Bankruptcy Law in Virginia: Can You Eliminate Credit Card Debt?

Bankruptcy law in Virginia can provide a lifeline for individuals struggling with overwhelming credit card debt. Understanding how these laws work and how they might apply to your specific situation is crucial for making informed decisions about managing your financial future.

In Virginia, consumers typically file for bankruptcy under Chapter 7 or Chapter 13 of the Bankruptcy Code. Both options have the potential to eliminate credit card debt, but they approach the process in different ways.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy, also known as "liquidation bankruptcy," allows individuals to eliminate most unsecured debts, including credit card debt, in a relatively short timeframe. The process generally takes around three to six months from the time of filing to debt discharge.

To qualify for Chapter 7 bankruptcy, you must pass the means test, which evaluates your income, expenses, and overall financial situation. If your income is below the state's median income or if you have sufficient disposable income after allowable deductions, you may qualify for this form of bankruptcy.

Once you file for Chapter 7 bankruptcy, an automatic stay goes into effect, preventing creditors from continuing collection actions, which can provide immediate relief. Ultimately, unsecured debts, such as credit cards, may be completely wiped out, giving filers a fresh start. However, it is important to note that some assets may be subject to liquidation to satisfy debts.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy, also referred to as "reorganization bankruptcy," is designed for individuals with a regular income who want to keep their assets while repaying a portion of their debts over time. This type of bankruptcy involves creating a repayment plan lasting three to five years, where you pay a portion of your disposable income to creditors.

This option may be suitable for those who wish to protect certain assets, such as a home or vehicle, from foreclosure or repossession. While credit card debt can typically be discharged at the end of the repayment plan, it is not automatically eliminated; it is paid back at a negotiated rate as part of your repayment plan.

Filers must also pass the means test to qualify for Chapter 13, but the requirements are generally more flexible than those for Chapter 7

A significant benefit of Chapter 13 is that it allows for the discharge of unsecured debts at the end of the repayment period, potentially giving relief from credit card debt.

Impact on Credit Score