Virginia Bankruptcy Laws Stop Foreclosure Attorney Chapter 7 Fairfax Richmond
BANKRUPTCY – VIRGINIA ATTORNEYS
BANKRUPTCY LAW FAQs
The following are some of most commonly asked questions by our clients about bankruptcy in Virginia.
If you need the help of an attorney in Virginia for a bankruptcy in Virginia, do not hesitate to contact us. We have offices in Virginia to better serve you.
- Federal bankruptcy law has two goals
- Voluntary and Forced Bankruptcy
- Bankruptcy – To File or Not to File
- The Consequences of Bankruptcy
- Debts Not Discharged Through Bankruptcy
- Types of Bankruptcy
- Bankruptcy Filing Restrictions
- Exempt and Non-Exempt Property
- Typically Exempt Property
- Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
- The “Means Test”
- Mandatory Credit Counseling
- Residency Requirements
- Car Payments and Loans
- What Happens After You File
- First Meeting of Creditors – The 341 Hearing
- Reaffirmation Of Debts
- Dischargeable & Non Dischargeable Debts
- Credit Cards
- The Big Question: Will I Lose My House?
It happens… sometimes a person’s financial or business financial situation spirals out of control, and the debts just become too overwhelming to meet or pay back.
The founders of our nation were aware of this, and also aware that the “Old World” system of debtor’s prison was neither practical nor fair. That’s why they provided for bankruptcy in the Constitution.
- Obtaining fair treatment for creditors, and
- Obtaining a new start for debtors involved in bankruptcy proceedings.
It’s a way for debtors to start afresh, reorganizing their life unduly burdened by constant debt and demands for money that they just don’t have. It’s also a way for the creditor to at least possibly recoup a portion of the money owed them.
By far, most bankruptcy proceedings are voluntary. A debtor (the person or business owing the money) realizes their poor financial situation, and voluntarily applies for debt relief – either for total dissolution or a structured, financial reorganization .We’ll go into the forms of bankruptcy filings (called “Chapters”) below.
There are occasions when a creditor (the person being owed the money) will petition the courts for a forced bankruptcy – but those filings are very rare, since the creditor stands to gain nothing in the end.
Bankruptcy should be the “nuclear option” – the means of last resort. It’s not a game and shouldn’t be taken lightly.
If you find yourself in these situations, then consulting with a bankruptcy attorney may be your wisest choice:
- You can’t pay your existing monthly bills and obligations
- Your credit card debt is beyond your means to ever repay
- Debt collectors are making your life a living hell
- You’re being threatened with lawsuits or have judgments already levied against you
- Foreclosure on your house is being threatened or is imminent.
- You’ve experienced severe financial losses or setbacks due to illness, loss of employment, business failure, divorce and similar circumstances.
If you have the financial means you may want to try and settle your existing debts for a lump sum payment, or offer lesser payments over time. Sometimes this works, but in many cases the creditor goes on the offensive and will demand full payment, even though it’s to their advantage to take a lesser amount. (It’s called blind greed, since something is always better than nothing.)
You might also seek help from credit reorganization companies or non-profit groups whose business is to help people in your situation. However, please be aware that many of these “credit repair companies” are nothing short of scams. Always consult with your attorney, legal aid group, Better Business Bureau, Chamber of Commerce, or your states Attorney General Office if you have any doubts about the companies you’re thinking of dealing with.
Finally, take a good look at your situation. There’s a common misunderstanding about civil judgments. A person or company may get a civil judgment against you – but then they have to collect.
If you have nothing to seize and attach, (such as a house, a hefty bank account, real estate, securities, precious coins, and so on) even if a creditor does get a civil judgment, they can’t collect on assets you don’t have. They won’t hesitate to use the fear of civil proceedings against you – but if they see it’ll be a lesson in futility, they may just decide the expense isn’t worth the improbable gain.
Also be aware that in most states, the statute of limitations is 4 years for collecting on most common debts. If a creditor doesn’t file in court before the deadline – they lose the right to go after that debt.
A realistic consultation with an experienced bankruptcy attorney will be able to define and answer these questions for you.
First off, your ability to obtain credit will very probably be greatly impaired. However, if credit cards were your downfall, then you shouldn’t be applying for them in the first place. Even if you do get credit, you’ll probably be paying a much higher rate of interest, since you’ll be viewed as a high risk case. It can take up to three or more years to reestablish your credit rating.
Your ability to buy or rent housing, and perhaps even secure a job will likewise be adversely affected.
The bankruptcy discharge will remain on your consumer credit report for seven to 10 years.
Bankruptcy isn’t a magic bullet. There are debts that won’t be discharged after you file and the bankruptcy approved:
- Government fines or penalties
- Alimony & Child support
- Student loans
- Recent large purchases
- Debts obtained through fraud
Depending upon your situation, federal bankruptcy law provides for different types of proceedings or Chapters in applying the law.
- Chapter 7 (Personal Bankruptcy) The complete liquidation of the debtor’s estate.
- Chapter 7 Bankruptcy, or “liquidation,” is generally the simplest and quickest form of bankruptcy. It’s available to people, corporations and partnerships. Your non-exempt property is assessed and sold by a trustee of the court, with the proceeds going to pay the creditors.
You can’t file for a Chapter 7 Bankruptcy is it’s been less than 8 years since your last Chapter 7 filing, or 6 years from a previous Chapter 13 filing. Chapter 13′s can be filed every two or four years depending upon the circumstances and type of previous bankruptcy filing.
Property is divided into two categories: Exempt and non-exempt. Basically, these are exactly what they sound like. Exempt property is property that can’t be seized, taken or sold by the person or person to whom money is owed. Both federal and state laws govern what constitutes exempt property. Depending upon the state in which you live, you may be required to use state exemptions over the federal ones. In other states you can choose the one most beneficial to you.
When you file, you state whether your assets are exempt or non-exempt. In many Chapter 7 filings, there is simply nothing asset wise to go around and hence there’s no non-exempt property for the court trustee to sell. The burden of proof lies with the trustee to challenge the exempt filing.
Any non-exempt property is taken over by the trustee, who’ll then sell it – using the proceeds to pay court costs and then the creditors according to a schedule of claims priorities. However, once you do file for bankruptcy, any subsequent wages you then earn are yours, beyond the reach of your creditors.
Creditors are usually prohibited from seizing certain assets. These include:
- Personal jewelry
- Vehicles (up to a certain value)
- Equity in a home (up to a certain value)
- “Tools of the trade” – tools and equipment necessary for employment.
- Social Security payments
- ERISA-qualified retirement accounts
- Life Insurance policies
On October 17th, 2005 a new bankruptcy law went into effect. It was passed in order to “reform” the bankruptcy system. That it did, all in favor of the banks, credit institutions and credit cards companies who lobbied for years to get it passed. While imposing many new restrictions upon individuals, the law did nothing to modify the often times draconian lending practices of these institutions. The “Consumer Protection” part of the law’s title seems a bit callous and disingenuous at best.
One important change is the “means test” for filing for Chapter 7 relief.
Income and expenses are examined in detail to see how they compare to the standard wages and cost of living for your locality as determined by the IRS. If you earn less than the median income for a family of your size in your state, you can automatically file for Chapter 7 bankruptcy.
However, if your income from the last six months is greater than the median income and you can pay at least $6,000 over five years or $100 a month toward your debt, you must file for Chapter 13 instead – requiring you to repay a portion of your debts over three to five years.
You must also now apply for and receive approved credit counseling and a budget analysis, to be paid out of your own pocket.
Yet another change is that of residency. Previously, one could move to another state with more liberal bankruptcy exemption provisions and file immediately. Now one must be a resident of the state for a certain amount of time before filing, or be forced to take federal exemptions.
Previous to the Bankruptcy Reform Act of 2005, you could continue to make your car payments when they came due. Title to the car would be transferred to you upon satisfying the loan.
Now you must “re-affirm” your auto loan within 45 days after the meeting of the creditors (the so-called “341 Meeting” described below). You no longer have the option to continue payments without this re-affirmation. This makes it easier for the creditors to repossess your auto, using the sale proceeds to satisfy the debt. Plus, you are now liable for any deficiency between the loan and selling price, which wasn’t the case before October of 2005.
Once you file for either Chapter 7 or Chapter 13, you receive what’s called an automatic stay – meaning your creditors are stopped from trying to collect on the debts owed them. For a creditor to circumvent this stay, they have to convince the bankruptcy judge there is sufficient cause. This is a rather rare occurrence.
If a creditor continues to attempt to collect a debt after you’ve filed, they should be notified via certified mail that you have filed for bankruptcy. If the creditor ignores your notification, then they can in turn be sued in civil court.
After your petition for bankruptcy is filed, the first meeting of creditors is held – usually between 20 and 40 days afterwards. This is known as the “341 Hearing or Meeting.”
You’ll be asked under oath about your property and debts. Your creditors are also invited to this meeting to ask any questions they’d like to pose pertaining to your filing. However, creditors usually seldom bother to appear.
If your creditors object to any part of the 341 meeting, they have 60 days to make those objections known. If not, then they must abide by the findings.
Creditors can be a persistent breed. They may approach you and ask for a “reaffirmation” of your debts to them. Basically, you’re agreeing to remain liable for payment even after bankruptcy – and even if the debt could have been legally discharged. The only advantage to the debtor is that if regular payments are made, the property in question (if any – such as an automobile) won’t be sold or repossessed.
One option during the 341 meeting is to pay the outstanding obligation (such as an auto loan) in full. However, since one is in bankruptcy court, the likelihood of having a bunch of ready cash or credit available is about zero to zilch.
Even if you do want to reaffirm the debt, the court will have to approve it. It would make little sense to sign affidavits saying you’ll pay the loans when you have no realistic way of doing so. And outside of a very few tangible items (such as a car) it would be foolish to do so. Why continue to pay, when the debt can be discharged? You’ll still have a bankruptcy on your credit reports, but with the added burden of continued payments.
Sometimes unsecured creditors such as credit card companies will offer to keep you as a card holder, but under new terms, if you agree to reaffirm the debt. Be very careful about this. In most cases the new terms and conditions are totally one sided – the credit card company’s side. With the increased interest rates and penalties for missing payments, you may well find yourself in the same boat as before – but without the option of bankruptcy as a last resort.
Debts are divided into two categories – dischargeable (those that will be discharged or annulled) and those that can’t be discharged. There are also debts that fall within a grey zone as well.
Dischargeable debts include: Personal loans, credit card debt, repossession deficiencies, auto accident claims, civil or private judgments, business debts, leases, and claims of negligence.
Non dischargeable debts include: Taxes, child or family support, criminal fines or restitutions, auto accident claims involving a DWI/DUI, government penalties, student loans and debts listed in a prior bankruptcy where a discharge was denied.
The grey areas usually occur when fraud, dishonesty or embezzlement was involved with respect to the debt. Also, property settlements and debt obligations arising from divorce as well as claims arising from willful injury can also be non dischargeable.
In these cases, the creditor must ask the court to retain these debts. If the court agrees, then the debts cannot be discharged. If the court doesn’t agree, or if the creditor fails to petition the court – then these debts can be discharged under normal bankruptcy proceedings.
Also be aware if you are a co-signer to a loan or debt, and if the main party files for bankruptcy and lists that debt on the schedule – you are still obligated to pay. Even though the debt you signed for has been discharged for the person applying for bankruptcy, you still remain on the hot seat and liable.
If married, you’ll be faced with the decision to file an individual or joint petition. If one spouse is listed on the credit documents, then they too can be liable for all debts incurred. Filing a joint petition (both spouses file a singular document together) may be in your best interests. Consulting with your attorney is your wisest choice in deciding how you’ll file.
After catastrophic medical costs or severe economic downturns (such as loss of a job) the number one cause of bankruptcy proceedings are credit card debt. This is no accident, With credit card companies sending out 4 BILLION offers for credit every single year in the USA alone, they practically guarantee people will get in trouble. The advertisements and promotions all seem to tout “easy money and easy payments” – but the reality is a far cry from that Madison Avenue hype.
Insanely high interest rates, the reams of fine print penalties, “universal default” and a whole slew of other methods of what’s been called “legal thievery” – it’s amazing that anyone of modest means can keep afloat. It can take a quarter century just to pay off a $5,000 balance making minimum payments!
After lobbying for and getting passed the new bankruptcy “reforms” – credit card companies have become even bolder in trying to make those debts non-dischargeable. In fact, some of them have been quietly lobbying for the Holy Grail of coercions – making credit card debt default a criminal and not a civil matter.
Not content with hounding their one time “privileged members” with aggressive collection tactics or bleeding their defaulting customers dry in civil actions, they are looking for ways to actually throw them in the slammer. If this happens, we’ll have come full circle – from the old world debtors prisons our founding fathers sought to dismantle, to a perverse 21st century equivalent.
There are a host of factors that determine if your credit card usage was “normal” or “fraudulent,” including:
The number, amount and types of goods charged, number and amount of cash advances, sudden changes in buying habits, employment or employment prospects when making charges, whether you consulted with an attorney about bankruptcy before incurring the debts, and whether the original application was fraudulent. (Which begs the question – if the application was obviously fraudulent, why didn’t the credit lending institution catch it beforehand instead of willy-nilly granting charging privileges?)
If credit card debt is your financial demise, it’s best to consult with an attorney about the nature of your expenditures and your possible options outside of bankruptcy.
The answer is: Possibly. The Bankruptcy Reform Act of 2005 actually makes that possibility more likely than before. (Another one of those so-called “consumer protections.”) Also, depending upon the state in which you reside, you may have more or fewer legal protections about whether your house will be forfeit. Up to a certain amount, your house is exempt. Over a particular value, and it possibly could be sold to satisfy your creditors.
SRIS PC – Bankruptcy Law - Virginia Attorneys (top)
Bankruptcy Laws can be complex. Creditors can be daunting and their tactics downright harassing. Foreclosure can be looming right before your eyes. All this at a time when you’re at your most vulnerable. Money is tight or non-existent, every time the phone rings or the mail comes you wince in anticipation of another dunning phone call or demands for payment. You don’t know from one day to the next how you’ll ever dig yourself out of your desperate situation.
The attorneys in Virginia who help clients with a bankruptcy in Virginia, at SRIS PC are experienced bankruptcy lawyers when it comes to bankruptcy laws, proceedings and filings. If you’re considering a bankruptcy in Virginia, give us a call.
Our Virginia lawyers and staff who assist clients speak the following languages in addition to English: Tamil, Hindi, Arabic, Telugu, French, Spanish, Malaysian, Cantonese & Mandarin.
If you are contemplating a bankruptcy or facing a foreclosure and would like the assistance of a Virginia lawyer to help you with a bankruptcy in Virginia, please contact us at our Virginia Offices. You can reach us by phone at 888-437-7747.
Let us help you through these trying times. Just call us at 888-437-7747