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
Researchers have identified a startling new trend in bankruptcy filings. They have gone up significantly for elderly people in Mississippi and nationwide. Since 1991, the number of filings from people over the age of 65 went up by 480 percent by 2016. When looking at the filings from people over 75, the increase during that period approached 1,000 percent.
Insufficient income and medical expenses represent the primary forces overwhelming older people and retirees. Drawing upon survey data collected by the Consumer Bankruptcy Project, researchers found that almost 70 percent of elderly bankruptcy filers cited job loss, income decline or inadequate retirement savings as the cause of their financial troubles. Medical bills or problems interfering with work came in a close second with 62 percent of people responding that health care issues motivated their filings. Some people experienced a financial hardship because of changing eligibility for Social Security and the shift away from pensions to 401(k) savings plans.
The majority of people tried to repay their debts for two or more years before seeking debt relief. Although the rise of seniors going bankrupt has emerged as a new trend, young and middle-aged people still account for the majority of bankruptcy filers.
When debt overwhelms a person, threats of repossession, foreclosure or wage garnishment could add to the stress. A conversation with an attorney about bankruptcy could inform someone about the potential for debt relief. A lawyer could analyze an individual’s income and debts and explain how a Chapter 7 or Chapter 13 bankruptcy might resolve the problem. If a person decides to file, then an attorney could prepare financial disclosures for the court and assume communications with creditors. The advocacy of a lawyer might enable a person to start over with a manageable payment plan or discharge of debts.
When people in Mississippi file for bankruptcy, the court issues an automatic stay that prohibits creditors from continuing to seek payment. Although issues like multiple bankruptcy filings could interfere with the immediate issuance of an automatic stay, the court order typically becomes effective as soon as debtors file their bankruptcy paperwork and lasts until the discharge of debts. Creditors might initially violate the stay in the first couple of weeks after a filing because they have not yet processed the notice about a bankruptcy. Unless evidence shows that creditors willfully violated a stay, they will likely avoid legal consequences unless they persist with collection efforts.
Since debtors could expect to receive letters and telephone calls right away a bankruptcy filing, they should be ready to provide their case number and bankruptcy court information. Debtors should keep records of contact with creditors so that they can show that they provided notice to creditors about the stay. The court also mails official notices to all creditors, and attorneys can alert creditors to the stay for their clients as well.
Creditors that might repossess a vehicle or advance a foreclosure case could be held liable by a court if they seize property during a bankruptcy. A court will require the return of repossessed property and the payment of damages to the debtor if applicable.
A person concerned about mounting debts and missed payments could seek out the representation of a bankruptcy attorney. A legal review of the person’s debts and income could provide insights about which chapter of bankruptcy to file. A lawyer could take action to inform creditors about a filing as soon as possible and challenge those that defy the automatic stay. With legal support, a person might prepare bankruptcy disclosures completely and stop repossession.
Some Mississippi consumers may be paying more than they have to in credit card interest rates because of a prevalent myth. Many people believe that carrying a balance is a way to build credit, but financial experts say this is not the case.
A report from Creditcards.com found that more than one-fifth of cardholders carried a balance as a way to build their credit. However, this is not one of the criteria used to determine a credit score. In fact, carrying a balance can hurt a person’s credit if the balance is creeping up toward the card’s limit.
A balance on a credit card can damage an individual’s finances in other ways as well. Interest rates may be 16 percent or higher, so some experts say that even if the belief that carrying the balance were true, the additional costs would not offset the benefit of the boost. Paying a bill on time is much more important although more than 40 percent of people reported that they had made a late payment. The most common reason for a late payment is forgetfulness followed by a lack of money to make it. Experts say the best way to use a credit card is to pay it off in full on time each month.
Unfortunately, some people may be carrying a credit card balance not because they hope to build their credit but because they are unable to pay it off. People who are struggling may want to talk to an attorney about debt relief and whether it might be time to file for bankruptcy. While bankruptcy does damage a credit score, so does falling more and more behind on bills, and once the bankruptcy is discharged, a person can begin rebuilding credit once more.
