Bankruptcy Process in Virginia

Since the Bankruptcy Abuse Prevention and Consumer Protection Act went into effect in October 2005, the process for filing bankruptcy in Virginia changed. There are new steps and requirements. A qualified bankruptcy attorney can help guide you through the new laws.

Credit Counseling – Anyone considering filing for either Chapter 7 or Chapter 13 bankruptcy must now complete approved credit counseling within 6 months before filing for bankruptcy. Once filed, the petitioner must also complete a financial management class. If you believe you qualify for Chapter 7 bankruptcy, you must also file any overdue tax returns you may have.

Gathering Documentation – Bankruptcy cases now require extensive documentation. Many bankruptcy attorneys now ask clients considering bankruptcy to provide this documentation before filing. Documentation required for bankruptcy cases include:
• Pay stubs or proof of income for 6 months prior to filing bankruptcy
• Copies of tax returns for the previous 2 years
• Proof of monthly expenses
• Proof of all secured and unsecured debt – mortgage, car loan, credit cards, student loans
• Proof of major financial purchases for the previous 2 years
• Lists of all assets – property deeds, car titles, loans, and possessions

A bankruptcy attorney can assist you in telling you exactly what documentation you might need to present to the courts. Your lawyer can help you speak with creditors and sort through your expenses to put together all the information the court and trustee may need.

Determining Chapter 7 Bankruptcy – if your attorney believes you are a candidate for Chapter 7 bankruptcy, you will be scheduled for a Chapter 7 Means Test which determines if you qualify for debt discharge. Your bankruptcy lawyer can tell you if your income falls above or below the local median income, and help you fill out the forms necessary to file with the courts.

To qualify for Chapter 7 bankruptcy in Virginia, your income must be below the median income for the area as determined by the U.S. Census Bureau for 6 months prior to the filing.

As of March 15, 2008, Virginia Median Income is:
• $46,055 – single wage earner
• $61,115 – two person household
• $69,719 – three person household
• $80,646 – four person household
• $6,900 – for each additional person over four

However, if your income exceeds Virginia Median Income, you might still qualify for Chapter 7 bankruptcy if, after deducting acceptable expenses from your income, you are unable to pay $6,000 ($100/month) to your unsecured creditors over 5 years.

Acceptable expenses include:
• Mortgage payments
• Car payments
• Back taxes
• Child support
• School expenses up to $1,500 per year

If your budget allows for payments of $6,000 ($100/month) or more in a 5 year period, you will be denied Chapter 7 bankruptcy.

A qualified attorney can assist you with all the calculations to see if you qualify for Chapter 7 debt relief.

Determining Chapter 13 Bankruptcy - is a debt restructuring plan that allows for repayment of your debts over a 3-5 year period, giving you time to pay off your debts. In Chapter 13, the petitioner must propose a payment plan for which provides for full payment of priority debts like taxes, child support, and student loans, but allows for partial payment of unsecured, or consumer, debt.

To file Chapter 13 bankruptcy your repayment plan must past three tests:
• Must be delivered in good faith
• Must pay creditors at least as much as they would get in a Chapter 7 settlement – generally the value of all non-exempt property
• All disposable income must be paid into the plan for at least 3 years and up to 5 years and must meet the Chapter 7 requirement.

If you decide you wish to pay off your debts, or do not qualify for Chapter 7, a bankruptcy attorney can help you determine what kind of monthly payment you can afford and help you file your payment plan with the courts.

Automatic Stays and Trustees – once bankruptcy has been filed with the courts, the petitioner is granted an immediate Automatic Stay. Automatic stays prohibits creditors from staking any claim to any of your property or from making any direct contact with you. It also stops foreclosure proceedings.

You will be assigned a trustee by the court who takes control of all debts and property and arranges for your payments under Chapter 13. Many times these payments can be taken out of your wages. The trustee manages creditor payments, evaluates assets, and can challenge any part of the bankruptcy case.

341 Hearings – occur about a month after filing Chapter 7 bankruptcy. This is a meeting called by the trustee and is a meeting between you and your creditors. You are required to attend this “first meeting of creditors”. Creditors have 60 days to challenge your right to debt discharge.

If there are no challenges, you will receive notices that your debts have been discharged in approximately 3 – 6 months.

Bankruptcy attorneys are by your side every step of the way during the hearing to guide you through the process.

Chapter 13 Confirmations – happens after a hearing before a bankruptcy judge. He or she will either approve or deny your repayment plan. Bankruptcy attorneys are with you every step of the way during the hearing to make sure your case goes through.

If approved, and you make all your payments on time, the remaining balance of your debts will be discharged at the end of your term – usually 3-5 years.

If you’re ready to talk with someone about your bankruptcy options, fill our evaluation form, and talk to a bankruptcy attorney today.

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