People in Mississippi who are struggling with debt might hesitate to file for bankruptcy because of certain myths they believe about bankruptcy. There are a number of misconceptions about filing for bankruptcy and what happens to a person’s credit afterward.
The main impact of a bankruptcy on a credit score is the bankruptcy itself. In other words, the score is unlikely to be mitigated by positive information on the credit report. The amount of debt discharged may affect the severity of the drop in credit score. Furthermore, debts that cannot be discharged, such as student loans, will remain on the report. However, it is important to remember that a bankruptcy eventually falls off the credit report. A Chapter 7 bankruptcy remains on the credit report for 10 years. All other information, including a Chapter 13 bankruptcy and things like liens and judgments discharged in bankruptcy, are removed from the report after seven years.
Even while the bankruptcy is still on the report, it is possible to improve the credit score significantly. It is possible to begin rebuilding credit with a secured credit card or a loan and by paying all bills on time. In the end, while bankruptcy represents a short-term hit on a person’s credit, getting free and clear of that debt may allow a person to rebuild a stronger credit record than before.
Another misconception people might have about bankruptcy is that they will lose all their assets. Even in a Chapter 7 bankruptcy, certain assets are exempt, but in a Chapter 13 bankruptcy, a person may be able to keep assets such as a home. Filing for bankruptcy can halt, at least temporarily, actions such as foreclosures, and the person works out a plan to pay creditors over three to five years. This plan must be approved by the court and is supervised by a bankruptcy trustee.
Mississippi readers with credit card debt are not alone. According to a report by WalletHub, in 2017, Americans added the most credit card debt since 2007. Further, the Federal Reserve estimates that the total amount of U.S. credit card balances currently exceeds $1 trillion.
WalletHub reports that Americans added $92.2 billion in credit card debt in 2017. Of that, $67.6 billion was added in the final quarter, which represents the highest one-quarter jump in three decades. The latest numbers are part of a trend. Between 2015 and 2016, U.S. credit card debt increased by $44 billion.
According to experts, one reason for the sharp increase in debt is that charge-offs, or uncollectable debts, are at historically low rates. This means that banks feel more comfortable extending credit to Americans with subpar credit scores. Another reason could be medical expenses. According to the Centers for Medicare and Medicaid Services, Americans were responsible for paying $338 billion in out-of-pocket health care costs in 2015. These costs included deductibles, co=pays, office visits and uncovered medical procedures. Apparently, many people paid for those costs with credit cards. WalletHub reports that 62.3 percent of Americans say health care expenses make up a portion of their credit card debt.
Mississippi residents who are seeking relief from credit card debt may wish to consider filing for Chapter 13 bankruptcy. Under this chapter, consumers repay their obligations over a period of three or five years pursuant to a court-approved plan. Any remaining credit card balance would generally be discharged upon the successful completion of the plan. An attorney can outline the eligibility requirements.
Source: Yahoo Finance, Credit card debt has now reached pre-recession levels“, Brittany Jones-Cooper, March 8, 2018
You have made the difficult decision to file for bankruptcy, but you may still have some misgivings. If so, you are not alone. Countless people in Mississippi and elsewhere who are going through a personal bankruptcy are dealing with negative feelings about their situation, including embarrassment and shame. You may be reassured to learn you do not have to feel this way.
There was a great deal of negative social and professional stigma surrounding bankruptcy in the past that, for the most part, no longer exists today. However, many people still attach a negative connotation to what they see as a last resort. You might feel a number of unpleasant feelings during your bankruptcy process, including the following:
Fortunately, most lenders are aware that bankruptcy has become a necessity for many, especially in today’s financially uncertain times. Many banks or alternative lending companies are willing to offer loans to people recovering from bankruptcy. You can start rebuilding your credit soon after discharging your debts, and you may have learned valuable skills in budgeting, saving and financial planning that can prevent you from having trouble in the years to come.
It is important when recovering from monetary difficulties to let go of any sense of guilt or shame and realize that you have done the best you could to regain your financial footing. While you are going through the bankruptcy process, your attorney should be able to advise you on effective ways to keep moving in a positive direction.
Some people in Mississippi may be struggling to pay off their student loans, but these obligations are generally not dischargeable in a bankruptcy. The total amount of student loan debt in the United States has reached $1.4 trillion carried by 40 million people. In the 1970s, Congress began reducing the ability of borrowers to discharge student loan debt. It is only allowable in cases of “undue hardship”. What this is has never been defined, but courts have traditionally set very stringent guidelines.
On March 1, Federal Reserve chairman Jerome Powell spoke before the Senate Committee on Banking, Housing, and Urban Affairs and said he could not explain why student loans were not dischargeable. However, he said that it was not a change he could make in his position although Congress could address it.
Sen. Brian Schatz asked Powell about the effect the student loan debt could have on the economy. Powell said that on an individual level, it hurt people’s credit ratings and their economic lives over the long term. As for the economy as a whole, he said the amount of debt could hinder growth. Powell is not the first financial expert to express concern about student loan debt. For example, the president of the Federal Reserve Bank of New York has talked about its effect on economic mobility.
While a person may currently be unable to discharge student loans in bankruptcy, restructuring debts under a Chapter 13 bankruptcy might free up enough cash to stay on top of payments. People who are struggling with debt might want to talk to an attorney about how this type of bankruptcy could work for them. Filing for bankruptcy automatically stops any debt-related action against a person including foreclosure. Chapter 13 bankruptcy allows a person to keep some assets and pay off creditors over three or five years.
Sometimes in life, financial hardship comes upon you unexpectedly. Even if you have always been diligent about paying your bills and debts, a sudden change in circumstances, such as a job loss or a major medical expense, can cause your finances to take a sharp downward turn.
The main monthly expense for many families is their home mortgage payment. Predictably, when finances take a turn for the worse, the mortgage payment is often the first bill to suffer the effects of lost wages or diminished income. If you are having trouble meeting your monthly mortgage payment, do not despair. There are options for you to restore your financial stability and remedy the situation. Here are three options to take into consideration as you examine how to proceed.
1. Loan modification
A loan modification can be the first step to try to avoid foreclosure by the bank. It is worth it for you to attempt to speak to your bank about the possibility of a loan modification before you face more drastic measures. A loan modification can make your loan payments more affordable while you make efforts to get your financial situation back on track.
2. Short sale
If the situation has progressed to a more critical stage, you may wish to consider a short sale. In a short sale situation, the mortgage lender agrees to allow you to sell your home for less than what you owe on the mortgage. In this scenario, the lender still gets partial payment on the mortgage rather than having to take the full hit of a foreclosure and sale at auction.
3. Bankruptcy
Bankruptcy is often the homeowner’s last resort if he or she can no longer pay the mortgage. Although there can be a stigma attached to bankruptcy, in certain cases, it can be the best option for you and help you get a fresh financial start. There are two different types of bankruptcy for individuals: Chapter 7 and Chapter 13. If you are in a situation in which you think bankruptcy may be your only option, you should contact a qualified bankruptcy attorney to help you evaluate your case and plan the way forward.
