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.
Part of a credit card agreement is that the Mississippi cardholder will pay back charges, plus fees and interest. In some cases, though, credit card companies have incentives to lower the amount outstanding, or they realize it won’t be worth it to pursue the cardholder with collections efforts. For people who are going through serious financial hardship, it may seem impossible to get out. If it is approached correctly, debt settlement can be a way to satisfy these types of obligations.
Some debt settlement companies give poor advice at times, though, like advising clients not to communicate, pay or work with creditors. This can be a dangerous tactic, and most cardholders will get more out of calling their credit card companies directly or asking an attorney to communicate with creditors on their behalf.
Debt settlement can harm a person’s credit score, because the credit reporting agencies are notified that the obligation has been settled for less than the amount owed. The cardholder’s credit score suffers for up to seven years before the note comes off. In some cases, the Internal Revenue Service may demand that taxes are paid on the amount of credit card debt forgiven. If the amount forgiven is at least $600, the taxpayer will usually be required to pay taxes. Tax liability may be reduced, though, if the debtor is insolvent.
An attorney might be able to help people in Mississippi who are struggling to pay down debts. Debt settlement may be an option for some. Debt restructuring, consolidation or filing for bankruptcy may make sense for others. An attorney might be able to provide advice regarding the different debt reduction or elimination options available.
Debt is a problem for most millennials in Mississippi and in other states. In 50 large cities across the United States, millennials are carrying an average of over $23,000 in personal debt excluding mortgages. San Antonio is the area with the largest average non-mortgage debt for millennials at $27,122 followed by Pittsburgh and Austin.
Student loans account for the largest proportion of debt in the U.S. for individuals age 22 to 37 followed by credit cards. Car loans are another major source of debt for millennials. One problem faced by many is that even in areas where the cost of living is low, wages are also lower.
Another problem that many young adults face when they are taking out loans is that their credit histories are not usually very extensive. Loans may end up costing them more because of a low credit score.
Some loans may be difficult to avoid. For example, most people need a car to get to and from work, so taking on a car loan may seem like a necessity. When juggled with student debt, credit cards and other personal loans, millennials in most major cities are finding debt difficult to manage.
Many debtors are turning to bankruptcy in order to stop repossession, creditor calls and wage garnishment. A bankruptcy attorney may be able to assist debtors who have fallen behind on their payments by filling out paperwork, providing legal advice and attending a meeting of creditors with the debtor prior to the final discharge of debt.
Most individual debtors choose to file a Chapter 7 bankruptcy, which can wipe out unsecured debts. Debtors who do not qualify to file a Chapter 7 may be able to file a Chapter 13 bankruptcy, which requires that payments be made for several years. An attorney may be able to help clients who are contemplating bankruptcy decide if it is a good solution for them.
In the 2017 fiscal year, individuals in the United States filed a total of 767,721 personal bankruptcies in the federal courts. Residents of Mississippi may benefit from learning about some common mistakes people make that may lead them to file for bankruptcy.
For example, overspending with credit cards is a major culprit as many individuals do not have an updated budget that is based on what they really need. Not having a well-developed budget means that individuals are unaware of how much disposable income they have and what they can buy without having to incur any debt. It also means that they are unaware of how much money they can actually borrow and repay within a sensible amount of time.
Another mistake people may make that can lead them into bankruptcy is spending money on certain unnecessary things, such as expensive vacations. Many people may be swayed by peer pressure or constant marketing to make these purchases without determining if they are actually able to afford them.
It is not uncommon for financial institutions to solicit individuals for credit cards. However, many people make the mistake of believing that because they have been solicited for credit they can actually afford to take on the debt and pay back the entire amount. They may also mistakenly believe that simply paying the minimum owed on a credit card debt is sufficient.
A bankruptcy attorney may evaluate the financial circumstances of a client and advise them of the differences between Chapter 7 and 13. In many cases, filing for bankruptcy can give a debtor a new financial start and allow them to retain their personal property.
While bankruptcy cases have been decreasing in Mississippi and across the U.S. since the end of the Great Recession, many consumers still need to file for bankruptcy protections each year. However, experts say that people need to understand a few key points before deciding to file for personal bankruptcy.
First, in order to get maximum debt relief, consumers need to make sure they declare all their debts in their bankruptcy filing. This means that they need to carefully review their financial situation and make sure they understand what types of debt they owe and who they owe it to. Second, consumers need to realize that bankruptcy filings are long, complicated and easy to mess up. For example, many people fail to provide all the necessary documents, such as bankruptcy schedules, or fail to complete federal requirements, such as attending debtor education classes. Unfortunately, these types of mistakes can significantly delay a case.
Speaking of delays, experts say that, in most cases, consumers shouldn’t postpone filing for personal bankruptcy. Filing can eliminate certain monthly debt payments, which could provide extra funds for essentials, including food and gas. A bankruptcy filing also puts an end to debt collection efforts and harassing phone calls, which can reduce anxiety and stress. Finally, consumers should realize that bankruptcy is permanent. This means that, while it may only stay on their credit report for seven to 10 years, it will remain on their record for the rest of their lives. As a result, it could prevent them from getting certain jobs or loans.
Individuals considering bankruptcy could learn more about their legal options by contacting an attorney. An attorney could review a client’s case and recommend the best way to obtain financial relief.
Source: Born2Invest, “Personal bankruptcy: 4 things to know before filing one,” Christopher Elliott, Aug. 10, 2018
