Injuries and illnesses too often impose financial hardship on people in Mississippi. In addition to the physical pain, medical bills quickly absorb savings and force people to use their credit cards. The Commonwealth Fund reported that about one-third of consumers used credit cards for medical bills in 2014. For 44 percent of these people, that act produced a negative result on their credit scores. Younger people in the Millennial generation have begun to feel the pinch as well. A survey of Millennials in 2016 found that 74 percent of respondents had unpaid medical bills.
Between 2008 and 2018, the percentage of medical debts among young people that went to collections rose sharply from 10 percent to 30 percent. Possessing health insurance does not insulate people from medical bills. A study sponsored by the Kaiser Family Foundation revealed that 20 percent of people with insurance still struggled to pay for health care.
Bankruptcy represents one approach to managing debts that become insurmountable. Another strategy for controlling health care costs involves debtors negotiating their bills with hospitals. This effort could result in an arrangement that lets people pay their debts with interest-free installment payments.
When a person wants to know more about debt relief, an attorney could provide helpful insights. For example, one may prevent a home foreclosure by selling the property through a short sale or negotiating a new mortgage with the lender. Other types of creditors might accept a debt management proposal or settlement offer prepared with assistance from an attorney. This strategy might gain someone a lower payment that relieves pressure on the monthly budget. In situations that involve disputed charges, an attorney could take the creditor to court and strive to resolve the debt.
Financial calamity is sometimes unavoidable. Unfortunately, something may happen in your life that leaves you struggling to make ends meet. If you are racking up debt and are considering filing for bankruptcy, you are not alone. Millions of people declare bankruptcy in America every year.
But why is bankruptcy such a prevalent issue? What brings so many people to the brink? Here are some common reasons that Americans file for consumer bankruptcy.
1. Medical bills
According to USA Today, the majority of U.S. bankruptcy filings occur due to medical bills. Health care debt is the leading cause of bankruptcy. Even if you have health care insurance you may fall victim to huge medical costs. A sudden injury or illness may drain your savings, making bankruptcy your best option.
2. Job loss
Whether it is because of a layoff, firing or resignation, losing income can be devastating. If you are lucky enough to get severance pay, you may be able to survive for a little bit until you find a new occupation. But even then, there is no guarantee when you will find a new job. Not having a job may quickly make your savings and assets go down the drain.
3. Dissolution of marriage
Divorces create a significant amount of financial stress on both people. Dividing marital assets, paying legal fees, living on a single income and making support payments may make it difficult for you to pay your bills.
4. Credit card debt
Credit is a useful tool. However, it may sometimes rack up your debt. While overspending is one issue, you may also accumulate credit debt if you use your card to cover a disability, job loss or emergency expense.
5. Foreclosure
If you have financial troubles and are not able to make your mortgage payments, you may be at risk of losing your home. Filing for bankruptcy may be one way to avoid a home foreclosure.
People in Mississippi who are considering bankruptcy might wonder if they will be able to recover financially. One study by Lending Tree found that three years after a bankruptcy, people applying for a mortgage without a bankruptcy on average only paid about 19 bps less than those with a bankruptcy. Two years after a bankruptcy, around 65 percent of people had brought their credit score up to 640 or more.
Once a bankruptcy is discharged, the first step is to apply for a secured credit card. To get this type of card, a person puts down a deposit, and the initial credit limit is usually around the same as the deposit amount. The next step is to use the card conservatively, putting no more than 20 percent of the total credit limit on it at a time and paying it off each month. Once it has been established that the person will not max out the card and will pay it off responsibly, it might be possible to apply for a regular type of credit card.
Credit scores and issues such as identity theft can be monitored by signing up with a credit monitoring service. Although many bankruptcies occur because people have issues such as medical debt or job loss, those who struggle with spending should take a look at their budgets and try to improve.
One advantage of filing for bankruptcy is that it stops all actions against a person ranging from creditor harassment to foreclosure, lawsuits and more. Certain debts, including some taxes, child support and most student loans, cannot be discharged in bankruptcy, but in Chapter 7, most other debts can be, and a person may be able to make some assets exempt. A Chapter 13 bankruptcy may allow a person to keep certain assets and pay creditors using a payment plan of three or five years.
Bankruptcy has the potential to give people in Mississippi a fresh start if they are struggling with financial challenges. The need to pay for court fees and legal advice, however, can keep people from pursuing this legal remedy that might wipe out their burdensome debts. The challenge of paying for the process sometimes prompts people to choose Chapter 13 bankruptcy when filing under Chapter 7 could have produced greater benefits.
When debtors have no cash on hand to pay an attorney, they might agree to pay for legal representation as part of a Chapter 13 payment plan. This form of bankruptcy requires a debtor to create a plan for paying down debts over the course of a few years. By bundling legal fees into the agreement, attorneys gain a method for collecting payment. The drawback for debtors, however, involves their frequent inability to complete a payment plan. Failing to finish payments voids their bankruptcy protection and allows debts to return.
With a Chapter 7 filing, debtors generally receive a legal discharge of their qualifying debts. The assistance of an attorney with this process greatly increases the likelihood of a debtor gaining substantial debt relief without a payment plan.
The decision to file for bankruptcy requires a person to consider many variables. An attorney may inform a person about what types of assets could be exempt from liquidation, how to halt collection efforts and how to prevent foreclosure or wage garnishment. An attorney may help organize a person’s financial records for disclosure to the court. This effort might allow a person to avoid mistakes that could cause a court to reject an application. During the process, an attorney might also intervene to protect a person being harassed illegally by creditors.
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.
