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Michael D. Hart, P.C.
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December 2018 Archives

Understanding Chapter 13 bankruptcy options

People in Virginia who are facing insurmountable debt may look for relief from their situation by filing for personal bankruptcy. There are two major bankruptcy options for individuals: Chapter 7, or liquidation, and Chapter 13, or repayment. When a person files for Chapter 7 bankruptcy, a trustee is appointed by the court to liquidate the person's assets, using the proceeds to pay off some debts. After that liquidation, the person's remaining debts are discharged. It should be noted that, in general, neither type of personal bankruptcy is typically able to discharge student loan debt although it can address medical bills, credit card debt, loans and other types of personal debt.

The root causes of credit card debt

As a whole, U.S. consumers have accumulated nearly $1 trillion in outstanding credit card debt. One of the reasons why credit cards can be so appealing is that they allow individuals access to capital beyond what they earn. However, doing so can cause a person to go into debt. Ideally, a Virginia resident will use credit cards for occasional purchases until the next payday.

Credit card debt mounting across the country

For people in Virginia and across the United States, credit card debt can be a severe and escalating problem. Virginia is one of the five states whose residents owe the most on their credit cards. While Virginians tend to have higher median incomes, allowing them to pay back their bills, circumstances can change rapidly in case of a job loss, divorce or disability. The lower a person's income, the more he or she may struggle to repay their growing debt. Those difficulties can cause the debt to grow even more as interest charges, late fees and other costs stack up on top of one another.

Consumer debt to hit $4 trillion

According to statistics posted by Yahoo! Finance, consumer debt has increased since 2013 by more than $1 trillion. Total consumer debt in Virginia and across the U.S. is expected to reach $4 trillion before the end of 2018. The total debt numbers break down into $1.04 trillion in credit card or revolving debt and non-revolving debt of $2.9 trillion. Non-revolving debt includes debt tied to auto loans and student loans. Mortgage debt is not included in consumer debt figures.

Filing Chapter 7 bankruptcy for a second time

Those who are struggling to repay their debts may want to file for bankruptcy protection. However, there are certain criteria that must be met to do so. For instance, those who have filed for Chapter 7 bankruptcy protection in the past must wait eight years to file another such case. To convert a Chapter 7 case to a Chapter 13 case, four years must have passed from the date in which the Chapter 7 case was filed.

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