Bankruptcy can be a beneficial tool when you utilize it properly. Also, in order to reap the benefits, you must complete all necessary aspects of the process.
Therefore, it can be helpful to understand the key aspects of the bankruptcy process before you begin. There are certain financial requirements in particular that you must meet before, during and after filing for bankruptcy.
Credit counseling
Before filing for bankruptcy, you must complete a credit counseling course. This course must be through an approved credit counseling agency, and you must submit the certificate of completion with your bankruptcy application. The course completion and filing must be within six months of each other. There are certain instances where you may not have to complete the counseling course:
In all cases, the bankruptcy court must approve of the pardon.
Means test
If you desire to file for Chapter 7 bankruptcy, the means test is a requirement. The first step is to compare your average income over the past six months with the average income in the state. If your income falls under the average, no further calculations are necessary, and you may file for Chapter 7. On the other hand, if your income is higher than the average, you must submit additional information for further consideration. Depending upon the final numbers, you may still qualify for Chapter 7 or have to file for Chapter 13.
Financial management course
In order to encourage filers to budget better and prevent bankruptcy in the future, you must complete a debtor education course before receiving a full bankruptcy discharge. This course covers income responsibility, budgeting and other financial tools. Upon completion, you must submit the debtor education certificate to the court.
Along with understanding the requirements that you must complete, it is important to make sure you fulfill each one by completing all paperwork and submitting any additional material. Doing so may aid in avoiding a bankruptcy denial or cancellation.
At the end of 2018, Americans owed credit card companies roughly $900 billion. However, the Consumer Financial Protection Board says that Mississippi residents and others throughout the country aren’t necessarily in a perilous financial situation. Currently, most of the credit card debt is being generated by people who have credit scores of at least 740. This means that they are more likely to pay their debts in full and on time.
Furthermore, interest rates for other debts such as mortgages and credit cards are lower by historical standards. This makes it easier for debtors to handle their overall debt loads. Finally, unemployment is reportedly at its lowest level in 50 years, and employers are expected to spend more money on worker salaries in 2020. Consumer confidence is also relatively high despite the fact that the United States and China have been engaged in a long-term trade battle.
However, there are some reasons to believe that increasing credit card debt could eventually become a problem. For example, those with lower credit scores are accumulating debt at a relatively high rate, and this has led to an increase in both late payments and charge-offs over the past two years. The CFPB also says that debtors have been increasingly seeking out debt settlements and other forms of relief in recent years.
Those who are seeking a fresh financial start may be able to obtain it by filing for bankruptcy. Doing so might make it possible to eliminate credit card and other debt balances. An attorney may be able to help a person learn more about the process of filing. In many cases, individuals who file are entitled to an automatic stay of creditor contact. This may prevent creditors from going through with a foreclosure or repossession until a case has been resolved.
When a Mississippi resident is facing overwhelming debt, options start to dwindle. Financial problems may have a single cause, such as an illness or job loss, or might be the result of several years of financial bad luck or mismanagement. However, the associated costs of bankruptcy may prove burdensome for a debtor and may even make filing for bankruptcy protection difficult.
Financial counselors indicate there are three categories of costs an individual filing for bankruptcy must consider: court filing fees, mandatory education classes and attorney fees. The minimum total for these is a little under $1500 while the maximum can be closer to $4000, depending primarily on whether Chapter 7 or Chapter 13 bankruptcy is involved. It is possible to have fees on filing and classes waived based on income as compared to federal poverty guidelines, in consideration of family size and state of residence.
Legal representation is not a guaranteed right, and it is possible to represent oneself in a bankruptcy proceeding. There are legal clinics that do not offer representation but can be of assistance with filling out the appropriate paperwork and legal forms. The question becomes whether it is worth the risk to file in pro per, that is, acting as one’s own counsel. Statistically, it is extremely difficult to successfully discharge debt through self-representation as compared to the success rate when represented by legal counsel.
Bankruptcy is governed by federal law, and procedures must be followed precisely. A consultation with an experienced bankruptcy lawyer might be helpful in determining if either Chapter 7 liquidation or Chapter 13 reorganization is appropriate under the specific circumstances of the case.
Financial challenges and overwhelming debt are problems for many Mississippi residents. Struggling with debt may lead to physical and emotional exhaustion, especially if the person has to moonlight. Paying back creditors is a weary task. However, many people choose to go this route because they think filing for Chapter 7 bankruptcy or Chapter 13 bankruptcy may cause additional financial struggles.
Some debtors do not realize that choosing a route other than bankruptcy could mean losing funds in a retirement account because of the need to pay back creditors. In most cases, a bankruptcy filer does not need to relinquish assets held in an Individual Retirement Account (IRA) or a 401(k) plan. These types of funds are typically protected by bankruptcy regulations. Consulting with a bankruptcy attorney can help clarify the pros and cons.
Legal counsel may also help a client get a better settlement with creditors. It’s important to understand that debtors opting for debt settlements may need to pay taxes on the forgiven amounts. A debtor facing serious financial challenges may not have the money available to pay back the Internal Revenue Service. Furthermore, IRS debts generally cannot be forgiven in a bankruptcy. This makes obtaining good debt forgiveness terms all the more important.
An individual contemplating filing for Chapter 7 bankruptcy first needs to pass a means test. A bankruptcy attorney can help a client fill out the legal paperwork required to determine if the debtor qualifies. Setting up an appointment with a bankruptcy lawyer is the best way to make a wise decision.
Consumers who are having trouble keeping up with their debts may want to think about filing for bankruptcy. This could be especially true for Mississippi residents who have no savings or assets to pay off their debts with. Those who want protection from creditors may be able to file for Chapter 7 bankruptcy. In a Chapter 7 case, an individual is allowed to sell assets and use the money to pay off their debts.
If there is a remaining balance on an unsecured debt after assets have been liquidated, it may still be discharged. To qualify for a liquidation bankruptcy, a debtor must have a household income less than the state median. It may also be necessary to pass a means test, which looks at a person’s disposable income to determine if he or she qualifies for a Chapter 7 bankruptcy.
Those who don’t qualify for a liquidation bankruptcy might want to file for Chapter 13 protection. In a Chapter 13 proceeding, a debtor will make payments to creditors over a predetermined period of time. To qualify for Chapter 13 bankruptcy, an individual must have no more than $419,275 in unsecured debt and no more than $1,257,850 in secured debts. Debtors must also be current on their federal tax returns and have enough money to make plan payments each month.
Individuals who are facing the threat of repossession or a foreclosure may want to consider filing for bankruptcy. Doing so may make it possible to obtain debt relief without the need to give up property like a home or a car. When a case is filed, creditors may be barred from filing lawsuits or calling a debtor about an outstanding balance. Legal counsel may further explain the potential benefits of a Chapter 7 or 13 proceeding.
