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

Credit card balances in Virginia surpass $31 billion

A recent survey reveals that revolving debt in Virginia grew by more than $1 billion during the second quarter of 2019 and has now reached a worrying $31 billion. The average Virginia household owes $10,480 to credit card companies, which is a figure that is only surpassed in Alaska and Hawaii. The personal finance website WalletHub based the survey on data provided by TransUnion and the U.S. Federal Reserve.

Many consumers turn to credit cards to cover unexpected expenses like car repairs or medical bills, but a growing number of Americans are becoming reliant on revolving debt to pay their day-to-day living expenses. This worries experts as credit cards tend to charge higher rates of interest and the balances can be extremely difficult to pay off. According to a report released by CreditCards.com, about 39 million Americans are carrying credit card balances that are two or more years old.

Illness and injury often contribute to bankruptcy

Many Virginia residents struggle to pay their bills each month. While this could be the result of financial irresponsibility, debt is often caused by unavoidable circumstances. For example, debt could be tied to an illness or injury within a household.

The reality is that many medical conditions are caused by issues outside an individual's control. Accidents can happen at work, in the home or while on the road. Similarly, illnesses can strike at any time. When this happens, a worker could suffer financially in at least two ways -- the cost of medical bills and having to take time off a job to either recover or to provide care to a family member.

Disabled veterans receive more protections in bankruptcy

Military veterans in Virginia may face a difficult time adjusting to their time after service, especially when it comes to financial issues. As a result, many veterans face escalating debt and may be forced to file for bankruptcy. Under a 2019 federal law, the Honoring American Veterans in Extreme Need Act -- the HAVEN Act -- disabled military veterans receive some additional protections during the bankruptcy process. This can be important in helping people decide to file and seek debt relief.

Before the law was passed, federal disability benefits from Veterans Affairs and the Department of Defense were included when calculating a person's disposable income. Chapter 7 bankruptcy filings are limited to people below a certain income threshold while filers for Chapter 13 bankruptcy must develop payment plans based on their income. Therefore, these disability payments were considered within the reach of creditors during bankruptcy proceedings for disabled veterans. The law received widespread bipartisan support in both chambers of Congress and was signed into effect on Aug. 23. It was also promoted by several veterans' advocacy organizations and had both Democratic and Republican co-sponsors in both houses.

How to time a bankruptcy filing

Debtors in Virginia and throughout the country who are struggling to keep up with their bills may be able to take advantage of Chapter 7 bankruptcy. However, there are limits to how many times an individual can file. In most cases, an individual will need to wait eight years after a Chapter 7 case is discharged before they can file another liquidation bankruptcy case. Those who file for Chapter 13 bankruptcy must wait six years before filing for a liquidation bankruptcy.

There may be an exception for individuals who have paid off at least 70% of their unsecured debts after filing for Chapter 13 protection. If a Chapter 7 case is discharged, an individual must wait four years from the date that the case was filed to purse a Chapter 13 proceeding. If a bankruptcy case is dismissed, a debtor may need to wait 180 days before trying to file for bankruptcy again.

Is your debt nearing the danger zone?

You have debt. This is not unusual. It seems that everyone carries a certain amount of debt, even if it is only a mortgage, car loan and student loan. However, you may find your paycheck does not stretch as far as it once did, and the number of envelopes or email reminders you receive from creditors may be starting to overwhelm you.

When you are right in the middle of the situation, it may be difficult to tell if you are losing control of your financial stability. Everyone goes through rough patches with their money, but if you are in trouble, you will want to seek help as soon as possible to avoid the very negative ramifications of being unable to pay your creditors what you owe. Can you recognize the signs that you are drowning in debt?

More elders forced into bankruptcy

Elderly people in Virginia and nationwide are finding it more difficult to make ends meet. As a result, an increasing number of people are filing for bankruptcy later in life. There are a number of factors that are contributing to the problem, including major financial and social shifts in society. In 1991, only 2% of the people who filed for bankruptcy were elderly; that number has now reached 12%. People over 65 are often seeking relief from a range of debts. However, there are still obligations that cannot be discharged in personal bankruptcy, including student loans, tax obligations or overdue child support.

While the student loan crisis may be more heavily associated with financial problems for younger Americans, it is also impacting elderly people. Elders may co-sign student loans with their children and grandchildren and wind up with nondischargeable debt. In most cases, elderly people filing for personal bankruptcy have low incomes. A full 78% of all bankruptcy filings by people over 65 involved those with incomes below the median. In addition to the student loan issue, other factors have also contributed to elder bankruptcy. Fewer people can rely on pension plans, and wages have stagnated over the years. It is more difficult for low-income people to save successfully for retirement.

What not to do when filing for bankruptcy

If you have unmanageable debt, bankruptcy can give you a chance to refocus your finances. By filing for bankruptcy, your debts are forgiven.

Now, a few cons. Although the purpose of bankruptcy is to alleviate some financial stress, the process costs money. Ironically, filing for bankruptcy can be expensive.

Taking on new debt during a Chapter 13 bankruptcy

Virginia consumers who are struggling with insurmountable debt may file for personal bankruptcy in order to find relief. Chapter 13 bankruptcy is available for people with higher incomes than the threshold required for a Chapter 7 liquidation bankruptcy. It has some advantages, such as lasting a shorter time on a credit report as well as allowing people to keep property while a payment plan is set up for their debts. However, an open Chapter 13 bankruptcy can persist for several years while the payment plan is in place. During this period, people can still take out new loans and get new credit.

However, in order to do so successfully, they must get a court order authorizing them to incur additional debt. If they take out loans or other types of debt during the bankruptcy without getting this authorization, they could have the bankruptcy process dismissed. In order to get an authorization to incur debt, people need to obtain information about the loan laying out the interest rate, maximum term, monthly payment, and other key points. This document must first be submitted to the bankruptcy trustee.

Types of bankruptcy and applying for a loan

People in Virginia who are struggling with debt might wonder whether they should file for bankruptcy and what type of bankruptcy they should file for. They might also wonder whether they would still be able to get a car loan after filing for bankruptcy.

There are two main types of bankruptcies for individuals: Chapter 7 and Chapter 13. To file for Chapter 7, the person must have an income below the median income for the state. If so, the person may be able to go through the Chapter 7 process, which takes around three to six months. This will eliminate most types of debt. A person who makes more than the median income may still be able to file for Chapter 13. This is a longer process, but it can allow the person to keep some assets. With a Chapter 13, a person has to be able to stick to the terms of a payment plan for three or five years.

Indirect methods of accruing credit card debt

Credit cards can be effective tools when Virginia residents are planning a vacation. This is because many cards offer cash back, airline miles or other perks that can be used to pay for a hotel or a rental car. However, using a credit card can also make a vacation more expensive than it needs to be. This can be especially true for those who want to take a trip now and pay for it later.

A program from American Express allows people to get an advance on airline miles that they plan to accrue in the next six months. However, cardholders have to pay a fee for every mile that they fail to accrue. The fee is applied to a person's balance at the same interest charged on other new purchases. Individuals who book flights through layaway sites may have to pay interest twice.


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

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