Virginia residents who are struggling to pay down debts and putting off filing for bankruptcy might be interested in the results of a report published in the Notre Dame Law Review. The report focuses on the pre-bankruptcy period, sometimes called the sweatbox. Researchers made use of data provided by the Consumer Bankruptcy Project, which gathered information from 3,200 bankruptcies filed between 2013 and 2016. The report takes information from 910 of the 3,200 bankruptcies and comes to some interesting findings.
Some Virginia consumers may find themselves overwhelmed by credit card debt. The efforts of credit card companies to collect on that debt usually begins with letters asking people to pay. However, once those debts go to a collection agency, the pressure may become overwhelming with calls and letters demanding payments. People might then begin to consider bankruptcy.
Overwhelming debt can affect anyone due to losing a job, accumulating credit card debt or running into unexpected medical expenses. Over 700,000 individuals in the United States filed for personal bankruptcy in 2017. Naturally, personal bankruptcy rates vary by state with Virginia falling well within the middle range.
Virginia residents who have filed for bankruptcy, might wonder if they will be able to reestablish a quality credit rating. A survey by Lending Tree found that its users who had filed for bankruptcy within the previous three years were offered mortgages at an average of just 19 bps higher than people without a bankruptcy on record. Furthermore, just two years after bankruptcy, most people had achieved a credit score of at least 640.
When people struggling with debt in Virginia consider their options for debt relief, bankruptcy is usually investigated. Unfortunately, many people who are considering taking this step may find it difficult to actually begin the process due to financial constraints.
There were 844,495 bankruptcy cases filed in 2015 in Virginia and throughout the country, and 97 percent of those cases were filed by individuals. Those individuals had a median income of $34,392 and median expenses of $30,972 when they filed. In the past, those who filed for bankruptcy may have been seen as people who were irresponsible with their money. However, the system exists to allow people to take risks in a capitalist society.
Virginia consumers who have ever filed for bankruptcy or are considering it might assume that it ruins their chances of ever having good credit again. But in actual fact, there is a time limit for bankruptcy to remain on a person's credit report, and when it is removed, rebuilding credit to the good score range is quite possible. Not all negative information remains on a credit report for the same amount of time. Late payments remain for seven years, as does Chapter 13 bankruptcy. But Chapter 7 bankruptcy remains for 10 years.
Imagine that after graduating from college, you find a job that makes you proud and allows you to live the life you've always wanted. As the months and years pass, you keep saving to make a big purchase, such as putting a down payment on a house. But suddenly, it all comes crashing down. You get into a car accident and have to pay thousands of dollars to deal with it. You suffer a medical emergency soon after, embroiling you in medical debt. And on top of it all, the credit card debt that you usually pay off on time is now too much for you to handle.