Many people across Mississippi struggle to support themselves and their families financially, and if you count yourself among them, you may be sorting through your options and trying to figure out if a bankruptcy filing might give you the fresh start you desire. While, in many cases, filing for bankruptcy can be a great way to get your affairs in order so you can start to dig your way out of debt, your credit will most definitely take a hit after doing so.
There are, however, certain efforts you can make to help rebuild your credit after bankruptcy, which, over time, can help you raise your credit score and otherwise get back on your feet financially. Just what types of actions can you take after a bankruptcy filing to help raise your credit score?
Consider a secured loan
A secured loan is something you may be able to obtain through a local bank or credit union, and it can help boost your credit score if you stay current on all necessary payments associated with it. There are two primary kinds of secured loans. The first involves putting down a deposit and then borrowing against that money you have on deposit, while the second type involves placing money in a savings account you can access once you have made all required payments.
Consider a secured credit card
A secured credit card, meanwhile, can help you build your credit in a manner similar to a traditional credit card, but you need to fund the credit card yourself by putting down a deposit. There are typically high fees and interest rates associated with secured credit cards, though, so view this option as a temporary fix, rather than a long-term solution.
While these are two effective methods of rebuilding your credit on your own, you may also be able to do so through other methods that involve enlisting the help of others. For example, you may be able to have a close friend or family member co-sign on a loan or credit card to help you rebuild credit after bankruptcy.
Going into debt is a normal part of life for most Americans. Significant purchases such as a house or car usually require loans. Emergencies happen, medical or otherwise, and you may have to max out your credit cards. The causes of debt are numerous.
As the numbers rise, you may wonder if you should start to worry about the debt you are in. When can you tell your debt has become a problem? When should you start considering filing for bankruptcy?
Signs of too much debt
A simple calculation you can do is to compare how much debt you pay each month to how much you make each month to find your debt-to-income ratio. Add up your recurring monthly debts and divide it by your gross monthly income. Multiply the answer by 100 to get a percentage. The cutoff of what is bad differs between financial institutions and experts, but generally speaking, a number above 43 percent is a red flag.
This ratio is not solid proof, however. Other signs include:
Low credit scores and high interest rates may also reflect your financial state.
When to file for bankruptcy
Not every debt situation requires bankruptcy. Another option may be better for your circumstances. Bankruptcy may be best for long-lasting financial troubles, there exists a risk of losing assets or a lender is garnishing your wages. Also, most of your debt needs to be eligible for bankruptcy.
Perhaps you are about to petition for either Chapter 7 or Chapter 13 bankruptcy protection. Within a few weeks of your filing date, you must attend the 341 meeting.
This is sometimes called the meeting of creditors, but there is another aspect to it: The 341 meeting is a major stop on your bankruptcy journey because you will meet your trustee.
Acting under the U.S. Bankruptcy Code
The United States Bankruptcy Code requires you, as the debtor, to attend the 341 meeting, the initial meeting of creditors. The name comes from Section 341 of the Code. The trustee assigned to your case from the Office of the United States Trustee will conduct the hearing. He or she will want information that makes your bankruptcy administration go as smoothly as possible. Therefore, you must truthfully answer questions under oath. The trustee will also want to ensure you understand both the positive and negative effects of a bankruptcy filing.
Inviting creditors
The Office of the U.S. Trustee will notify your creditors of the time and place for your 341 meeting. Creditors may attend and ask you questions concerning your bankruptcy; for example, they can inquire about the type and location of your assets. However, creditors rarely come to these meetings. They do not waive their rights if they choose not to appear.
What to bring
Your attorney will accompany you to the 341 meeting and provide documents the trustee needs. Every bankruptcy proceeding is different, but, among other items, trustees usually expect to receive federal and state tax returns, payroll information, bank statements and perhaps a property tax card for any real estate owned. The only items you must bring with you are your Social Security card and a government-issued photo ID, such as your passport or driver’s license. Keep in mind that the 341 meeting is held outside of court and no judge will be present. Despite the fact that the hearing usually only lasts a few minutes, it is an important stop on your journey to a debt-free future.
Bankruptcy is a scary reality for many people living in Mississippi. Fortunately, the rate of people filing for bankruptcy appears to decrease around the country. In particular, many older Americans over the age 65 no longer have to seek out bankruptcy.
It is vital to realize filing for bankruptcy is not the end. In some cases, it is the only way to take control of your financial future. However, you need to go through your bankruptcy the right way. Many people doom themselves from the start by making one of the following mistakes before or during the bankruptcy.
Avoid using your credit card
When you suffer from extreme credit card debt, it may seem like a good idea to rack up more debt in the months before you file. This is a poor decision because a judge may still require you to pay off a large portion of the debt if it looks like you tried to get recent purchases discharged from the bankruptcy. You should stick to making purchases through your debit card in the few months before you file.
Avoid transferring assets
A lot of people think they can protect some of their assets by giving them to family members and friends. Concealing assets is not a good idea, and you should assume a judge will learn of such actions eventually. A typical example of this involves transferring the title of your car to another person’s name.
Avoid suing anyone
When there is someone you want to sue, you should wait until you resolve your bankruptcy first. Any legal claim you currently have in process can become an asset taken into consideration by the bankruptcy court. Even claims you have filed with others but have not gone to court yet can still come into play. It is a good idea to seek out sound financial advice before pursuing any type of legal claim.
Often, difficult financial situations seem to snowball. Various types of debt accumulate and become increasingly harder to get rid of.
If you owe federal or Mississippi state taxes, it is important to know ways to handle them. Some people assume tax debt just goes away after filing for bankruptcy, while others may have heard bankruptcy can never discharge tax debt. Both of these assumptions are wrong. The best way to handle tax debt can vary depending on your situation.
How bankruptcy handles taxes
Your bankruptcy may discharge income tax debt you owe on returns due at least three years or filed at least two years prior to your bankruptcy filing. Generally, you need to file a return before your tax debt can qualify for a discharge; sometimes, filing a late return may help in this regard.
As a rule, bankruptcy will not address tax debt you incurred through fraud or evasion. It will also not eliminate any taxes other than income taxes.
If you do obtain a discharge for tax debt, it will mean you will no longer need to repay it (other than what is part of a Chapter 13 plan). The IRS will not be able to garnish your wages or take other actions. However, if the IRS or state tax authorities placed a tax lien on your property prior to your bankruptcy, the lien will remain in place. The only way you will be able to sell that property would be to pay the tax debt that underlies the lien.
Other options
You may also consider some other ways to manage your tax debt. Both the IRS and the Mississippi Department of Revenue may allow you to make a repayment plan. You can also ask for the reduction or elimination of some penalties.
