If you are accumulating too much debt, you may think about filing for bankruptcy. While it may sound intimidating to go bankrupt, it may be a good option for you. It can help you get free from crippling debts and start over.
However, before you rush into filing for bankruptcy, there are some things to handle. Here are some steps you should take before declaring bankruptcy.
1. Review your finances
You should have a clear picture of your financial situation before filing. At the very least, you should understand your income, expenses and total debts. Figure out what is causing your debt. You should also request your credit report for free before filing for bankruptcy. Not only will your credit report be an indication of your financial troubles, but it will also give you a good list of the creditors you owe.
2. Avoid racking up more debt
If you gather too much debt too close to your filing, the creditor may claim you are committing fraud. Do not spend frivolously on luxury items if you are considering bankruptcy. If you take on new debt, make sure it is for necessities such as food, utilities or medical bills.
3. Stop automatic payments
You may have settings on your credit cards or bank accounts to make automatic payments. Whether you have these for utilities or monthly subscriptions, you should freeze them before you declare bankruptcy.
4. Get legal help
According to CreditCards.com, talking to an attorney is essential before moving forward with bankruptcy. It is risky to attempt to handle it by yourself because the laws are so complex. Not only do you need assistance understanding bankruptcy laws, but you need someone who will steer you on the right path and tell you about your best options.
You do not need to feel fear or shame when it comes to bankruptcy – just make sure it is the right decision and you are ready for it.
Up to 80 percent of Americans living in Mississippi and throughout the country have some form of debt. However, for some, that debt may become too large to manage in an effective manner. To start the process of lowering credit card and other balances, it is important to understand the different options available to achieve that goal. One such option is to apply for a personal loan.
Personal loans allow individuals to consolidate a variety of different debt balances into one payment. Typically, these loans come at a lower interest rate than credit card companies charge. This results in lower monthly payments and the ability for an individual to improve his or her credit score. Another option for those with credit card debt is to transfer balances to to a new credit card with a lower interest rate.
It is important to understand that zero percent interest offers only apply for a limited time. After about 12 to 14 months, the interest rate on a remaining balance could be up to 15 percent. Individuals who can’t or don’t want to make use of those options could choose to work with a debt relief company that will negotiate with lenders on a debtor’s behalf. Instead of sending payments directly to creditors, payments are made to the debt relief company instead.
There are many ways in which a person may be able to overcome financial challenges. In addition to debt consolidation or working with a debt relief company, it may be possible to file for bankruptcy. Depending on a person’s income and asset levels, debts can either be discharged immediately or discharged over a series of three or five years. An attorney may describe the pros and cons of using bankruptcy or other debt relief options.
Debt is something that almost everyone experiences at one point or another. According to Goldman Sachs, the average amount of credit card debt is $5,700 for families. It is such a prevalent issue that you may feel like having debt problems is normal, or you simply ignore it.
Now, the path into debt struggles is often complex. If you understand some of the most common reasons people go into high levels of debt, you may be able to better protect yourself and know when taking action to address debt issues can be particularly important. Here are some causes of debt problems.
1. Health care expenses
Medical costs are on the rise and are crippling for too many Americans. You may fall into medical debt even if you have health insurance. Injuries, illnesses and other health conditions can suddenly cause bills to pile up. It is impossible to predict when a sudden medical problem will strike.
2. Losing income
If a primary source of income goes away, your bottom line will suffer. Examples of losing income include the following:
Whenever any of these things happen to you, you may face an overwhelming number of expenses and bills with no way to cover them.
3. Sudden emergencies
You may end up in debt when something bad and expensive occurs. Here are some costly emergencies you may encounter:
Without a substantial emergency fund, these kinds of occurrences may leave you facing significant financial difficulties.
No matter how you end up with high debt levels, you may think it is impossible to get out. However, in some circumstances, filing for bankruptcy may give you the relief you need to start over.
If a Mississippi resident is having trouble paying down his or her debt, it may make sense to think about filing for bankruptcy. By taking this step, an individual can obtain a stay of creditor contact and certain actions such as wage garnishment. However, the bankruptcy will be noted on a credit report and stay there for up to 10 years for those who file Chapter 7 bankruptcy.
An upside to filing for Chapter 7 bankruptcy is that individuals will likely have most of their debts wiped away in a short period of time. If a person files for Chapter 13 bankruptcy, he or she will have three to five years to repay their debts. Debtors who don’t qualify for Chapter 13 because they have too much debt may qualify for Chapter 11 bankruptcy instead. Regardless of what type of bankruptcy a person files for, the effects of that decision should decrease over time.
Individuals who file for Chapter 7 bankruptcy may be able to get a mortgage within four years of filing. Prior to filing for bankruptcy, it could be worthwhile to meet with an attorney. A consultation might be free, and individuals may find out about alternatives to filing for bankruptcy protection. Debtors may get help putting financial records together to present to a bankruptcy court.
Those who are facing financial challenges may find that filing for bankruptcy is an effective way to handle debts. Bankruptcy may allow debtors more time to renegotiate loan terms or have existing debts discharged in a reasonable amount of time. Taking this action might also put an end to wage garnishment or prevent it from happening at all. Debtors may generally keep property such as a house or car as their bankruptcy case unfolds.
Mississippi residents who find themselves with debts they cannot afford to pay have the option of voluntary bankruptcy. A voluntary filing means that a debtor chooses to file for bankruptcy without being petitioned to do so by a creditor. While bankruptcy can wipe out many types of debt, some debts are excluded. For example, taxes owed are often not allowed to be dismissed in bankruptcy. It all depends on what type of taxes, what type of bankruptcy and whether or not the taxes in question meet some very specific criteria.
For individuals and couples, there are generally two types of bankruptcy. Chapter 7 dismisses allowable debt and liquidates some assets to pay creditors. On the other hand, Chapter 13 requires making payments to creditors for a period of time under an affordable payment plan. When the payment plan is completed, remaining debt is dismissed.
Taxes can sometimes be eliminated by bankruptcy, but there are very stringent rules about this. Generally, taxes can be discharged if they are associated with a tax return that was due at least three years before the bankruptcy was initiated and filed at least two years before the bankruptcy. If an associated return was never filed, the taxes cannot be discharged. The taxes must also have been assessed at least 240 days before bankruptcy was filed.
This is only a partial list of the criteria that must be met for taxes to be dischargeable. Additionally, the rules could be different if the bankruptcy is involuntary.
When someone is considering bankruptcy, they might not have the option of filing for Chapter 7 if they do not meet the income requirements. Chapter 13 is considered to be bankruptcy for wage earners who have steady income and can make payments under a payment plan. A lawyer could help a debtor decide which type of bankruptcy to file.
