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Michael D. Hart, P.C.
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Roanoke Virginia Bankruptcy Law Blog

Why debtors choose to seek bankruptcy protection

Virginia residents who are experiencing financial difficulties may use bankruptcy as a way to get control over their debts. Prior to bankruptcy, courts require the filer to take a credit counseling course. Furthermore, it's necessary to take continuing education courses after filing.

There are three common forms of bankruptcy, and a debtor will choose a type based on the circumstances of their case. Chapter 7 bankruptcy involves liquidating eligible assets and using the money to pay off creditors. Chapter 13 allows debtors to reorganize their debt and repay it over the course of three or five years. Chapter 11 bankruptcy is generally used by businesses to reorganize their debt, but it can also be used by those who have too much debt to qualify for Chapter 13 protection. During a Chapter 11 or 13 case, a debtor will generally need to ask permission from the trustee to take on new debt.

What to know about credit card balance forgiveness

When a Virginia debtor has a credit card balance forgiven, they aren't always totally in the clear. In some cases, only a portion of the balance is forgiven. Furthermore, it is possible that the forgiven debt could be treated as income by the IRS. This would make it necessary to pay taxes on that amount. How flexible a creditor is about repaying a credit card balance depends on who holds the debt.

If a credit card company holds the debt, one could work out a new payment plan. It may also be possible to pay no interest for a period of several months as opposed to getting a balance reduced or forgiven entirely. As a general rule, contacting the credit card company sooner rather than later may limit the damage done to a credit score.

How Virginia residents can gain control over medical debt

A study published in Health Affairs analyzed the 2016 credit reports of 4 million people. It found that over half of medical debts that went into collections each year were for less than $600. The study also found that those in their 20s have a greater chance of struggling with medical debt compared to those in their 60s. The average medical debt went down by 40 percent between the ages of 27 and 64.

This is possibly because younger people are less likely to have insurance or any meaningful savings. Those who are in their 60s may also qualify for health insurance through Medicare. However, it didn't account for those who may have paid their bills with credit cards. Individuals who are having trouble paying their medical bills are encouraged to talk with their creditor before the bill goes to collections.

Survey looks at reasons for missed credit card payments

Some people in Virginia may be among the growing number of Americans who are delinquent on their credit cards. The delinquency rate has risen from 2.42 percent at the start of 2017 to 2.47 percent. Delinquency means the credit card payment is at least 30 days past due.

NerdWallet, a personal finance service, surveyed more than 2,000 people and found that around two-thirds did not have the funds to pay their credit card bills while about one-third said they forgot. Given the opportunity to select more than one reason, 29 percent of people said they did not pay because of a lack of income or unemployment while one-quarter said they made paying off other kinds of debt a priority. Studies have shown that people tend to pay mortgage or rent, student loans and car payments before they pay their credit cards.

Can filing for bankruptcy hurt my career?

Filing for bankruptcy can bring induce any number of unforeseen worries for individuals struggling to handle their debt. However, a bankruptcy filing is not a detrimental move for your financial or professional future.

For an individual in Virginia who already holds a job in either public or private industry, employers cannot terminate an employee solely based on a bankruptcy filing. Federal law protects employees from termination and other forms of discrimination based on a bankruptcy filing.

Generation Z already in debt

According to a survey of 2,000 people by banking and brokerage firm Charles Schwab, members of Generation Z, the generation after millennials, are already carrying debt. Young adults born between 1998 and 2002 have an average debt load of $4,343. Millennials born between 1993 and 1997 have $11,663 in average debt when credit card debt and student loans are included. Virginia residents who are in debt or considering taking on new debt should be aware of the different types of credit and debt.

Almost half of the young adults surveyed had less than $250 in savings. One in five called home mortgages bad debt and 27 percent labeled credit card and other revolving debt good debt. Nearly 40 percent of those surveyed thought student loans were bad debt. According to those who work in the financial fields, though, student loans and mortgages are good debt. These debts are usually low cost and come with tax advantages for the borrower. Credit card debt, meanwhile, is typically viewed as bad debt because of its much higher interest rates.

More older Americans are filing for bankruptcy

Wealth inequality is blamed for many of the social ills in Virginia and around the country, and a report from the Consumer Bankruptcy Project suggests that it may also be behind a recent surge in bankruptcy filings among older Americans. Bankruptcy petitions filed by individuals 75 years of age or older have more than tripled since 1991, and filings made by people between the ages of 65 and 74 more than doubled during the same period according to the report.

Most experts expect this trend to continue in the years and decades ahead as the number of Americans over the age of 65 is predicted to climb to 88 million by 2050. Another recent study makes for equally grim reading. According to researchers from the Urban Institute, American retirees in the bottom income bracket can expect to see their lifetime earnings to fall by 13 percent by 2085. The CBP study was published online by the Social Science Research Network on Aug. 5.

Consumer debt in the United States continues to climb

Consumer debt around the country reached an all-time high of $13.2 trillion in the first quarter of 2018, which prompted many financial experts to conclude that consumers in Virginia and throughout the U.S. have not taken the lessons learned during the financial crisis and ensuing recession to heart. These fears are bolstered by a personal savings rate, which measures savings as a percentage of disposable income that has fallen to its lowest level in more than a decade. Household debt levels in the United States fell significantly between 2008 and 2013, and Americans saved more than 10 percent of their earnings as recently as the 1970s and 1980s.

The rise in consumer debt has been made possible by years of historically low interest rates, but that era appears to be drawing to a close. The Federal Reserve has raised rates twice in 2018 and another two hikes are expected before the year ends, and studies suggest that increased borrowing costs are a burden that many Americans are unprepared for. According to research conducted by the Federal Reserve in 2017, 35 percent of Americans would be rendered financially insolvent by an unexpected $400 emergency.

What happens at a section 341 meeting of creditors?

If you have filed a chapter 7 or chapter 13 bankruptcy, you may feel anxiety upon hearing that you will need to attend the section 341 meeting of creditors. It is called a section 341 meeting because that is the section of the Bankruptcy Code that requires it take place. Provided you have disclosed all of your property, income and debts, there is no need to be nervous. However, knowing what to expect may help you feel more comfortable.

What debtors should know about Chapter 13 bankruptcy

Virginia residents and others who file for Chapter 13 bankruptcy may repay their debts over three or five years. The length of time during which they must make payments depends on their income relative to the median in the state where the case is filed. To file for Chapter 13 protection, an individual must show proof that he or she has filed tax returns in the past four years.

A debtor must also present a copy of his or her most recent tax return and a credit counseling certificate of completion. Finally, a debtor must propose a repayment plan. Payments under that plan are made within 30 days that a person files for bankruptcy. Those payments will be held by the court until the plan itself has been confirmed or denied. Debtors will also need to pay a bankruptcy filing fee within 180 days of seeking protection from creditors.


Michael D. Hart, P.C.
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Roanoke, VA 24011

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