Virginia Bankruptcy Law and Debt Discharge: What’s Eligible?
Virginia bankruptcy law provides individuals and businesses with a legal process to eliminate or restructure their debts. Understanding what debts are eligible for discharge is crucial for anyone considering bankruptcy in Virginia. This article will explore the types of debt that can be discharged, the bankruptcy options available, and the implications of filing for bankruptcy.
In Virginia, the two most common types of bankruptcy filings for individuals are Chapter 7 and Chapter 13. Each has different procedures and eligibility requirements, which significantly affect which debts can be discharged.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy, often referred to as “liquidation bankruptcy,” is designed for individuals with limited income who need to eliminate unsecured debts. In this process, a bankruptcy trustee may sell non-exempt assets to pay off creditors, but many individuals find that their assets are protected under state exemptions.
Debts eligible for discharge under Chapter 7 include:
- Credit card debt
- Medical bills
- Personal loans
- Utility bills
- Judgment debts
However, certain debts are typically non-dischargeable, including:
- Student loans (unless undue hardship can be demonstrated)
- Child support and alimony
- Certain taxes
- Debts incurred through fraud or dishonest conduct
Chapter 13 Bankruptcy
Chapter 13 bankruptcy, also known as “reorganization bankruptcy,” allows individuals with a regular income to develop a repayment plan to pay back all or part of their debts over three to five years. This type of bankruptcy is ideal for individuals who wish to keep their property while managing their debts.
In Chapter 13, many debts can be reorganized and, in some cases, discharged after the repayment plan is completed. Eligible debts include:
- Unsecured debts, like credit card balances and personal loans
- Secured debts, like a mortgage or auto loan, where repayment terms can be modified
As with Chapter 7, some debts remain non-dischargeable in Chapter 13, which includes:
- Domestic support obligations (child support and alimony)
- Most student loans
- Certain tax debts
The Bankruptcy Process in Virginia
The process of filing for bankruptcy in Virginia begins by taking an approved credit counseling course. Following this, the individual must complete and file bankruptcy forms with the U.S. Bankruptcy Court for the Eastern District of Virginia. It is essential to provide accurate financial information, including income, expenses, assets, and debts.
Once the bankruptcy is filed, an automatic stay goes into effect, which halts most collection efforts, allowing the individual to focus on the bankruptcy process without the stress of ongoing creditor action.
Conclusion
Navigating Virginia bankruptcy law can be complex, but understanding what debts are eligible for discharge is vital for those considering filing. Whether opting for Chapter 7 or Chapter 13, individuals can find relief from overwhelming debts and regain financial stability. Consulting with a qualified bankruptcy attorney can further clarify the options and help ensure that individuals make informed decisions tailored to their circumstances.