Virginia Bankruptcy Process
Bankruptcy is not for every situation or for everyone. Because bankruptcy is a process that is so often abused, it should be used with caution. Bankruptcy is not designed to eliminate the outstanding debt for those with means to do it themselves. In fact bankruptcy is not able to eliminate debts to secured creditors, discharge the debts of special treatments, or protect those who have cosigned loans.
Secured credit means loans made from collateral. Special treatments include divorce-related debts, alimony, child support, student loans, criminal fines, court restitution, and some taxes. Bankruptcy is unable to affect cosigners. Those who cosign loans are not relieved from their responsibilities and are still required to pay of their portion of the loan.
Bankruptcy is appropriate for those who have experienced sudden financial difficulty. These usually include a recent divorce, the loss of employment, an illness resulting in an extended stay in the hospital, or the loss of a major client.
In recent years bankruptcy has been used as an “easy-out” for some consumers. To decrease this abuse of the bankruptcy system, the government installed new acts of prevention. The 2005 Bankruptcy Act placed new regulations on who is allowed to apply for Chapter Seven bankruptcy and set new increases on Chapter Thirteen bankruptcy repayment plans.
Now each month will have higher minimum payments to speed up the bankruptcy process. New prevention acts were also installed to decrease the access to all bankruptcy courts, including Virginia bankruptcy courts.
To eliminate abusers, Virginia requires each bankruptcy petitioner to complete a means test. This means test will calculate an individual’s income, debts, and expenses and then compare them to the median of all other residents in the state of Virginia.
Those that come below the median or are equal to the median are often eligible for Chapter Seven bankruptcy. Those who come above the median are often eligible for Chapter Thirteen bankruptcy.
Different Types of Bankruptcy
Virginia offers four different types of bankruptcy for its citizens. Chapter Seven bankruptcy is called liquidation or straight bankruptcy. This form of bankruptcy is for consumers with heavy debts. Chapter Seven bankruptcy used liquidated access and properties to pay off creditors.
The court assigns a trustee to handle the liquidation process of non-exempt properties. This process can take up to six months. In the meantime all creditor calls and foreclosures will be frozen.
Chapter Eleven bankruptcy is called reorganization as it allows businesses to eliminate large amounts of debt. Chapter Twelve bankruptcy is for family-owned farms to relieve financial strain. Chapter Thirteen bankruptcy is called debt adjustment as it handles debts through financial adjustments.
Chapter Thirteen bankruptcy eliminates debts through a court organized repayment plan. The court will evaluate an individual’s finances, income, expenses, debts, and dependents before calculating how much is required to be paid monthly to eliminate debt within five years.
The state of Virginia allows individuals to file for Chapter Thirteen again anytime when needed. However individuals are required to wait a minimum of six years before they can again file for Chapter Seven bankruptcy.