Virginia Debt Relief: Your Guide to State Laws and Managing Debt

Virginia has some of the highest debt levels in the country, especially when it comes to mortgage and credit card debt, for which it ranks No. 6 out of the 50 states, according to our analysis of Federal Reserve data. If you’re struggling with finding Virginia debt relief, this is your guide to everything from payday loan laws in Virginia to understanding the statute of limitations. With this guide, you can learn how you can address your debt and find a path toward financial stability.

• Debt in Virginia: At a glance
• Debt collection in Virginia
• Virginia debt relief programs
• Payday lending laws in Virginia
• Tips to tackle debt in Virginia
• Filing for bankruptcy in Virginia

Debt in Virginia: At a glance

Here’s how debt in Virginia stacks up against debt across the rest of the country, and how it has changed over time.

Debt collection in Virginia

Debt collection laws vary by state, so it’s important to understand exactly how debt collection in Virginia works before attempting to tackle your debt. By understanding what the laws on debt in Virginia are, you’ll be able to make sound money decisions to help improve your financial health.

The Federal Fair Debt Collection Practices Act (FDCPA) is designed to protect consumers from creditors who use invasive techniques for collecting debt, although it does not prevent a creditor from pursuing legal action against a debtor.

Further protecting consumers, the Virginia Code has a criminal statute prohibiting anyone from falsely simulating legal documents such as a warrant or lien in an effort to collect a debt.

When it comes to debts owed to the state, such as fines or fees, there is a separate section of the Code of Virginia known as the Virginia Debt Collection Act, that outlines how the state must proceed. The state has been given authority through the Code of Virginia to aggressively collect on outstanding amounts.

Responding to collection letters

If you receive a collection letter about a debt in the state of Virginia, your first step should be to ensure the collection letter is legitimate. Creditors can send you information about debts owed, but they can’t attempt to simulate legal documents. If you receive anything that looks like a legal document, make sure it actually is — otherwise the creditor could be in legal trouble for deceptive practices.

If you believe a creditor’s practices violate the FDCPA you can file a complaint through the Federal Trade Commission and the Consumer Financial Protection Bureau (CFPB).

Follow up with a debt verification letter if you have additional questions about your debt. The CFPB has drafted several debt verification letter templates you can write depending on your situation.

Understanding Virginia’s statute of limitations

Every state has a different statute of limitations that dictates how long creditors have to collect debt. If you’re pursuing debt relief in Virginia, checking to make sure you debt is still valid under the state’s statute of limitations is one of the first steps you should take. If the statute of limitations has already passed on your debt, creditors are then unable to pursue legal action against you if they have not already obtained a judgment against you.

Even though creditors can still pursue debt collection, if your debt is outside of the statute of limitations their options are somewhat limited. They won’t be able to garnish your wages or win a judgment against you in court.

In Virginia, there is a distinction between written contracts and oral ones. A collector must show that you’ve signed a complete agreement that shows the interest rate and term of the loan. If they can’t produce this, the debt falls under the oral category, for which the statute of limitations is three years. If they can, then it falls under a written contract for which the following statute of limitations apply:

If you suspect that your debt is outside of the statute of limitations in Virginia, contact a financial professional in your area who can verify this and advise you what steps to take next. And be careful in responding to collection attempts for time-barred debts. If you promise to make a payment or make even a small payment, it could restart the clock on the statute of limitations.

Virginia debt relief programs

If you’re struggling with managing your debt it might be time to start looking into Virginia debt relief programs. There are organizations that will help you manage your debt and make progress toward financial health.

You can find credit counselling services offered throughout the state at credit unions and through nonprofit agencies. Make sure whatever credit counseling programs you use are accredited by either the National Foundation for Credit Counseling or Financial Counseling Association of America. In Virginia, if someone is giving you paid advice about debt management the must either be licensed by the Virginia State Bar or by the State Corporate Commission.

If you have legal questions about Virginia debt relief programs you can use the resources available through VALegalAid.org.

Payday lending laws in Virginia

Payday loans are small-dollar, short-term loans that are due on your next payday. A payday lender uses your paycheck as collateral against the loan. When the loan is due, if you are not able to pay, the lender can take the funds directly from your next paycheck as part of their agreement with you.

You can usually get approved for a payday loan if you have bad credit or no credit, which makes them attractive to some borrowers, but it’s very easy to get caught in a destructive cycle of debt when you have a payday loan. Even though you might think you’ll have enough money to repay the loan on your next payday, additional expenses invariably come up that could leave you short. You can’t extend payday loans, so one option that many people pursue is getting a new payday loan — with a new set of fees — to pay off the old one. This strategy can keep people stuck in debt.

Additionally, most payday lenders do not report positive payments to the credit reporting agencies, making it difficult to build your credit so you have access to better financial products.

Each state has passed individual payday lending laws that restrict how payday lenders can operate.

Here are the rules for payday lenders in Virginia:

• Maximum loan amount: $500
• Maximum loan term: Loan term must be at least twice the length of the borrower’s pay cycle
• Finance charges: APR can’t exceed 36%; loan fees can’t exceed 20%; and the verification fee cannot exceed $5

In addition to those laws, in Virginia, the law states that you cannot receive a payday loan if:

• You have a current payday loan
• You resolved a payday loan on the same day you are applying for a new one
• You paid an extended term loan in the last 90 days
• You received an extended term loan in the last 150 days
• In the past 90 days you paid a payday loan with an extended payment plan
• In the past 45 days you paid a fifth payday loan that you received within the last 180 days

Since payday loans can be such a slippery slope, try to find other alternatives do working through any financial issues.

Tips to tackle debt in Virginia

Tackling your debt is crucial to resolving financial troubles and getting back on track with your money. Don’t ignore lingering debts, even if they seem overwhelming. Finding a debt repayment strategy that works for you and sticking to it is the best way to slowly but surely climb out of debt. Here are some strategies that you could use to help resolve your debt

Consolidate your debt

If you have multiple loans, one option might be to pursue debt consolidation. How does it work? Debt consolidation in Virginia entails getting one large loan that you can use to pay off all your smaller loans. After you consolidate your payments you’ll only have one loan payment to keep track of each month.

Pros:

• Simplify payments into one
• Your new loan could have a lower monthly payment or interest rate
• Because they have a fixed repayment term, you’ll know exactly where the finish line is

Cons:

• You aren’t reducing your debt; you’re just simplifying it
• If your new monthly payments are too high, you might still struggle to keep up
• Dragging out the payment term on your loans could add additional interest costs over the life of the loan

Refinance

Another alternative to help manage your debt is refinancing. When you refinance a loan, you’re looking to get a new loan with a better interest rate that will be less expensive over the lifetime of the loan. You’ll use this to pay off your original debt and then focus on repaying your new loan.

If your credit has improved since you first got a mortgage, student loan or auto loan, you could be able to save money overall by refinancing. Keep in mind that for student loans, though, it may not be the wisest move if you have federal loans, as you’ll forfeit the option to participate in forgiveness or repayment programs.

Pros:

• If you can qualify for a lower APR, you can potentially lower the cost of your loan over its lifetime and pay off your loan faster
• Refinancing to a longer term can lower your monthly payment, giving you additional cash flow

Cons:

• Lenders might have additional fees associated with refinancing
• You might not get approved for a new loan at a lower interest rate
• Refinancing to a longer term loan can decrease your monthly payment but add additional interest charges over time

Use a balance transfer card

Using a balance transfer credit card entails moving the balance of one, high interest credit card onto another card with a lower interest rate, or even a 0% APR for a promotional period (usually 12 to 21 months). If you qualify for a better interest rate on a new card, this could help you save money in interest payments. Remember, once you transfer the balance of a credit card, you’ll suddenly have the full balance of your original credit card available to you. Make sure you don’t use this, otherwise you’ll get into deeper debt than you began with. Additionally, this might not be the wisest road to take if you’re not able to pay off the balance before the promotional period ends and a new, much higher interest rate hits.

Pros:

• You could get a new card with better terms
• Consolidating your credit card debt leaves you with fewer bills to keep track of

Cons:

• You might not qualify for a lower interest rate
• You could incur a balance transfer fee (usually 3 to 5% of the amount transferred)

Filing for bankruptcy in Virginia

Are you thinking about filing for bankruptcy in Virginia? Before you do, it’s smart to consider the cost of bankruptcy. While bankruptcy can help you get out from underneath your debts, it does have consequences too.

There are two types of consumer bankruptcy — Chapter 7 and Chapter 13. With Chapter 7 bankruptcy is most often used in cases where individuals have a very limited ability to repay their debts. If you declare Chapter 7 bankruptcy, your assets are sold to pay as much of your debt as possible.

With Chapter 13 bankruptcy, you’ll have to follow a three- to five-year debt repayment plan outlined by the court to repay some of your outstanding debt from your current earnings. Unsecured debt could be discharged.

Is filing for bankruptcy right for you? Bankruptcy can put a stop to creditors who are trying to collect against you and help you discharge your debt. However, it can also follow you around on your credit report — for up to 10 years. If you don’t have any other options to pursue, that’s when you might consider bankruptcy. Generally, trying alternatives to solving your debt first is advantageous.

If you’re trying to decide whether to declare bankruptcy in Virginia you can find more information to help you make your decision at the United States Courts website. You can find resources for free or low cost legal help through the American Bar Association.

The bottom line

Your road to Virginia debt relief might take you down several different paths, make sure you take time to weigh the pros and cons of each method before you make your decision. Even though it might seem daunting now, getting out of debt is not impossible. With a thoughtful, consistent approach you can start reclaiming control of your finances.

The information in this article is accurate as of the date of publishing.