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.
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.
