Data published by credit reporting agency Equifax indicates that people in Mississippi and across the country owe $13.5 trillion in total consumer debt. Of that debt, more than $1 trillion is owed by people between the ages of 18 and 29. This debt is primarily made up of student loans, but it also includes credit card debt, mortgage debt, auto loans and other types of consumer debt. The last time people in this demographic owed over $1 trillion was just before the 2008 financial crisis during the fourth quarter of 2007.
Bankruptcy may be an option for Mississippi residents who have been overwhelmed by substantial debt. However, filing for bankruptcy can have a long-term impact on their credit. Before filing, they should consider several factors to decide whether it is the best option for them.
Bankruptcy law recognizes that debts might overwhelm Mississippi consumers. When individuals file for bankruptcy protection, they generally do so under either Chapter 7 or Chapter 13. The form of bankruptcy determines whether eligible debts will be discharged or if the person must continue to pay creditors under a court-mandated payment plan. The chapter under which people file also establishes waiting periods before they can file for bankruptcy again.
To properly assess the impact of credit card debt in Mississippi, it's important to compare debt levels with income levels. There is often a disparity in the American South. According to a study by CreditCards.com, however, New Mexico is the state most burdened by credit card debt. Massachusetts residents were the least burdened by such debt. The median income in New Mexico is $46,744 while the median income in Massachusetts was $77,385.
Mississippi residents and others are on pace to amass $4 trillion in collective consumer debt by the conclusion of 2018. That would be an increase of $1 trillion over the past five years alone. The increase is attributed to both revolving debts and others like student and auto loans that have a fixed end date. Revolving debt has increased 22 percent since 2013 while student and auto loan debt has increased by 30 percent in the same time period.
In Mississippi and throughout the nation, fewer people are defaulting on their credit card debt balances. This is according to the S&P/Experian Consumer Credit Default Composite Index. However, debt levels for U.S. consumers are increasing. If a cardholder does not make payments on a card balance for six months or more, the debt may be charged-off. This can have a profound impact on a person's credit score as well as on his or her ability to get another card in the future.
Mississippi residents sometimes put off pursuing bankruptcy because they believe that filing a Chapter 7 or Chapter 13 petition damages credit ratings for many years, but a Lending Tree study reveals that four out of 10 bankruptcy filers have credit scores of 640 or higher after just one year. The figures also suggest that a few years of careful borrowing can counteract the impact of a bankruptcy.
Debt for many residents of Mississippi is a way of life. However, when it continues to increase and cannot be whittled down, debt becomes burdensome. It is not only the economic strangle-hold of paying interest without seeing the principal go down; there is a stigma to carrying debt that may not be deserved. While some people acquire debt through irresponsible lifestyle choices, many others do so only when there is no other option.
People paying off debts in Mississippi often stop using credit cards and switch to making purchases with cash. Although this is an appropriate way to tackle debt, careful use of credit cards does help people maintain their credit ratings. Credit cards that offer reward points provide consumers with multiple advantages when paid in full every month.
Part of a credit card agreement is that the Mississippi cardholder will pay back charges, plus fees and interest. In some cases, though, credit card companies have incentives to lower the amount outstanding, or they realize it won't be worth it to pursue the cardholder with collections efforts. For people who are going through serious financial hardship, it may seem impossible to get out. If it is approached correctly, debt settlement can be a way to satisfy these types of obligations.