Chapter 7: Liquidation
The better bankruptcy option is Chapter 7, especially if you have no or little assets. That is why in 2021 in the state of Virginia, more than 70% of nearly 6,000 bankruptcies filed were Chapter 7. Through liquidating any nonexempted assets to pay your debtors, a Chapter 7 bankruptcy provides you with a new beginning.
If you are not planning to keep secured property like a house or land, a Chapter 7 bankruptcy is best because, in many cases, the bankruptcy eliminates all dischargeable debts.
You may also decide to keep certain secured debts such as your house, furniture, and/or car. If you do so, you’ll sign an agreement that you will not file bankruptcy on these debts for eight years. This means you will still owe these debts and are obligated to continue to make payments, bringing your account(s) up-to-date if your payments are behind.
Some debts are not dischargeable such as certain charged items, student loans, certain taxes, fraudulent debts, child support, and alimony. However, an experienced bankruptcy law attorney may help you to keep the majority of your important assets.
The following debts are not dischargeable under Virginia Bankruptcy for Chapters 7 and 13:
- Back child support, alimony, and other debts related to supporting your family
- Debts for personal injury or death when caused by a DWI
- Student loans for the most part, unless you can prove undue hardship
- Penalties and fines for violating the law, such as traffic tickets
- The last three years of income tax debts
- Any debt not listed on your bankruptcy
An experienced bankruptcy lawyer can help assess which bankruptcy works best for you.
An experienced debt relief attorney can help assess whether you qualify to file a Chapter 7 bankruptcy. Please call Kindlund Legal LLC, serving the Manassas, Virginia community, for a complimentary case evaluation at (240) 539-9393 or text us at (240) 539-9393.
Chapter 13: Reorganization
Because a Chapter 13 bankruptcy acts similar to a 3- to 5-year repayment plan, if you do have assets you wish to keep such as a home, you propose a payment plan to pay your creditors in full or in part. You make this payment plan with the help of an experienced bankruptcy attorney.
You do have to have a consistent source of income and some disposable income to qualify for a Chapter 13 bankruptcy.
A benefit of living in Virginia is you get to choose between the federal or state exemptions list. Not all states permit this option. The State of Virginia’s bankruptcy exemptions can protect your home or car if it is worth more than the state’s exemptions allow.
For example, while the Federal Bankruptcy Homestead Exemption does not protect your equity in rental properties, it does protect up to $27,900 of equity in the home (house, condo, or trailer) you live in.
However, the State of Virginia’s Homestead Exemption exempts up to $5,000 of equity in a property, and for residents 65 or older, up to $10,000. This is in addition to the $500 for each dependent. A $25,000 principal resident exemption was added in the 2020 homestead exemption changes. In other words, up to $30,000 of equity in your home, condo, or trailer is exempted.
To claim the homestead exemption, you are required to file a homestead declaration.
An experienced debt and bankruptcy attorney can help assess whether a Chapter 7 or 13 bankruptcy is the right choice for you. Please call Kindlund Legal LLC, serving the Manassas, Virginia community, for a complimentary case evaluation at (240) 539-9393 or text us at (240) 539-9393.
Alternatives to Bankruptcy
The two alternatives to declaring bankruptcy are consumer credit counseling or taking out a second mortgage.
Consumer Credit Counseling Service
Consumer Credit Counseling Services provides a loan that is not secured by your home. With their help, you create a plan to pay a fee each month to them and they pay your creditors, usually for a fee. They also negotiate with your creditors to either eliminate the interest or lower it.
Often this type of plan requires you to agree to not apply for additional credit while making payments on the plan.
Depending on the amount of equity you have in your home, an alternative to filing for bankruptcy is taking out a second mortgage, which is secured by your home as collateral. Be careful. Your home could be lost if you are unable to make the payments or even if the payments are late.
An experienced debt negotiation lawyer can help assess whether filing for bankruptcy or an alternative is the right choice for you. Please call Kindlund Legal LLC, serving the Manassas, Virginia community, for a complimentary case evaluation at (240) 539-9393 or text us at (240) 539-9393.