Bankruptcy
The two primary types of consumer bankruptcies are Chapter 7 and Chapter 13. A Chapter 7 is a "liquidation" bankruptcy. The Chapter 7 Trustee liquidates your non-exempt property and pays off as many of your debts as possible. The remaining debts are discharged. However, some debts are not dischargeable; examples of which are: taxes and other money owed to the government, guaranteed student loans and domestic support obligations among others. The Chapter 13 is a "wage earner" bankruptcy. If you have a significant amount of disposable income (money left over after paying for necessities), your attorney will develop a pay back plan which uses your disposable income to pay off as many of your debts as possible over a period of three to five years. The remaining debts are discharged much the same as in the Chapter 7 bankruptcy.
There are numerous exemptions that may apply to your real and personal property, thereby allowing you to retain the property even if you file bankruptcy. Some of the most common exemptions are:
- Household furnishings ($5000 per debtor, plus $500 per dependant)
- Clothing ($1000 per debtor)
- Automobile ($2000 per debtor)
- Homestead ($5000 per Virginia resident; may be applied to any real or personal property)
- Most retirement plans
YOU MAY ALSO BE ABLE TO KEEP YOUR HOME AND FILE A CHAPTER 7 BANKRUPTCY THEREBY ELIMINATING YOUR OTHER DEBTS.
There are numerous other exemptions in addition to those listed above. If you have property that is encumbered by a loan (house, car), you can keep the property if you reaffirm the debt or redeem the property for fair market value.
Documents you will have to provide the Chapter 7 Trustee include:
- Federal income tax return
- Pay stubs verifying current income (for the last 60 days)
- Copies of any depository accounts (checking, savings, CD, money markets, etc) showing the balance in each account on the day the bankruptcy petition will be filed.
- A certificate of completion for credit counseling issued from one of the counselors approved by the Eastern District of Virginia Bankruptcy Courts.
- If you own real estate, you will also need to provide a copy of the latest tax assessment on the property and the payoff amount for all mortgages.
- Any deeds to real estate owned.
The following debts are NOT dischargeable in a Chapter 7 case:
- Most tax debts.
- Debts for obtaining goods or services by means of fraud or false pretenses.
- Debts not listed on your bankruptcy schedules.
- Debts for domestic support obligations such as child support or alimony.
- Debts for intentional or malicious injury to the person or property of another.
- Guaranteed student loans.
- Debts for personal injury caused while under the influence of drugs or alcohol.
Please note that the information provided on this page is general in nature, is subject to change without notice, and does not constitute legal advice. For more information, please call to schedule a free initial consultation.
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