Lots of Virginia residents find themselves facing insurmountable debt. In many cases, that debt arises due to medical bills. Even insured patients can rack up thousands of dollars in medical bills if they need pricey specialized treatment, expensive prescription drugs or out-of-network specialists. In fact, medical bills are the leading contributor to personal bankruptcy filings in the U.S. There are a few steps that people can take to help avoid medical debt or find relief if they are already struggling.
Virginia residents who are burdened by overwhelming debt may seek relief by filing for bankruptcy, but student loans are generally not dischargeable under a Chapter 7 or Chapter 13 petition. However, that may soon change as a bill was introduced on May 9 that would eliminate the part of the bankruptcy code that makes federal and private student loan debt nondischargeable. The bicameral bill has bipartisan support.
Some consumers in Virginia may be struggling more with credit card debt than they were in the past. Bloomberg Intelligence reports that in the first quarter of 2019, the charge-off rate increased to 3.82%. These are loans that credit card companies do not expect to ever collect. This is the highest charge-off rate seen since 2012.
The impact of a bankruptcy on a person's credit score depends on a number of different factors. There are cases where a Virginia resident who is struggling to pay debts actually sees an improvement in his or her credit score after filing for bankruptcy. Credit scores are calculated by looking at credit history and other data points. When the discharge process is completed, the lower amount of outstanding debt reported may result in an increased credit score. After that, the filers will need to take steps to begin the process of rebuilding credit.
March and April are prime months for bankruptcy as people commonly use their tax refunds to pay for the opportunity to do so. Virginia residents may be required to wait until they receive their tax refunds because it is the only way that they can afford to file at all. A debtor can expect to pay about $1,000 for attorney fees in addition to other costs. Typically, the attorney fee must be paid upfront.
Calls from debt collectors may be one of the more stressful elements for Virginia consumers who are overwhelmed by their obligations. However, debt collectors are required to abide by certain laws regarding when they contact people and who they are able to contact.
Virginia residents may be interested in knowing that although there is no income limit set in order to file for Chapter 13 bankruptcy, there is a limit to the amount of debt one can have. For a person to be able to file for Chapter 13 bankruptcy, their debt must be less than $394,725 in unsecured debt. It cannot be more than $1,184,200 in secured debt.
Young adults in Virginia and across the U.S. are in more debt than they've been in since 2007. In fact, Americans between the ages of 18 and 29 owe a whopping $1.05 trillion, according to a new report from the New York Fed Consumer Panel and Equifax.
The subprime mortgage crisis is still fresh in the memory of many Virginia residents. Thankfully, the nation has recovered from the various factors that aligned to create that situation. However, it is not unusual for families to be living paycheck to paycheck and one unexpected downturn away from financial disaster. Too often, homeowners simply give up and do nothing, but there may be options available even in the most dire of circumstances.
Virginia residents who are planning on filing for bankruptcy have different methods available. For those with a steady income, a Chapter 7 case involves liquidating assets and using the money to repay creditors. A Chapter 13 case involves reorganizing current debts and repaying them over the course of several years. At the end of the repayment period, the remaining debt could be discharged. Generally speaking, only those who meet the income threshold in the state can file for Chapter 7 bankruptcy.