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Lawmakers propose bill to discharge student loans in bankruptcy

For many people in Mississippi, student loans have offered a pathway to future career success. Excessive student loan debts, however, have proven burdensome for many people in recent years. Nationwide, outstanding student loan balances will likely hit $2 trillion by 2020. Delinquency or outright default afflicts over one-quarter of student loan borrowers today. Due to the inescapability of these debts, a group of lawmakers has proposed the Student Borrower Bankruptcy Relief Act of 2019.

CFPB seeks to change rule about debt collector contact

If a proposed rule by the Consumer Financial Protection Bureau takes effect, debtors in Mississippi and elsewhere may be hearing a lot less from creditors. The rule would amend the Fair Debt Collection Practices Act to limit debt collectors to seven phone calls to a debtor per week. Debt collectors would also be required to send a written notice containing information about a debt balance and how to dispute it.

How bankruptcy affects credit scores

Mississippi residents who are coping difficult financial situations are often reluctant to pursue debt relief because they are worried about what a bankruptcy will do to their credit ratings. While a Chapter 13 bankruptcy will appear on credit reports for seven years and a Chapter 7 bankruptcy will show up for 10 years, how they actually affect borrowing is more influenced by the actions taken after a bankruptcy has been discharged.

Bankruptcy reform proposals highlight student loan debt

Many Mississippi residents are struggling under piles of insurmountable debt. The sources of these debts may include everything from credit cards and auto loans to medical bills and student loans. While many of these debts can be discharged through personal bankruptcy, people struggling with significant student loan debt have faced particular difficulties. In the past, the bankruptcy code was amended on multiple occasions to make it harder for borrowers to find relief from their student loans. At the same time, the cost of university has gone up dramatically, leaving Americans with $1.5 trillion in student loan payments.

How to deal with debt collection tactics

Mississippi residents with mounting debts often get phone calls from debt collectors. Some of these threatening callers may not be following regulations on debt collection procedures. In fact, debt collectors are sometimes accused of harassing debtors. According to the Fair Debt Collection Practices Act (FDCPA), collectors have limitations as to what they are permitted to do when attempting to collect debts. The same regulations apply to credit card debts, missed payments on mortgages, vehicle loans and medical bills.

Consumer debt tops $13 trillion

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.

When to file for bankruptcy

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.

Second bankruptcy possible but waiting periods apply

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.

Income plays a role in determining credit card debt burden

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.

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