When you are experiencing financial difficulties, you would do almost anything to keep from losing your home. The thought of foreclosure is enough to cause chronic stress and fear in any Mississippi resident. Fortunately, you have options that may allow you to keep your home and make your debt more manageable, such as Chapter 13 bankruptcy. You may also have been advised to apply for a loan modification, but you might hesitate before you learn more about this option.
U.S. News & World Report explains that there are positive and negative aspects to getting a mortgage modification. The immediate benefit to a modification is that the lender lowers your payments, which can help your mortgage payments fit nicely into your monthly expenses. However, the numerous downsides to a loan modification can include the following:
When you file for Chapter 13 or you are having difficulty keeping up with your mortgage payments, companies may contact you offering a loan modification to “solve your problems.” A legitimate modification may help you temporarily while you rebuild your credit if you plan on refinancing later to get better interest rates. It helps to understand your other options if you are unwilling to accept the downsides to a loan modification.
Like many Mississippi residents, you have some debt. It can be challenging enough taking care of your usual bills every month. The last thing you need is another debt added to the pile. However, one day you get a collection notice in the mail for a debt you don’t recognize. You are sure you didn’t make this purchase, so why are you receiving a bill for it? Even worse, why are you being taken to collections for it?
This is, unfortunately, not an uncommon scenario. Countless people receive bills for unfamiliar purchases, which can spark uncertainty and panic when they start receiving collection notices or harassing phone calls. Can you get this debt taken off your record? Will it affect your credit score? How can you get the harassment to stop?
The U.S. Federal Trade Commission explains that an unfamiliar debt may be a case of mistaken identity, or you could be the unwitting target of a scammer who is hoping you won’t question the charges and will pay up. Regardless of the reason, you can take the following steps to protect your credit and dispute a debt you don’t believe is yours:
You might feel tempted to just throw away collection notices for a debt you’re sure doesn’t belong to you. However, if you fail to address the issue, the harassment is unlikely to stop, and even a false debt may impact your credit score.
If you are struggling with overwhelming debt, you may be wondering what options you have. Bankruptcy is often a viable choice for people who have no other way to free themselves from their debt obligations. Bankruptcy can provide a much needed fresh financial start in order to begin financial rebuilding.
There are some options, however, that may be available to you before you reach the point of needing to file for bankruptcy. It can be important to consider these possibilities because bankruptcy, although a very useful solution for many, can bring with it some consequences that are better to avoid.
Negotiating with creditors
One option to consider before you file for bankruptcy is to contact your creditors or debt collectors and ask to work with them to restructure your payments into a plan and schedule that you can afford. Many creditors would prefer to get something rather than nothing, and therefore are often willing to work with clients to help them reorganize their payments. This type of solution works best if you have a steady income and can still realistically devote some of that income to paying off your bills.
Debt consolidation
Another possibility for reorganizing your debt is consolidation. In this option, your debts are combined into a consolidated one with a lower overall interest rate, so that you can begin to pay off your debt more effectively. There are several different ways to do this, and not all the solutions you see advertised are actually advisable. It is in your best interest to fully inform yourself about the conditions and parameters of a debt consolidation plan so that you can be sure you are actually getting a good deal and not further complicating your financial situation.
With some research and planning, you may be able to take advantage of a bankruptcy alternative to help you get back on track and get out of debt. Remember, however, that if your debt is spiraling out of control, ignoring the problem will not make it go away. Take action to get control of the situation and plan for your future.
Your Mississippi bankruptcy is over and the court gave you your discharge papers. Congratulations! Now that you have your financial feet on the ground, it is time for you to begin your post-bankruptcy life. You likely learned so much during the past months that you can start afresh to establish and build your credit and responsibly manage it.
Reestablishing your credit, however, is the final of five things you should do. Here are all five.
1. Keep your bankruptcy paperwork
Do not be tempted to discard all the paperwork you collected during your bankruptcy. At the very least, you will need the following documents in the future:
Keep these and your other bankruptcy documents in a safe place. Even better, scan them and put them in a file folder on your computer desktop. That way you have electronic copies whenever you need them.
2. Get your credit reports
You may not be aware of it, but all three major credit reporting agencies give you a free report each year. Get all three after about three months to give your bankruptcy dust time to settle. Review each one carefully, making sure that none of your discharged debts appear on any of them. Likewise check to see that no collection agency now has one or more of your discharged debts. The last thing you need is to once again begin receiving harassing phone calls, emails or snail mails demanding payment for debts that your bankruptcy discharged.
3. Establish a budget
Before you roll your eyes at the thought of budgeting, you need to recognize that establishing a budget and sticking to it are two of the most important things you can do for yourself in your post-bankruptcy life. This is the only way you can ensure that your monthly household income can cover your monthly bills.
Unless you are one of those unusual people who keeps your hardcopy bills after you pay them, you probably will need to estimate the amount of at least some of your monthly bills at first. On the other hand, if you have online accounts or do online banking, you can find out how much you paid on each bill each month. If you can discover this, total each bill’s last six payments and divide by six. This will give you a realistic average of how much you spend each month for each bill. Do not forget to determine a monthly average for those bills, such as insurance, for which you pay an annual or semiannual premium.
4. Establish an emergency savings account
While budgeting is one of the most important things you can do, even the best budget seldom makes provision for those emergency situations that invariably arise when you can least afford them. If your air conditioner stops working or your car needs its transmission fixed, you need cash to pay for the repairs. Open a new emergency savings account into which you place any money left over at the end of each month, no matter how small the amount.
5. Begin rebuilding your credit
Once you have your monthly bills in hand, it is time to start reestablishing your credit. Not only does a credit card come in very handy when even your emergency savings account cannot cover an unexpected expense, some businesses, particularly online businesses, refuse to take anything other than a credit card.
Now that your bankruptcy wiped out virtually all your debts, you can apply for a new credit card. Admittedly, you may have to settle for a prepaid one or one with a low credit limit. In addition, you likely will pay a higher than usual interest rate. Nevertheless, getting one credit card and paying it off each month is a great way to reestablish your credit.
For all practical purposes, your bankruptcy gives you the opportunity for a financial “do over.” By following the above five steps, you undoubtedly will discover that this time you can face and overcome whatever financial issues arise in the future.
If you are a Mississippi resident whose monthly bills exceed your monthly income, you likely are in a quandary over what to do. You may be considering bankruptcy as a last resort, but are confused about which type is best for you. In addition, you may fear that you will lose everything if you file bankruptcy. Set your mind at rest. You do not lose everything in a bankruptcy. In fact, many of your assets are exempt in a Chapter 7 bankruptcy.
While bankruptcy admittedly is a drastic solution to your financial problems, sometimes it not only is your best option, but also your best strategy. If you have reached the point where one of the following red flags applies to you, you may wish to seriously consider bankruptcy.
You truly cannot pay your bills
If you recently got laid off from your job or you or one of your family members suffered an unexpected injury or illness resulting in huge medical expenses, you may be on the brink of financial disaster through no fault of your own. While buying your groceries and paying your other living expenses via credit cards may be a short-term solution, your credit card debt will quickly balloon and your minimum payments alone may well become more than you can handle.
In addition, as your credit card balances increase, so does the portion of your payments going for interest instead of debt reduction. Not only do the interest payments eat you alive, you quickly reach your credit limits. Now you really are in trouble and Chapter 7 bankruptcy may be your only answer. Its whole purpose is to discharge your overwhelming debts, particularly your credit card debt.
You start getting harassing phone calls
Once you begin making late payments or no payments at all, your phone starts ringing incessantly. This is especially true if your creditors start turning your accounts over to collection agencies. These debt collectors are notorious for the lengths to which they will go to collect debts. Not only will they deluge you with nasty phone calls, they may also contact your relatives and/or show up at your door or those of your neighbors. Again, Chapter 7 bankruptcy can rescue you. Its automatic stay provision prohibits your creditors from attempting to collect their debts during the pendency of your bankruptcy.
Your wages become garnished
Assuming you are still working, you may receive a nasty surprise when your paycheck amount is considerably less than what you expected. When this happens, it likely is because one of your creditors sued you and obtained a court order allowing it to garnish your wages. When presented with such a court order, your employer by law must abide by it and withhold the designated amount from your paycheck each pay period until you pay your debt in full. This is another way in which Chapter 7 bankruptcy can come to your aid. It stops the garnishment. Be aware, however, that it cannot stop a garnishment related to child support or alimony payments a court ordered you to make.
Your home is in danger of foreclosure
If you own your own home and are behind on your mortgage payments, your mortgage lender may threaten to foreclose or even have started foreclosure proceedings against you. In this situation, a Chapter 13 bankruptcy protects your home much better than a Chapter 7. While Chapter 7 can forestall a foreclosure, it seldom prevents one altogether. You stand a much better chance of saving your home by filing for Chapter 13 instead.
Unlike Chapter 7, which discharges most of your debts, a Chapter 13 bankruptcy is a reorganization. Under your reorganization plan, you not only have the opportunity to renegotiate the terms of your mortgage, you also have a relatively long period, generally between three and five years, to get caught up on your mortgage payments under their new rates.
There is no denying that deciding to file bankruptcy is a life-changing decision that you should not make lightly. Having said this, however, bankruptcy is not the end of the world. In fact, it is a new financial beginning for you and your family.
