When someone has more debt than they can pay off, filing for bankruptcy may be the best answer. Unfortunately, many people may put off filing because they are afraid that they will lose all of their belongings or never be able to build back their credit. While there are some potential downsides to filing for bankruptcy, the reality is that there are also a lot of misconceptions about this debt relief option.
People in Virginia who are considering a bankruptcy will likely need to limit how much they set aside to fund retirement plans during the course of the bankruptcy. A judge in one bankruptcy court rejected a Chapter 13 payment proposal from a married couple because about 18 percent of the couple's income would be directed to a retirement account.
Virginians who file for bankruptcy in order to get their debts excused may not always be able to leverage consumer protection laws the way they may expect. In one case, the Ninth Circuit Court decided to dismiss a borrower's lawsuit against one of her foreclosure trustees over what she believed was a violation of her rights under the FDCPA, which stands for the Fair Debt Collection Practices Act.
Virginia residents and those living elsewhere around the country that have negative equity in their vehicles may qualify for loan cramdowns. However, this option is available only to individuals who file for Chapter 13 bankruptcies and meet other requirements. It should also be mentioned that filing for bankruptcy may impact an individual's finances for several years, so the decision to file should not be taken lightly.
Credit card debt held by cardholders in Virginia and throughout the country is on track to grow to an all-time high of more than $1 trillion by the end of this year. This is accompanied by a nearly all-time low in charge-off rates.
A new vehicle can quickly depreciate in value, and the owners may find themselves owing more on the balance than what the vehicle is worth. Virginia residents who still owe money on a loan for a vehicle that has been repossessed or voluntarily surrendered may be able to have the balance discharged in bankruptcy.
Much has been written about the financial challenges faced by members of the millennial generation in Virginia and around the country. The media often focuses on student loan debt when covering this issue, and studies have found that even millennials earning $75,000 per year or more sometimes fear that they will not be able to pay off their tuition bills. Research reveals that two out of three millennials have at least one source of long-term debt, and many of them make basic financial mistakes that can make escaping debt far more difficult.
Many people in Virginia have unpaid medical bills that have gone into collections. According to a recent study by the Consumer Financial Protection Bureau, more collection calls are made for unpaid medical bills than for any other type of debt. After medical debt, the other most common reasons for collection calls are overdue telecommunications bills and utility payments.
The bankruptcy laws are designed to give consumers in Virginia and across the country the opportunity for a fresh start. During a Chapter 13 bankruptcy, outstanding bills are consolidated and debtors make payments over three to five years. However, debt collection agencies sometimes submit claims that do not qualify for payment because the debts concerned are time-barred under the applicable stature of limitations, and this practice has been widely criticized by federal agencies, legal organizations and consumer advocacy groups.
Debt collection around the country has grown into a $13.7 billion per year industry, but a report from the Consumer Financial Protection Bureau reveals that many of the nation's debt collectors routinely ignore regulations that have been put in place to protect consumers in Virginia and elsewhere from harassment and abuse. The findings contained in the CFPB report, which was released on Jan. 12, are based on more than 2,000 surveys returned to the agency by American consumers.