Southhaven Legal Issues Blog

If you, like so many others, have found that overwhelming debt has become a fixture in your life, you may be exploring your options and trying to figure out how to get your finances back under your control. People in your circumstances often feel hopeless, but the good news is, there are a variety of options that may meet your needs. Regrettably, however, some companies tend to prey on those struggling with seemingly insurmountable debt, and they do not always engage in ethical tactics when doing so.

For example, if you are facing massive amounts of, say, credit card debt, you may start receiving offers from so-called debt settlement agencies that attest that they can resolve your debts for only a small fraction of what you owe. Sounds great, right? Keep in mind, however, that, as with many things in life, if something seems too good to be true, it just well might be.

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:

• A loan modification can significantly raise your interest rate and add years to the length of your repayment schedule.
• The lender may mislead you on the terms of your loan and other options that could better fit your situation.
• The lender may tell you that it will forgive a portion of your loan with the modification, only to add the “forgiven” amount to the end of the loan without your knowledge.
• A loan modification can involve lots of paperwork, hassle and time.
• Scammers posing as legitimate lenders often target people desperate for help, and they may ask for up-front processing fees, which are illegal.

At the end of March 2018, there was a total of $1.4 trillion in student loan debt, according to the New York Fed. Across America, there are 44 million people - many of whom live in Mississippi - who have student loan debt, and it is highly unlikely that it can be discharged according to current bankruptcy laws. However, there is support for new rules that may make it easier to get rid of this type of an obligation in a bankruptcy proceeding.

Under proposed legislation, the definition of undue hardship would be broadened. To have student loan debt discharged, the borrower must show that being required to make payments would constitute an undue hardship. The Department of Education has asked for public comment about this issue as it believes that current rules are discouraging some debtors from filing for bankruptcy. There is no set definition of what an undue hardship is, which means that criteria are applied on a case-by-case basis.

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.