For people in Mississippi struggling with unrepayable debt, bankruptcy can be a way out from financial disaster. However, the types of debt that can be wiped away in bankruptcy vary depending on the type of bankruptcy a person pursues. In addition, some types of debts are almost always dischargeable while some types of debt are notoriously difficult to discharge.
Most consumers who file for bankruptcy pursue either Chapter 7 or Chapter 13 bankruptcy, both of which help people to find a new financial lease on life after debt. Only people who make below a certain income, usually the state median, can file for Chapter 7 bankruptcy. Under this type of filing, a person’s assets are liquidated while the funds are distributed to creditors to satisfy the debt. Some assets are exempt from liquidation, including those necessary for life such as a car or tools used on the job. After this process, remaining debt that is qualified for discharge will be fully released, and creditors will need to stop their attempts to collect these debts.
Chapter 13 bankruptcy is different because debt is restructured rather than instantly discharged. People enter a new period of repayment of the restructured debt, and after that payment period is over, qualifying debt could also be discharged. In general, mortgages, auto loans, personal loans, medical bills, credit card debts, unpaid utility bills and similar debts can be discharged in bankruptcy. Student loans are the most difficult type of debt to discharge along with child support and spousal support or government fines.
People struggling with debt can often be eligible for Chapter 13 bankruptcy regardless of their income level. When considering options to escape from the spiral of personal debt, people may consult with a bankruptcy lawyer for advice on the type of bankruptcy that is best to pursue in each individual circumstance.
Your Mississippi bankruptcy is over and the court gave you your discharge papers. Congratulations! Now that you have your financial feet on the ground, it is time for you to begin your post-bankruptcy life. You likely learned so much during the past months that you can start afresh to establish and build your credit and responsibly manage it.
Reestablishing your credit, however, is the final of five things you should do. Here are all five.
1. Keep your bankruptcy paperwork
Do not be tempted to discard all the paperwork you collected during your bankruptcy. At the very least, you will need the following documents in the future:
Keep these and your other bankruptcy documents in a safe place. Even better, scan them and put them in a file folder on your computer desktop. That way you have electronic copies whenever you need them.
2. Get your credit reports
You may not be aware of it, but all three major credit reporting agencies give you a free report each year. Get all three after about three months to give your bankruptcy dust time to settle. Review each one carefully, making sure that none of your discharged debts appear on any of them. Likewise check to see that no collection agency now has one or more of your discharged debts. The last thing you need is to once again begin receiving harassing phone calls, emails or snail mails demanding payment for debts that your bankruptcy discharged.
3. Establish a budget
Before you roll your eyes at the thought of budgeting, you need to recognize that establishing a budget and sticking to it are two of the most important things you can do for yourself in your post-bankruptcy life. This is the only way you can ensure that your monthly household income can cover your monthly bills.
Unless you are one of those unusual people who keeps your hardcopy bills after you pay them, you probably will need to estimate the amount of at least some of your monthly bills at first. On the other hand, if you have online accounts or do online banking, you can find out how much you paid on each bill each month. If you can discover this, total each bill’s last six payments and divide by six. This will give you a realistic average of how much you spend each month for each bill. Do not forget to determine a monthly average for those bills, such as insurance, for which you pay an annual or semiannual premium.
4. Establish an emergency savings account
While budgeting is one of the most important things you can do, even the best budget seldom makes provision for those emergency situations that invariably arise when you can least afford them. If your air conditioner stops working or your car needs its transmission fixed, you need cash to pay for the repairs. Open a new emergency savings account into which you place any money left over at the end of each month, no matter how small the amount.
5. Begin rebuilding your credit
Once you have your monthly bills in hand, it is time to start reestablishing your credit. Not only does a credit card come in very handy when even your emergency savings account cannot cover an unexpected expense, some businesses, particularly online businesses, refuse to take anything other than a credit card.
Now that your bankruptcy wiped out virtually all your debts, you can apply for a new credit card. Admittedly, you may have to settle for a prepaid one or one with a low credit limit. In addition, you likely will pay a higher than usual interest rate. Nevertheless, getting one credit card and paying it off each month is a great way to reestablish your credit.
For all practical purposes, your bankruptcy gives you the opportunity for a financial “do over.” By following the above five steps, you undoubtedly will discover that this time you can face and overcome whatever financial issues arise in the future.
If you are a Mississippi resident whose monthly bills exceed your monthly income, you likely are in a quandary over what to do. You may be considering bankruptcy as a last resort, but are confused about which type is best for you. In addition, you may fear that you will lose everything if you file bankruptcy. Set your mind at rest. You do not lose everything in a bankruptcy. In fact, many of your assets are exempt in a Chapter 7 bankruptcy.
While bankruptcy admittedly is a drastic solution to your financial problems, sometimes it not only is your best option, but also your best strategy. If you have reached the point where one of the following red flags applies to you, you may wish to seriously consider bankruptcy.
You truly cannot pay your bills
If you recently got laid off from your job or you or one of your family members suffered an unexpected injury or illness resulting in huge medical expenses, you may be on the brink of financial disaster through no fault of your own. While buying your groceries and paying your other living expenses via credit cards may be a short-term solution, your credit card debt will quickly balloon and your minimum payments alone may well become more than you can handle.
In addition, as your credit card balances increase, so does the portion of your payments going for interest instead of debt reduction. Not only do the interest payments eat you alive, you quickly reach your credit limits. Now you really are in trouble and Chapter 7 bankruptcy may be your only answer. Its whole purpose is to discharge your overwhelming debts, particularly your credit card debt.
You start getting harassing phone calls
Once you begin making late payments or no payments at all, your phone starts ringing incessantly. This is especially true if your creditors start turning your accounts over to collection agencies. These debt collectors are notorious for the lengths to which they will go to collect debts. Not only will they deluge you with nasty phone calls, they may also contact your relatives and/or show up at your door or those of your neighbors. Again, Chapter 7 bankruptcy can rescue you. Its automatic stay provision prohibits your creditors from attempting to collect their debts during the pendency of your bankruptcy.
Your wages become garnished
Assuming you are still working, you may receive a nasty surprise when your paycheck amount is considerably less than what you expected. When this happens, it likely is because one of your creditors sued you and obtained a court order allowing it to garnish your wages. When presented with such a court order, your employer by law must abide by it and withhold the designated amount from your paycheck each pay period until you pay your debt in full. This is another way in which Chapter 7 bankruptcy can come to your aid. It stops the garnishment. Be aware, however, that it cannot stop a garnishment related to child support or alimony payments a court ordered you to make.
Your home is in danger of foreclosure
If you own your own home and are behind on your mortgage payments, your mortgage lender may threaten to foreclose or even have started foreclosure proceedings against you. In this situation, a Chapter 13 bankruptcy protects your home much better than a Chapter 7. While Chapter 7 can forestall a foreclosure, it seldom prevents one altogether. You stand a much better chance of saving your home by filing for Chapter 13 instead.
Unlike Chapter 7, which discharges most of your debts, a Chapter 13 bankruptcy is a reorganization. Under your reorganization plan, you not only have the opportunity to renegotiate the terms of your mortgage, you also have a relatively long period, generally between three and five years, to get caught up on your mortgage payments under their new rates.
There is no denying that deciding to file bankruptcy is a life-changing decision that you should not make lightly. Having said this, however, bankruptcy is not the end of the world. In fact, it is a new financial beginning for you and your family.
Healthcare costs are among the most significant financial concerns for senior citizens. When Mississippi seniors retire, they typically lose their employer-sponsored health insurance and depend on Medicare to cover healthcare costs. Although Medicare covers many of the medical expenses seniors face, it also includes deductibles for inpatient care and coinsurance for outpatient treatment. Fortunately, there are some things seniors can do to minimize their out-of-pocket costs and avoid excessive medical debt.
One way to avoid bankruptcy due to medical debt is to reduce expenses. Seniors can do this by keeping their employer health plan as long as possible to delay signing up for Medicare parts B and D. After they retire, seniors could reduce expenses by purchasing a Medicare gap policy. This kind of private insurance covers coinsurance and deductibles that the senior would be responsible for if they only had Medicare coverage.
Another option is to contribute money to a health savings account. The funds in these accounts are either pre-tax or tax-deductible and may be used after retirement to pay for health-related expenses. While seniors cannot add to the account after they enroll in Medicare, the funds they add prior to retirement will be available to them until they’re exhausted.
Seniors may use these strategies to avoid using credit cards to pay for medical expenses. Healthcare costs could lead to excessive debt and lower a senior’s credit score at a time when they have limited income to repay the lenders. Doctors and hospitals may allow seniors to pay their bills directly to the provider over time if they request this kind of arrangement. Seniors who have excessive medical debt may wish to work with an experienced bankruptcy attorney to get debt relief. This may help them lower, or even eliminate, their medical debts.
Filing for bankruptcy is not a decision that those in Mississippi or anywhere else in the country can take lightly. While many debts could be eliminated in a Chapter 7 filing, it could also result in a person’s credit score dropping by about 200 points. This may make it harder to borrow money, and lenders who are willing to work with a person after bankruptcy will likely charge high interest rates.
Chapter 7 bankruptcy is ideal for those who either don’t have a lot of money or don’t have any income at all. A trustee will be appointed to liquidate a debtor’s non-exempt assets and use the money raised to repay creditors. If a debtor also has secured debts like a home or car payment, he or she could choose to continue making those payments in a Chapter 7 filing.
As a general rule, this type of bankruptcy will stay on a credit report for up to 10 years. However, individuals are urged to continue making payments on their remaining debts to show that they can be trusted with debt again. Those who don’t have a job are encouraged to find employment as having an income generally makes it easier to save money or pay existing debts.
A person who has overwhelming debt might benefit from filing for Chapter 7 bankruptcy in a variety of ways. For instance, he or she may get a stay from creditor contact or collection activities such as a lawsuit. Bankruptcy might also result in debt balances being reduced or eliminated in a short period of time, allowing debtors to better manage their finances. An attorney may be able to describe other benefits of bankruptcy or whether it is in a person’s best interest to file for such protection.
