What Happens to Your Assets After Filing Bankruptcy in Virginia?
When you file for bankruptcy in Virginia, it’s crucial to understand how it affects your assets. Bankruptcy can provide relief from overwhelming debt, but it also raises questions about what happens to your property. Understanding the process can help you make informed decisions.
In Virginia, people typically file for either Chapter 7 or Chapter 13 bankruptcy, and the treatment of assets differs significantly between these two types.
Chapter 7 Bankruptcy
Chapter 7 is often referred to as "liquidation bankruptcy." When you file under Chapter 7, your non-exempt assets may be sold by a trustee to pay off your creditors. However, Virginia allows certain exemptions that enable you to keep some of your property. These exemptions include:
- Homestead Exemption: You can exempt up to $25,000 of equity in your home (or $50,000 if both spouses file together).
- Vehicle Exemption: You can protect up to $6,000 of equity in your vehicle.
- Personal Property Exemptions: Items like household goods, clothing, and certain retirement accounts may also be protected.
Any non-exempt assets, however, could be sold by the bankruptcy trustee. It’s worth noting that personal injury settlements and certain types of prepaid insurance might not be exempt and could be claimed in the bankruptcy process.
Chapter 13 Bankruptcy
In contrast, Chapter 13 bankruptcy is known as "reorganization bankruptcy." This option allows you to keep your property while reorganizing your debts into a manageable repayment plan. If you earn a steady income, you can keep your valuable assets as long as you adhere to the repayment plan approved by the court.
Under Chapter 13, you will propose a plan to repay your debts over three to five years. During this time, creditors cannot repossess or foreclose on your assets as long as you maintain your payments under the plan.
Additionally, Virginia provides a unique option for homeowners to protect their homes from foreclosure through Chapter 13 bankruptcy. If you have fallen behind on mortgage payments, this type of bankruptcy allows you to catch up over time while keeping your home.
Effects on Secured Debts
In both Chapter 7 and Chapter 13 cases, secured debts are handled differently than unsecured debts. Secured debts, like car loans or mortgages, are tied to specific assets. If you want to keep these assets, such as your car or home, you typically must continue making payments. In Chapter 7, you may have to reaffirm the debt, while in Chapter 13, the debts are included in your repayment plan.
Conclusion
Filing for bankruptcy in Virginia can significantly impact your assets, depending on whether you choose Chapter 7 or Chapter 13. Understanding the state’s exemption laws and how each bankruptcy option works is essential for protecting your financial future. Always consider consulting a bankruptcy attorney to navigate this complex process and to ensure you make the best decision regarding your assets.