Thinking about filing chapter 7 bankruptcy? Wondering about the chapter 7 bankruptcy rules and how it works? Do you live in Alexandria, VA or the surrounding Northern Virginia?
When people think of bankruptcy protection and getting a Fresh Start, chapter 7 bankruptcy relief is typically what comes to mind. The beauty of a chapter 7 bankruptcy filing is that it allows you to eliminate your unsecured debt. Unsecured debt means debt that is not secured by a lien. In other words, credit card debt, medical debt, and personal loans will be eliminated once a chapter 7 discharge order is entered by the court. Similarly, previous judgments will become void (unenforceable in other words), garnishments will cease, and if the circumstances are right, old tax debt obligations may be eliminated as well. Moreover, if your previous home was sold in a short sale, was taken over by the bank following a foreclosure, or if your home was so “upside down” that you simply decided to walk away, the chapter 7 bankruptcy will relieve you of your personal legal obligations on the mortgage loans.
Some debts however, such as alimony, child support, and recent tax debt cannot be discharged in bankruptcy. You are stuck with these debts in other words. The same can be said for student loan; barring exceptional circumstances they cannot be discharged in bankruptcy. However, for some folks a chapter 13 bankruptcy may be just what the doctor ordered when it comes to dealing with student loans.
Regretfully, not everyone can qualify for chapter 7 bankruptcy. There are income limitations. Generally speaking, if you do not make a whole lot of money, chances are that you will automatically qualify for a chapter 7 bankruptcy. If you make an amount of money that is above Virginia’s median income for your household then you will have to take the Means Test. If you pass the Means Test, then you are entitled to chapter 7 bankruptcy relief. If your income for your household size is particularly high and you cannot pass the Means Test, then your only remaining option is a chapter 13 bankruptcy. Please see my blog post Virginia’s Means Test: Will You Pass The Test? for a further discussion on the Means Test.
Another question that comes up from time to time is the frequency with which you can file again and obtain a chapter 7 bankruptcy discharge. If you previously filed a chapter 7 bankruptcy case AND got a discharge, then you have to wait eight years before you can file another chapter 7 bankruptcy. If you previously filed a chapter 13 bankruptcy AND got a discharge, then you only have to wait four years to file a chapter 7 bankruptcy.
Finally, in keeping with the motto of “there is no such thing as a free lunch,” the bankruptcy law expects you to turn over to the bankruptcy trustee all assets that cannot be exempted. The assets that cannot be exempted –protected in other words- however are typically only those of significant value. Your old car, the couple of thousand of dollars you have in the bank, your clothing, home furnishings, wedding ring, retirement account, etc. are protected and will not have to be surrendered. That is why 90% of chapter 7 bankruptcy filings are described as “No Asset Cases.” Meaning the individual filing will not be expected to turn over any assets to the bankruptcy trustee. You keep everything you own. For more on Virginia’s bankruptcy exemptions please visit my article Why Virginia’s Bankruptcy Exemption Laws Must Be Amended.
As for how long the process takes, typically about 100 days from the time that your case is filed with the court until you get your discharge order and the case is closed.
Please note that this page is a mere overview of how a chapter 7 bankruptcy works in Virginia. There are many pitfalls as well as twists and turns that you need to be aware of. For a more in depth discussion please visit myAlexandria, VA Bankruptcy Blog
Contact me today to schedule your free initial consultation. Take the first step towards getting your Fresh Start. There are no obligations and you will feel better after we talk.