Filing Bankruptcy as an Individual in Virginia

Filing bankruptcy as an individual in Virginia is a serious financial decision that requires careful consideration and understanding of the legal process involved. Bankruptcy can provide a fresh start for individuals struggling with overwhelming debt, but it also comes with long-term consequences. If you're considering this path, it's important to understand the types of bankruptcy available, eligibility requirements, the filing process, and the impact on your financial future.

Types of Bankruptcy Available in Virginia

In Virginia, individuals typically file for bankruptcy under either Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code. Each chapter serves different financial situations and has its own qualification criteria.

Chapter 7 Bankruptcy: Also known as “liquidation bankruptcy,” Chapter 7 allows individuals to eliminate most unsecured debts, such as credit card debt and medical bills, without the need to repay them. However, certain assets may be sold to repay creditors, though many individuals retain exempt assets under Virginia law.

Chapter 13 Bankruptcy: This option is designed for individuals with a regular income who wish to repay some or all of their debts over a specified period, typically three to five years. Chapter 13 allows you to keep your property while consolidating payments into a single monthly amount to make repayment manageable.

Eligibility Requirements

To file for Chapter 7 bankruptcy in Virginia, you must pass the means test, which assesses your income against Virginia’s median income for a household of your size. If your income is below the median, you may qualify for Chapter 7. If it’s above, you may need to file Chapter 13 instead.

For Chapter 13, you must have a regular income and your secured and unsecured debts must not exceed the limits set by the Bankruptcy Code (as of 2023, $465,275 for unsecured debts and $1,395,875 for secured debts).

The Filing Process

The process of filing for bankruptcy in Virginia involves several steps:

Credit Counseling: Before filing, you must complete a credit counseling course from an agency approved by the U.S. Trustee’s office. This course helps you explore alternatives to bankruptcy.
Prepare the Petition: Complete the necessary forms, including schedules of assets, liabilities, income, and expenses. You may want to seek help from a bankruptcy attorney to ensure all documents are properly filled out.
File Your Petition: Submit your bankruptcy petition and schedules to the bankruptcy court in your region. You will be required to pay a filing fee, although you can request a fee waiver if you meet certain low-income criteria.
Automatic Stay: Once you file, an automatic stay goes into effect, stopping creditors from pursuing collections or foreclosure actions against your property.
341 Meeting: Attend the Meeting of Creditors, where you will answer questions from the bankruptcy trustee about your finances and bankruptcy forms.
Discharge of Debts: After completing the process, eligible debts will be discharged, meaning you are no longer legally obligated to pay them.

Impact of Bankruptcy on Your Financial Future

Filing for bankruptcy can provide immediate relief from debt, but it also impacts your credit score and financial life. A Chapter 7 bankruptcy remains on your credit report for up to ten years, while Chapter 13 stays for seven years. Rebuilding your credit afterward requires careful financial management, including making timely payments and avoiding new debt.

Furthermore, certain obligations may survive bankruptcy, including child support, alimony, and certain tax debts. Understanding these exclusions is crucial as you plan for your financial future.

Seeking Professional Guidance

Considering bankruptcy can be daunting, and navigating the legal landscape often requires professional guidance. Consulting with a qualified bankruptcy attorney in Virginia can help you make informed decisions, ensure compliance with legal requirements, and improve your chances of achieving a successful discharge of debt.

If you’re feeling overwhelmed by debt and unsure about your options, filing for bankruptcy might be a viable solution. Educate yourself on the process and seek the help of professionals to navigate your financial difficulties effectively.