way to free themselves from their debt obligations. Bankruptcy can provide a much needed fresh financial start in order to begin financial rebuilding.
There are some options, however, that may be available to you before you reach the point of needing to file for bankruptcy. It can be important to consider these possibilities because bankruptcy, although a very useful solution for many, can bring with it some consequences that are better to avoid.
Negotiating with creditors
One option to consider before you file for bankruptcy is to contact your creditors or debt collectors and ask to work with them to restructure your payments into a plan and schedule that you can afford. Many creditors would prefer to get something rather than nothing, and therefore are often willing to work with clients to help them reorganize their payments. This type of solution works best if you have a steady income and can still realistically devote some of that income to paying off your bills.
Debt consolidation
Another possibility for reorganizing your debt is consolidation. In this option, your debts are combined into a consolidated one with a lower overall interest rate, so that you can begin to pay off your debt more effectively. There are several different ways to do this, and not all the solutions you see advertised are actually advisable. It is in your best interest to fully inform yourself about the conditions and parameters of a debt consolidation plan so that you can be sure you are actually getting a good deal and not further complicating your financial situation.
With some research and planning, you may be able to take advantage of a bankruptcy alternative to help you get back on track and get out of debt. Remember, however, that if your debt is spiraling out of control, ignoring the problem will not make it go away. Take action to get control of the situation and plan for your future.
Generally speaking, those who have student loan debt in Mississippi and any other state are unlikely to have it discharged in bankruptcy. However, recent trends have seen bankruptcy judges reduce the amounts that debtors are asked to repay. Furthermore, lenders themselves have been increasingly open to the idea of settling student loan debt for less than the full balance owed. Judges may be more sympathetic to student loan debtors because they see the impact it has on their own children.
They may also see the impact it has on their law clerks or others close to them. Typically, student loan debt can only be discharged if a person can show that being forced to pay the debt would constitute an undue hardship. In 2017, only 473 people tried to use bankruptcy to obtain student loan relief according to the Wall Street Journal.
Overall, there are 45 million Americans with student loan debt, and the average law student graduates with a balance of $119,000. While the standard to get such debt canceled or reduced is a high one, some judges believe that it is too high. In 2017, an individual had $50,000 in student loans canceled because health issues made it difficult to find employment. Those who don’t want to seek debt relief through bankruptcy may wish to contact their lender for other options.
Individuals who are facing financial challenges because of student loan or other types of debt may benefit from bankruptcy. It may be possible to have debts discharged or reorganized, which may make them easier to repay. An attorney may explain the benefits of bankruptcy such as a stay from foreclosure or repossession of assets. He or she may also help a person show that paying student loan debts could constitute an undue burden.
For some debtors in Mississippi, waiting to file for bankruptcy could lead to many more financial issues. The Notre Dame Law Review released a report that found that the longer people waited, the more likely their assets would be depleted.
People may want to delay a bankruptcy filing because they feel obligated to pay off their debts or want to avoid what they see as a stigma. The report identified a point at which people began to struggle to afford basic necessities or faced things such as debt collection lawsuits. It found that those who waited at least two years past that point to file bankruptcy had a median debt to income ratio that was 40 percent higher compared to those who filed earlier.
Experts advise that there are several points that may indicate it is time to file. For example, it’s a problem when one is paying off debt with more debt. Another indicator is when a person’s debts reach 40 percent or more of their income. People who are foregoing basics such as medical care to pay off debts may also want to consider bankruptcy.
It’s important to note that not all debts can be discharged in bankruptcy. While medical and credit card debts can be discharged, student loans and some other types of debts are not eligible.
An attorney may be able to discuss various debt relief options with a client. Chapter 7 bankruptcy is generally for debtors whose income is below a certain level. People might be able to exempt certain necessary assets in a Chapter 7 bankruptcy. On the other hand, Chapter 13 bankruptcy allows debtors to pay creditors over a period of several years while keeping some important assets.
It is not uncommon for individuals in Mississippi and other states to have debt. In 2018, Americans held more than $1 trillion in combined credit card debt balances. Individuals may also have personal loan, payday loan or medical debt to contend with in addition to mortgages or student loan balances to pay down. To help a person better handle his or her finances, it can be a good idea to list all the debts he or she has.
Ideally, a person will list the balances on those debts, the interest rate charged by a creditor and when each payment is due. This can make it possible to develop a strategy to pay down the debt in a timely manner. Listing the interest rates for each debt can help debtors figure out how much it is truly costing them. By knowing the due date of each payment, it reduces the odds that payments are made late.
Late payments can have negative consequences on a person’s credit score and history. There could be options for those who can’t make a payment on time such as deferring a student loan payment. Other lenders may be amenable to alternate payment arrangements as they would rather get some of their money now as opposed to getting nothing.
Debtors who are having financial challenges may be able to overcome them by filing for bankruptcy. This may put a stop to a foreclosure or repossession as well as postpone a lawsuit or other collection actions. An attorney may explain the process of filing and inform a person whether they are eligible for a Chapter 7 bankruptcy. Chapter 7 may be preferable for those with few or no assets as debts may be discharged in a matter of weeks.
It is possible for Mississippi residents to get financing for a car while in Chapter 13 bankruptcy. However, the process may take longer and be more difficult than for people who are not in bankruptcy. The first step is to find a lender and dealer. If finding a lender is not possible, the next step is to look for a subprime dealership. They specifically work with lenders whose specialty is people with bad credit.
The dealer will create a buyer’s order once the terms of the loan have been agreed upon and the vehicle has been chosen. This must then be submitted to the trustee along with paperwork that includes an explanation of why the vehicle is needed. A trustee is not likely to approve a luxury vehicle, so making the right choice is important.
The information in the Motion to Incur Additional Debt that the trustee files with the court will also be sent to creditors. Creditors have the option to object, but this is not an automatic rejection. The debtor would have to attend a hearing. A debtor receives an Order to Incur Additional Debt if the court approves the loan. This then must be taken to the dealer. If the loan is not approved, a debtor can try with a different car or try again later.
Some people may be reluctant to file for bankruptcy because they are afraid it will ruin their credit. However, this is not necessarily the case. Bankruptcy does damage a person’s credit, but so does unmanageable debt, and it is possible to rebuild credit after a bankruptcy. Furthermore, a Chapter 13 bankruptcy, which involves creating a payment plan to repay creditors over several years, can make it possible to keep some assets such as a house.
