Chapter 7: Liquidation
If you are considering filing for a Chapter 7 bankruptcy, you are in good company. More than 70% of the almost 5,800 bankruptcies filed in 2021in Virginia are Chapter 7, which provides you a fresh start by liquidating any nonexempted assets to pay your debtors. It’s the better bankruptcy option if you are not planning to keep secured property like land or a house. In many cases, debtors may have very few assets, thus the bankruptcy eliminates all dischargeable debts.
You may also decide to keep certain secured debts such as your car, furniture, and/or house. You’ll sign an agreement that you will not file bankruptcy on these debts for eight years if you decide to do this. In other words, you will still owe these debts and are obligated to continue to make payments, bringing your account(s) up to date if they are in the arrears.
Some debts are not dischargeable though, such as student loans, certain taxes, fraudulent debts, child support, alimony, and certain charged items. However, an experienced bankruptcy lawyer can help you to keep the majority of your important assets.
Under Virginia Bankruptcy for Chapters 7 and 13, the following debts are not dischargeable:
- Debts for personal injury or death when caused by a DWI
- Back child support, alimony, and other debts related to supporting your family
- Penalties and fines for violating the law, such as traffic tickets
- The last three years of income tax debts
- Student loans for the most part, unless you can prove undue hardship
- Any debt not listed on your bankruptcy
An experienced debt relief attorney can help assess whether you qualify to file a Chapter 7 bankruptcy. Please call Kindlund Legal LLC, serving the Potomac Falls, Virginia community, for a complimentary case evaluation at (240) 539-9393 or text us at (240) 539-9393.
You must pass a test to qualify for filing a Chapter 7 bankruptcy, which is your averaged income over the last six months.
The average household income in Potomac Falls, Virginia is $129,726. To pass the Virginia mean test, that income would require a nine-member household. But the average household size in Potomac Falls is three people, which would require making less than $75,774 to pass the Virginia mean test.
There are exemptions for this test:
- If your debts are not mostly consumer debts
- If you are a disabled veteran and acquired the bulk of your debts while on active duty or a homeland defense activity.
An experienced bankruptcy lawyer can help assess whether you qualify for a Chapter 7 bankruptcy. Please call Kindlund Legal LLC, serving the Potomac Falls, Virginia community, for a complimentary case evaluation at (240) 539-9393 or text us at (240) 539-9393.
Chapter 11: Business Reorganization
Small Business Bankruptcy, Chapter 11 bankruptcies, are intended to permit a current business or high-income individual to restructure their debts. Our small business bankruptcy attorneys can assess your situation and recommend which bankruptcy favors your short- or long-term goals.
Chapter 13: Reorganization
If you do have assets you wish to keep such as a home, a Chapter 13 bankruptcy acts similar to a 3- to a 5-year repayment plan. With the help of an experienced bankruptcy attorney, you propose a payment plan to your creditors, paying in full or in part. By sticking to your plan, all your remaining dischargeable debt will be released at the end of the three- to the five-year agreement.
To qualify for a Chapter 13 bankruptcy, you do have to have a consistent source of income as well as some disposable income.
If your home or car is worth more than allowed, Virginia’s bankruptcy exemptions can protect them.
Not all states allow you to choose which exemptions you want: federal or state. The State of Virginia does.
For example, the Federal Bankruptcy Homestead Exemption protects up to $27,900 of equity in the home (house, condo, trailer) you live in. But it does not protect your equity in rental properties.
In contrast, the State of Virginia’s Homestead Exemption exempts up to $5,000 of equity in a property and up to $10,000 if you are over 65, plus $500 for each dependent. The 2020 homestead exemption changes added a $25,000 principal resident exemption. This means for the house, condo, or trailer you live in, up to $30,000 is exempted in equity.
You are required to file a homestead declaration if you decide to claim the homestead exemption.
An experienced bankruptcy attorney can help assess whether you qualify for a Chapter 13 bankruptcy. Please call Kindlund Legal LLC, serving the Potomac Falls, Virginia community, for a complimentary case evaluation at (240) 539-9393 or text us at (240) 539-9393.