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.
If they have a steady stream of income, debtors in Mississippi may use a Chapter 13 bankruptcy to pay off their substantial debts. They will have three to five years to use their disposable income to resolve their debts. If individuals currently have a vehicle or would like to purchase one during any stage of the bankruptcy process, this still can be achieved. However, there are some factors that have to be considered.
Chapter 13 bankruptcy filers who possess a vehicle before they file a petition may keep their vehicle except in certain cases. If the payments for the vehicle are extremely costly, the court may prevent the debtor from including the payment when calculating their disposable income. The expensive payment may be considered unreasonable as filers are only permitted to retain living expenses that are necessary and sensible.
Debtors who have an upside down auto loan and purchased their vehicle at least 910 days before submitting a bankruptcy petition may opt to cramdown the loan for the bankruptcy process. This allows the loan to be reduced to the amount of the vehicle’s cash value. The excess amount is included with the unsecured debts.
For debtors who are not current with their vehicle payments, filing for Chapter 13 bankruptcy stays most collections, including repossession of the vehicle. The payments in arrears may be included in the bankruptcy plan, and if the debtors make the remaining payments, they may be able to retain ownership of the vehicle.
Individuals who have substantial debt may consult a bankruptcy attorney about their legal options. A lawyer may advise individuals how a Chapter 13 bankruptcy may apply in their case if they have a regular income. People may be advised of how a bankruptcy may help them have a fresh financial start by reducing interest and stopping creditor harassment.
Federal bankruptcy laws provide people in Mississippi with a possible path to a fresh start when they experience financial hardships. Data from 2015 collected by Debt.org revealed that 97 percent of the 844,495 bankruptcy filings from that year arose from individuals seeking protection from creditors.
The two most common forms of consumer bankruptcy are Chapter 7 and Chapter 13. The flier’s incomes and debts determine which form applies. For those who qualify within the terms of Chapter 7, they could achieve a court judgment that discharges some or all of their unsecured debts. The law exempts certain assets, like a primary residence or retirement account, from liquidation during this process. Nonexempt property, however, must be sold to pay creditors.
Under Chapter 13, a person develops a payment plan of three or five years. This form of bankruptcy generally applies to people who have a regular and reliable source of income. They also have the chance to protect more assets under Chapter 13 if they can meet the obligations of a court-approved payment plan. Upon the successful completion, many remaining unsecured debt balances will be discharged. Another option is Chapter 11, but this is for people who have debts higher than the amounts allowed under Chapter 13.
Problems like a medical crisis or job loss can lead to severe financial challenges, and people who find themselves in this type of a situation often do not know where to turn. They might find it advisable to meet with an attorney who can describe the bankruptcy process in more detail.
You tried to be responsible. You gathered all of your financial documents, and you filed your tax return before the deadline. However, when you finished, you discovered you’re on the hook for a lot more money than expected—more than you have in the bank.
What do you do? Do you have to take out a loan to pay off your taxes? Or ask your family and friends for help?
Fortunately, the IRS offers some options to help you out—but only if you’ve already filed your required tax returns. If you’ve missed the filing deadline, then the below options are unavailable to you, and you should contact an attorney experienced in IRS debt to help you come up with a solution.
If you owe $10,000 or less:
You can apply for a Guaranteed Installment Agreement. This is an agreement under which the IRS allows you to pay off your tax liability in monthly installments over a three-year period. To qualify for this agreement, you must have a clean tax record over the past five years—i.e., you’ve filed your tax returns each year, you’ve paid any taxes you owe and you haven’t entered into another tax installment agreement.
If you owe up to $50,000:
Even if your tax liability is under $10,000 but you need more than three years to pay it off, a Streamlined Installment Agreement could be a good option for you. Under this agreement, you can pay off your liability in monthly installments over a six-year period. Note that for tax liability above $25,000, tax payers must submit payment via payroll deduction or direct deposit.
Regardless of your tax debt situation, talking to attorney with in-depth knowledge in this field can be an extremely valuable first step to resolution.
