Southhaven Legal Issues Blog

Injuries and illnesses too often impose financial hardship on people in Mississippi. In addition to the physical pain, medical bills quickly absorb savings and force people to use their credit cards. The Commonwealth Fund reported that about one-third of consumers used credit cards for medical bills in 2014. For 44 percent of these people, that act produced a negative result on their credit scores. Younger people in the Millennial generation have begun to feel the pinch as well. A survey of Millennials in 2016 found that 74 percent of respondents had unpaid medical bills.

Between 2008 and 2018, the percentage of medical debts among young people that went to collections rose sharply from 10 percent to 30 percent. Possessing health insurance does not insulate people from medical bills. A study sponsored by the Kaiser Family Foundation revealed that 20 percent of people with insurance still struggled to pay for health care.

People in Mississippi who are considering bankruptcy might wonder if they will be able to recover financially. One study by Lending Tree found that three years after a bankruptcy, people applying for a mortgage without a bankruptcy on average only paid about 19 bps less than those with a bankruptcy. Two years after a bankruptcy, around 65 percent of people had brought their credit score up to 640 or more.

Once a bankruptcy is discharged, the first step is to apply for a secured credit card. To get this type of card, a person puts down a deposit, and the initial credit limit is usually around the same as the deposit amount. The next step is to use the card conservatively, putting no more than 20 percent of the total credit limit on it at a time and paying it off each month. Once it has been established that the person will not max out the card and will pay it off responsibly, it might be possible to apply for a regular type of credit card.

People in Mississippi who are struggling with debt might hesitate to file for bankruptcy because of certain myths they believe about bankruptcy. There are a number of misconceptions about filing for bankruptcy and what happens to a person's credit afterward.

The main impact of a bankruptcy on a credit score is the bankruptcy itself. In other words, the score is unlikely to be mitigated by positive information on the credit report. The amount of debt discharged may affect the severity of the drop in credit score. Furthermore, debts that cannot be discharged, such as student loans, will remain on the report. However, it is important to remember that a bankruptcy eventually falls off the credit report. A Chapter 7 bankruptcy remains on the credit report for 10 years. All other information, including a Chapter 13 bankruptcy and things like liens and judgments discharged in bankruptcy, are removed from the report after seven years.

You have made the difficult decision to file for bankruptcy, but you may still have some misgivings. If so, you are not alone. Countless people in Mississippi and elsewhere who are going through a personal bankruptcy are dealing with negative feelings about their situation, including embarrassment and shame. You may be reassured to learn you do not have to feel this way.

There was a great deal of negative social and professional stigma surrounding bankruptcy in the past that, for the most part, no longer exists today. However, many people still attach a negative connotation to what they see as a last resort. You might feel a number of unpleasant feelings during your bankruptcy process, including the following:

• Embarrassment over your friends, family members or co-workers finding out you had to file for bankruptcy
• Loss of confidence and self-worth when you cannot meet your financial obligations
• Guilt over not repaying your debts and taking what some think of as the “easy way out”
• Worry that you may not be able to rebuild your credit or take out a loan in the future