Mississippi residents and others are on pace to amass $4 trillion in collective consumer debt by the conclusion of 2018. That would be an increase of $1 trillion over the past five years alone. The increase is attributed to both revolving debts and others like student and auto loans that have a fixed end date. Revolving debt has increased 22 percent since 2013 while student and auto loan debt has increased by 30 percent in the same time period.
Credit card interest rates are hovering between 16 and 17 percent on average, and that number could go up. This is because the Federal Reserve is planning on increasing interest rates up to four times in 2019. In 2018, Americans who have credit card balances have paid more than $100 billion in interest and other fees. Cumulatively, Americans owe $1.04 trillion in credit card debt, and this figure is expected to rise 5 percent in the last month of 2018.
The 5 percent increase was an estimate by LendingTree based on holiday sales figures. Americans have $2.9 trillion in non-revolving debts, but that figure does not account for outstanding mortgage balances. Those who are struggling to repay their credit card or other debts may be able to get help from a credit counseling service.
Those who are in the midst of financial challenges may be able to overcome them by filing for bankruptcy. In some cases, individuals may keep property like a house or car while they follow through with a repayment plan. In others, nonexempt assets may be liquidated in an effort to repay creditors. In either scenario, debtors are generally given a stay of creditor contact. This means that creditors are prohibited from taking steps to repossess an asset or contact a debtor about it.
In Mississippi and throughout the nation, fewer people are defaulting on their credit card debt balances. This is according to the S&P/Experian Consumer Credit Default Composite Index. However, debt levels for U.S. consumers are increasing. If a cardholder does not make payments on a card balance for six months or more, the debt may be charged-off. This can have a profound impact on a person’s credit score as well as on his or her ability to get another card in the future.
Damage to a credit score begins as soon as the first payment is missed. Missing a single payment could make it harder to get a loan because it will result in a lower credit score. Of course, having a poor credit score or history doesn’t mean that a person can’t get a credit card. As economic conditions improve and defaults drop, lenders tend to allow a wider range of people to obtain credit.
The interest rates of credit cards tend to be higher than those charged by home and auto lenders. The average interest rate is 17 percent, but it could go up to 30 percent after a missed payment. Generally speaking, those with better credit scores get better interest rates. To avoid a credit default, it is important to not charge more than what can be repaid at the end of the month.
Filing for bankruptcy may be ideal for those looking to overcome financial challenges. For instance, it may be possible to have credit card and other unsecured debt balances discharged. This could happen in a matter of weeks in a Chapter 7 case. Those looking to retain property during a bankruptcy may benefit from a Chapter 13 debt reorganization. During the repayment period, creditors are barred from taking most collection actions.
Mississippi residents sometimes put off pursuing bankruptcy because they believe that filing a Chapter 7 or Chapter 13 petition damages credit ratings for many years, but a Lending Tree study reveals that four out of 10 bankruptcy filers have credit scores of 640 or higher after just one year. The figures also suggest that a few years of careful borrowing can counteract the impact of a bankruptcy.
Bankruptcies appear on credit scores for up to 10 years, but that does not mean that they significantly affect borrowing for this amount of time. Recency is a crucial factor when credit is evaluated, and consumers who avoid falling into the traps that led to their financial problems in the first place can expect to be offered similar interest rates to individuals who have never filed for bankruptcy within a few years.
However, consumers who have filed a bankruptcy petition may be wise to wait at least two years before applying for a major loan. The additional borrowing costs on a $15,000 automobile loan taken out less than a year after a bankruptcy are $2,171 according to the Lending Tree study, but this figure falls to just $799 a year or so later.
Attorneys with debt relief experience may be familiar with the many misunderstandings and myths surrounding bankruptcy, and they could point out to individuals with unmanageable financial situations that their outlooks are unlikely to improve without some sort of action. Attorneys could also explain to their clients that the nation’s bankruptcy laws were written to give consumers the opportunity for a fresh start and not to only protect the interests of lenders.
Debt for many residents of Mississippi is a way of life. However, when it continues to increase and cannot be whittled down, debt becomes burdensome. It is not only the economic strangle-hold of paying interest without seeing the principal go down; there is a stigma to carrying debt that may not be deserved. While some people acquire debt through irresponsible lifestyle choices, many others do so only when there is no other option.
Financial experts recommend a thorough understanding of debt and why it was acquired before a plan to get out of it can be contemplated. If debt continues to grow, a major lifestyle change may be in order. If the debt was the result of a past incident or necessity, such as a medical emergency or student loans, there may be a way to climb out of the hole. In either case, a realistic cash flow appraisal of how much money is coming in and where it goes must be made.
The bottom line is that there must be disposable or discretionary income remaining after all minimal bills are paid each month to have a chance to pay off the debt. If there is simply no way to come up with the money to pay down the existing debt, it may be possible to negotiate a reduction with creditors through a debt relief plan.
If that is not possible, considering a personal bankruptcy may be appropriate. Bankruptcy laws were enacted under the U.S. Constitution guidelines to provide debtors with a chance at a fresh start. A bankruptcy lawyer may help explain whether a Chapter 13 or Chapter 7 filing is appropriate under the circumstances of the case.
People paying off debts in Mississippi often stop using credit cards and switch to making purchases with cash. Although this is an appropriate way to tackle debt, careful use of credit cards does help people maintain their credit ratings. Credit cards that offer reward points provide consumers with multiple advantages when paid in full every month.
An active credit card account that’s in good standing could help a person secure a low interest rate when financing a car or home. This benefit emerges after cultivating an excellent credit history on the same account over the long term.
To build a good credit history, a person should take care to not use over 30 percent of the available credit at any time. The full balance also needs to be paid on time every month. The development of a budget could help someone prevent overspending that would interfere with paying off his or her bill every month. Once a budget has been mastered, a person could then route regular expenses through the credit account in order to earn rewards. This regular monthly activity would also promote a good credit score because credit bureaus calculate scores based on the use of credit as well as the length of credit history.
A job loss or medical crisis, however, could undermine the budget of even a very careful person with good credit history. When bills start to go unpaid, interest rates and penalties add up quickly. If a resolution to financial challenges does not appear possible in the future, a person could consider tackling the problem head-on with a bankruptcy filing. An attorney could supply specific information to a person about qualifications and protection from creditors. A lawyer could also prepare the lengthy financial disclosures for the court to pursue the discharge of debts.
