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Richmond Virginia Family Law Blog

Unique custody arrangement keeps children in place after divorce

The divorce process can be quite difficult for the spouses as well as any children involved. That's why many divorcing parents in Virginia are committed to finding ways to help soften the blow of their split. For some, this means finding creative ways to address custody arrangements.

Bird nesting is a form of shared child custody in which the children remain in the family house on an ongoing basis after the divorce. Meanwhile, each parent moves in and out of the home for their shared custody time. The purpose of bird nesting is to enhance the child's feeling of emotional security and minimize disruptions at a time when many changes are taking place to the family's life. The parents may share an apartment between them for their off weeks or arrange their own housing during that time.

Tax debt and bankruptcy

Bankruptcy might seem like the right solution for some people in Virginia who are struggling with debt. People might file for Chapter 7 or Chapter 13 bankruptcy. A Chapter 7 bankruptcy discharges all allowable debts. A Chapter 13 allows a person to work out a payment plan in which some debts may be paid off. However, there are some types of debt that cannot be discharged, and tax liabilities may be among them.

A tax debt that can be discharged must fulfill certain conditions. It must be in association with a tax return either due a minimum of three years or filed a minimum of two years before the bankruptcy filing. It must also have been assessed a minimum of 240 days prior to the bankruptcy filing.

Medical debt could be on the rise

Many people in Virginia are struggling with overwhelming debt that seems to be insurmountable. For far too many people, medical debt can be a major reason for their inability to pay their bills and escape financial crisis. Reports show that health care costs for Americans are continuing to increase in 2018 and patients are assuming a larger portion of the cost of their medical care. According to some estimates, 20 percent to a half of the U.S. population are dealing with medical debt. Due to the large costs associated with health care, the amount of this debt can be crushing in many cases.

The Centers for Disease Control (CDC) noted that people under 65 who were unable to pay their medical bills experienced a five percent decrease in medical debt between 2011 and 2016. However, another study conducted that year found that 20 percent of Americans with insurance were struggling with medical debt and over half of uninsured Americans were dealing with difficulties caused by medical debt.

Experian's 2017 debt report

People in Virginia who have credit card balances or other debts can find out how their debt compares to the state average and the averages across American by taking a look at Experian's State of Credit report for 2017. The report discloses the average debt in every state and the country as a whole. It also breaks the information down into categories, like credit card debt and mortgages and student loans, and includes several other facts and figures.

The big news from the report is that Americans accumulated an all-time high amount of debt in 2017 at just over $1 trillion. Credit card debt increased over the course of the year with an average balance of $6,354. The median mortgage debt was $201,811, and the average student loan debt was $34,144, which set a record for that category.

How Virginians can rebuild credit after a bankruptcy

More than 700,000 Americans filed for bankruptcy in 2017. While the debt-forgiveness process does make it harder to get credit in the short-term, there are ways to get a higher credit score long before the filing drops from a credit report. According to a survey from LendingTree, those who filed for a mortgage three years after a bankruptcy only paid 19 basis points more than people with no bankruptcy.

Those who have filed for bankruptcy can help themselves by applying for a secured credit card. This type of loan is secured with an initial deposit that will play a role in determining a cardholder's credit limit. In some cases, the credit line will be more than the deposit, but this isn't always true for those who have just come out of bankruptcy. By making small payments in a timely manner, it shows that a person is responsible using credit.

Child support enforcement efforts streamlined

Child support enforcement can be a major concern for many families in Virginia struggling to cover everyday expenses while a delinquent parent refuses to pay court-ordered child support. Because the failure to pay support can lead to a difficult life for many children, enforcement has become a major priority for federal and state agencies. One of the most frequently used mechanisms for enforcing the payment of overdue child support is through wage garnishment or payroll deductions processed at the delinquent parent's workplace.

Child support, like other family law matters, are handled by state agencies at a local level. However, the federal Office of Child Support Enforcement (OCSE) strives to coordinate and improve these efforts for a higher success rate in enforcement cases. The efforts have been highly successful. In fiscal year 2016, $33 billion in child support payments were collected through the system, and 75 percent of these payments were brought in through payroll withholding. In order to further enhance the process, the OCSE is working with employers, state agencies and payroll companies to make a more effective system.

Leaning more about credit scores and bankruptcy

Far too many people in Virginia struggle with the devastating impact of overwhelming debt that seems impossible to repay. The accumulation of late fees, interest charges and other costs can leave individuals searching for a solution to their financial crises. While bankruptcy can offer hope for the future and an ability to escape from these unpayable debts, many people refrain from filing out of fear of what bankruptcy could mean for their future financial lives and health.

The impact of a bankruptcy on a person's credit report is substantial. It can cause a credit score to lower by 200 points or even more. However, this impact is not permanent, and a clear end date is in sight. While it is commonly believed that all bankruptcy information remains on a credit report for at least 10 years, in reality, only a Chapter 7 bankruptcy remains on a report for that period. All other bankruptcy information, including a filing for Chapter 13 bankruptcy or the details of accounts discharged remain on a credit report for seven years only.

Credit card debt on the increase nationwide

People in Virginia who are carrying a lot of credit card debt are not alone. According to a report by WalletHub, in 2017, credit card debt increased throughout the country by $92.2 billion. A Federal Reserve estimate says the total owed in credit card debt is over $1 trillion.

The final quarter of 2017 was when the majority of the year's debt was added, a $67.6 billion surge that was the highest accumulation in three decades. From 2015 to 2016, credit card debt more than doubled from $43 billion to $87 billion. It is unclear whether this increase is because there are consumers with unpaid balances that companies cannot collect on or low charge-off rates. Charge-off rates surged during the 2007 recession, and banks loaned money more conservatively. The more recent trend is banks extending credit to consumers with lower credit ratings. While delinquency rates have gone up slightly to 7.5 percent from 7 percent, this is still half what it was during the financial crisis.

Dividing a 401k in retirement

Virginia residents and anyone else looking to divide a 401(k) in a divorce may need to tread carefully when doing so. Ideally, the account will be split with the assistance of someone who has knowledge of the qualified domestic relations order (QDRO). The order will need to be written carefully to ensure that it adheres to language included in the divorce decree itself. Funds are generally sent from one person's 401(k) into a 401(k) in the other spouse's name.

This is generally done through a trustee-to-trustee transfer as this avoids triggering a taxable event. In some cases, funds will be put into a rollover IRA or given directly to the recipient. If a person receives funds directly, he or she will need to pay income taxes while avoiding the 10 percent early withdrawal penalty. This penalty does not apply if an individual is 59½ years or older.

Fed chair questions inability to discharge student loan debt

Student loan debt can be some of the most difficult debt for people in Virginia to deal with; while the numbers can be large, this type of debt is also unique in that it is ineligible for discharge in bankruptcy unlike other loans and debts. However, the chair of the Federal Reserve Board, Jerome Powell, questioned the necessity of this policy during testimony before the Senate Banking Committee in March 2018. Powell said that student loan debt stands alone in its inability to be discharged in bankruptcy and that he had no clear answer as to why this is the case.

One senator asked Powell about whether Americans' high rates of student loan debt are dragging down the country's economy. There is approximately $1.4 million in outstanding student loan debt distributed among over 40 million Americans. Various laws have been passed through the years that prohibited borrowers from discharging their student loan debt when filing for bankruptcy; now, the Department of Education is seeking input on the treatment of student loans in bankruptcy.

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Bowen Ten Cardani, PC

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