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.
Anyone in Virginia who has to deal with an unexpected illness may have issues with medical debt at some point. However, financial burdens related to cancer can be even greater, especially for younger survivors. Research presented in a peer-reviewed journal further notes that privately insured cancer survivors with high-deductible plans but no health savings accounts were even more likely to face financial hardship related to medical expenses.
Bankruptcy cases in Virginia and across the country are on the decline, but the reasons why may be more complex than they first appear. According to a report by Supreme Court Chief Justice John Roberts, bankruptcy filings have reached their lowest point in 10 years. While nearly 1.6 million filings were made in 2010, amid the widespread financial crisis, that number was halved by 2018. During the year, approximately 770,000 cases were filed in bankruptcy court, reflecting both corporate and consumer plans. The vast majority were filed by consumers, comprising 97 percent of the total.
An increasing number of older Americans are filing for bankruptcy in Virginia and across the country, even as bankruptcies overall appear to be on the decline. While 1.6 million people filed for personal bankruptcy in 2010, that number had reached only 789,000 by 2017, illustrating the changing state of the national economy. Still, the overall numbers may not clearly show some of the demographic differences that exist in bankruptcy trends. By 2016, 12 percent of all bankruptcy filings were made by people over 65, a proportion that rested at only 2 percent in 1991. The bankruptcy rate declined for people under 55, but shot up for those above that age.
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.
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.
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.
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.
Debt is on the rise throughout Virginia and the rest of the U.S. In fact, American consumers owe a total of nearly $14 trillion in debt. While these debts are increasing, credit card defaults are actually dropping.