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Roanoke Virginia Bankruptcy Law Blog

Credit card debt on the rise

People in Louisiana and across the country are facing increasingly high levels of household debt. In the second quarter of 2018, household debt increased for the 16th consecutive reporting period, reaching close to $14 trillion in collective debt. While $9.43 trillion is classified as housing debt, usually in the form of home mortgages, consumer debt is also on the rise. Credit card debt is increasing, but statistics indicate that default rates are still on the decline.

However, this may not fully indicate the effect that credit card debt is having on American families. Credit card debt alone grew by $14 billion in the second quarter of the year, and interest rates are also on the rise. The average annual percentage rate has risen to 17 percent, much higher than the interest rates for home mortgages, student loans and some other types of debt. When people miss payments, that APR could rise rapidly; penalty rates could reach nearly 30 percent after late or missing payments. Once fees and penalty rates begin to rack up, credit card debt can become increasingly insurmountable.

Buying a car after a bankruptcy

Filing for bankruptcy may have many consequences for those who file in Virginia or any other state. Anyone who files may see their credit score go down, and individuals who file for Chapter 13 protection generally have to make payments to creditors over three or five years. One other consequence of bankruptcy is that it can be harder to purchase a vehicle. This can be true whether a person is filing for Chapter 7 or Chapter 13 protection.

In some cases, a debtor may choose to convert a Chapter 13 bankruptcy into a Chapter 7 case. If an individual qualifies, it may make it possible to have debts discharged and the case resolved with six months. Once the Chapter 7 case has been completed, an individual is free to attempt to purchase a vehicle. However, it may be necessary to do so through a subprime dealer because of the impact bankruptcy has an individual's credit score.

Tips for paying off debt

Women in Virginia might carry more student loan, credit card and other types of debt than men. According to Comet Financial, women have over $6,000 more in student loan debt, over $1,000 more in credit card debt and over $1,500 more in auto loan debt. This may in part be due to the wage gap between men and women.

Both men and women should take steps to reduce their debt. They can start by making a budget. There may be unnecessary expenditures that can be cut out, and the money can be used to reduce the debt. Financial experts often recommend that people start with the debt that has the highest interest rate.

Life after bankruptcy: repairing your credit

Filing for bankruptcy can feel intimidating. You might think that your life will never completely recover, but this is not true. While your financials are affected for a period of time, this does not mean it will last forever.

People may be particularly concerned about their credit score. It is true, your credit takes a hit after filing bankruptcy, but it will not ruin your life. How can you fix your credit and your life after filing bankruptcy? Here is what you need to know:

Credit card debt can mount unexpectedly

Many people in Virginia are struggling to make ends meet, and they may find themselves stretching their credit card balances in order to do so. Credit card debt is growing across the United States, and the reasons can vary from financial emergencies to appealing offers from credit card companies. According to the Federal Reserve, revolving consumer debt, including credit card debt, increased across the country by 1.5 percent in July 2018. According to the national bank, American consumers' revolving debt totals $1.037 trillion.

There are several ways that people can find themselves facing greater credit card debt than they anticipated. Many cards offer rewards programs, especially those that feature travel. These rewards programs may allow people to buy travel now with the promise of making up the payments later by accumulating miles on the card. Of course, if the cardholder does not buy enough to accumulate the miles naturally, he or she will need to purchase miles directly from the airline. This cost can push the price of the trip into unaffordable territory that is difficult to pay off in full.

What to know about medical debt and credit scores

Medical bills could have a major impact on the credit score of a Virginia resident. However, anyone who receives a medical bill may have a variety of protections aimed to limit that impact. For instance, major credit bureaus Equifax, TransUnion and Experian must wait 180 days before putting information about a medical bill on a credit report. In many cases, a medical debt may be removed from a credit report if an insurance company ultimately pays the balance.

Those who do have to pay off a balance are urged to contact the creditor directly. It may be possible to start a payment plan with a low interest rate. In some cases, the debt can be paid in installments without being charged interest on the outstanding balance. Debtors are also encouraged to contact groups such as the Patient Advocate Foundation for assistance. Furthermore, patients should check their credit reports for inaccurate information, and they can contact the credit bureaus to get inaccurate entries removed.

Good reasons to use credit cards

Virginia consumers may believe that credit cards are nothing more than an easy way to get into too much debt. However, they can also be an effective way to cut down on travel expenses or offer other perks. Rewards cards are usually available to those with a credit score of 690 or higher, and credit scores generally increase as balances decline.

Therefore, access to a rewards credit card may be an incentive for individuals for who want extra motivation to cut down on debt. The perks themselves may provide incentive to continue using a credit card after paying down existing debt balances. Doing so is important because closing a credit account could negatively impact a person's credit score. This is because credit scores are calculated in part based on a how long a person has had experience with credit cards.

Facts about settling credit card debt

Virginia residents who owe credit card debt are expected to repay it in full. They may also be liable for interest charges and other fees that a lender may charge. While a credit card debt settlement may be one way to obtain relief, it isn't necessarily a debtor's best option. Those who choose to work with a debt settlement company could be charged a fee that is equal to a percentage of the amount forgiven.

Settling a debt could have negative consequences for a person's credit score even if an individual pays the entire amount. This is because a creditor will likely tell the credit agencies that a debt was paid for less than the full amount. If a settlement is reported to a credit agency, it will remain on a person's credit history for up to seven years.

Can you lose your home when filing for Chapter 13 bankruptcy?

It is natural to think you could lose your home if you decide to file for bankruptcy. Even if you are not in foreclosure for missing payments, there can be still be worry that the bankruptcy process may cost you your home. 

Filing for Chapter 13 bankruptcy will not cause you to lose property, including your home, to the bankruptcy trustee. Though you will not lose your home during Chapter 13 bankruptcy, if you do not continue to stay current on your mortgage payments, you will go into foreclosure.

Millennials are struggling with credit card debt

According to the Federal Reserve, the total amount of student loan debt now exceeds $1.5 trillion in America. It accounts for 11 percent of collective household debt (this is second behind only mortgage debt). However, student loans are not the biggest creditor for millennials throughout Virginia and the rest of the U.S. Rather, credit card debt exceeds student debt for this group, according to the Northwestern Mutual 2018 Planning and Progress Study. Credit card balances currently makes up a quarter of the total debt burden of older millennials, aged 25 to 34.

The study makes reference to a continuing cycle of buying and borrowing through which consumers accumulate credit card debt faster and faster. Repayment of debts is a low priority, generally. Once they have their basic needs covered, Americans spend almost the same amount on discretionary costs as they put toward debt service.

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