Michael D. Hart, P.C.

What Can Be Kept After Bankruptcy?

2022-09-14T14:19:37Z

One of the reasons people avoid filing for bankruptcy is that they have heard they have to get rid of their personal property. The requirement to sell off or liquidate assets can completely eliminate the financial benefits someone might derive from the discharge of their unsecured debts. No one wants to give up the assets they have spent a lifetime accumulating. Many people would prefer to continue struggling with debt payments indefinitely rather than risk the loss of their home equity or other valuable property. However, bankruptcy does not involve the loss of all your assets. The truth is more complex than what people assume.

There are multiple kinds of bankruptcy

There are different kinds of personal bankruptcy, and not all of them require the liquidation of your assets. In a Chapter 13 bankruptcy, for example, you make payments on your debts through the courts for years and won't have to liquidate your property. In Chapter 7 or liquidation bankruptcy, you will need to report your assets and provide financial records to the court. Of course, you still have the opportunity to protect your most valuable assets.

Virginia offers multiple bankruptcy exemptions

When you file for a Chapter 7 bankruptcy in Virginia, the trustee assigned by the courts will have to review an inventory of your property that you provide and determine if any of your property requires liquidation, as well as the distribution of any proceeds among your creditors. You can exempt a significant portion of your most valuable assets. A single adult filing for bankruptcy can exempt $30,000 worth of home equity, for example. Those with less equity than that can apply the remaining balance of the $25,000 as a wild card exemption for other assets. Those filing Chapter 7 bankruptcy can exempt up to $5,000 worth of household furniture, $5,000 in family heirlooms, $1,000 in clothing, all pets and up to $3,000 in firearms as personal property. Filers can also protect up to $6,000 in equity in a motor vehicle. People can protect up to $10,000 worth of tools for their trade, insurance benefits, like life insurance policies. Your assets influence the best approach to bankruptcy. If you have far more property than what you can protect with Virginia bankruptcy exemptions, filing a Chapter 13 bankruptcy may be a better option for you. Learning more about the basics of Chapter 7 bankruptcy will help you put the battle with debt behind you.

What happens after a successful bankruptcy filing?

2022-09-14T14:19:42Z

Bankruptcy can be a lengthy process. Depending on the kind of bankruptcy you file, you may have to wait several years between when you first file your paperwork and when the courts actually finalize your bankruptcy and discharge your debts. The discharge of your unsecured debts is perhaps the most important part of bankruptcy. It will absolve you of the legal obligation to repay the debts included in the bankruptcy and prevents the businesses from continuing collection efforts related to those debts. Once you are completely finished with the court process and your discharge, what will happen in your life?

Your budget will be easier to manage

Once you eliminate your unconquerable credit card balances or your medical debt from your recent cancer treatment, your budget will improve. You will be able to spend the money that once went toward minimum payments on those obligations on your mortgage or household expenses instead. You might even be able to put some money aside in savings.

Opportunities for credit will arise shortly after your discharge

You may start getting credit card offers in the mail within a few weeks of your bankruptcy discharge. You can expect a requirement for a security deposit in many cases, as well as high interest rates. However, getting a new card and paying off your balance every single month is a simple way to start rebuilding a positive credit history after bankruptcy.

Big financing options are available within a few years

Needing to buy a car or a vehicle after bankruptcy can be a bit of a challenge, as there are often limitations on what lenders will work with you. To qualify for standard financing opportunities again, you will typically need to wait at least two years after your discharge. The longer you can wait before applying, the less of an impact your bankruptcy will have on your ability to qualify and the terms your lender offers.

Eventually, the bankruptcy leaves your credit report

Years after your bankruptcy discharge, it will come off of your credit report. A Chapter 7 bankruptcy will come off of your report ten years later, while a Chapter 13 discharge leaves your credit report seven years after your discharge. At that point, your bankruptcy will no longer limit your credit opportunities or lower your credit score. Knowing how your financial circumstances will change after a personal bankruptcy might inspire you to file.

Chapter 7 or Chapter 13 bankruptcy?

2022-09-14T14:19:49Z

If you are dealing with financial issues, then something you may have considered is going into bankruptcy. Bankruptcy comes in a number of different forms, so the type of bankruptcy you choose may vary depending on the circumstances surrounding your case. The two main kinds of consumer bankruptcy include Chapter 7 bankruptcy and Chapter 13 bankruptcy. These kinds of bankruptcy are different enough that you should learn more about them before you decide on the one that is right for you.

Chapter 7 bankruptcy

The first type of bankruptcy to consider is called Chapter 7 bankruptcy. This form of bankruptcy, also identified as liquidation bankruptcy, is usually used by those whose debts far outweigh their income. It helps you discharge many of your unsecured debts, too, like medical bills or credit card debt. Chapter 7 bankruptcy is normally used when someone has no income or a very low income. There is a means test that must be passed. Once all the qualifications are met, then you can normally get your debts discharged within a few months. If you cannot pass the means test because your income is too high, then you may prefer to use Chapter 13 bankruptcy.

Chapter 13 bankruptcy

Chapter 13 bankruptcy is better known as a wage-earner’s bankruptcy. Uniquely designed to consolidate your debts, this form of bankruptcy reduces your debt load by minimizing your monthly payment and then discharging any qualifying debts that remain after you pay on those debts for three to five years. Chapter 13 bankruptcy is better for those who don’t qualify for Chapter 7 bankruptcy and those who have the means to pay down debt if they can get their monthly payments reduced. Some people will only qualify for one kind of bankruptcy while others will qualify for both. It’s a good idea to sit down and go through the qualifiers for each kind of bankruptcy to see which kind you qualify for and to determine if it’s right for you. There are both positives and downsides to either kind of bankruptcy, so make sure you do your due diligence before selecting what will work for you.

Can bankruptcy help you deal with a credit wage garnishment?

2022-09-14T14:19:55Z

When someone falls behind on their bills, their creditors may start taking aggressive action. Making collection calls to someone's house, sending them warning letters and reporting missed payments to the credit bureau are all tactics that help companies push people into making payments. However, some people don't respond even to those aggressive efforts, possibly because they don't have the personal assets to make a payment regardless of what the creditor does. When someone has missed multiple payments or has indicated a refusal to continue paying, their creditors might pursue a wage garnishment. Both federal and Virginia state laws allow creditors to go to court and ask a judge to directly allocate them money from someone's wages to force the repayment of a valid debt. Will bankruptcy potentially stop the garnishment of your wages?

Bankruptcy can affect garnishment in two different ways

When you file for bankruptcy, the courts grant you an automatic stay that temporarily stops collection activity against you. An automatic stay will mean that a pending debt-related lawsuit won't go to court until the courts move forward with your bankruptcy filing. In other words, a timely bankruptcy filing could prevent a creditor from getting a garnishment against you. In most cases, filing bankruptcy will also mean that the courts temporarily stop an existing garnishment. The wages that had previously gone to your creditor may go back into your pocket until the courts rule on your bankruptcy filing. In cases where the debt that resulted in the garnishment is part of your discharge, the garnishment will not continue after your discharge.

Garnishment is a serious issue that requires a careful response

While there are limitations on how much of your income can go to your creditors, if you already find yourself struggling to meet your financial obligations, losing some of your income could prove to be financially devastating. Garnishments can take a bad financial situation and make it far worse due to the loss of that disposable income. Avoiding the garnishment of your wages or successfully stopping a garnishment to reclaim that income can help you balance your budget and maintain control over financial circumstances even if creditors have become aggressive in their attempts to collect.

When are taxes dischargeable in bankruptcy?

2022-09-14T14:20:07Z

In most cases, there are some debts that cannot be discharged in bankruptcy. Those may include child support obligations, tax obligations and student loans. However, there are cases where people may be able to have their taxes forgiven and discharged in bankruptcy. This usually requires that the person filing for bankruptcy is dealing with unreasonable hardships and can show that paying off that debt would be impossible or have a significant, and negative, impact on their life.

Taxes are high-priority debts

Remember, taxes are high-priority debts, because they are used to pay for all kinds of needs and services of the American people. As a result, anyone who goes into bankruptcy may need to pay those back, even if other debts are forgiven. In Chapter 7 bankruptcy, it may be possible to get those taxes forgiven if the taxes:

Are income taxes based on commissions, wages or other income
Were determined using accurate tax returns

If your tax debt was due at least three years ago, then it may also be dischargeable in some cases. Additionally, you will need to show that you filed a tax return within two years of the bankruptcy petition. The Internal Revenue Service has to assess the tax before you can file for bankruptcy and include it for discharge. This has to happen at least 240 days before you file for bankruptcy. This doesn’t always happen right away after you file your taxes, so you will need to determine when the IRS assessed the tax debt prior to filing for bankruptcy to be sure that you waited long enough. Keep in mind that any fraudulent tax returns made will disqualify a person from getting the taxes discharged. For example, if the IRS finds that someone owes more debt because of submitting a fraudulent return, then that debt may not be discharged under most circumstances. It’s difficult to discharge taxes, but it’s not impossible. This is something to discuss if you’re considering filing for bankruptcy, because if the taxes can be discharged, you could save yourself hundreds or thousands of dollars in the long term and become financially stable much sooner.

What Assets Are Protected in Chapter 7 Bankruptcy?

2022-09-14T14:20:14Z

If you are going through a tough time financially, you may feel like you are in survival mode, constantly trying to work to manage to provide for your family. However, even if you are able to provide your loved ones with the basic necessities, it is likely that you will be chronically stressed and always thinking about the huge amount of debts that you have facing you.

It is important, therefore, to realize that no matter your financial situation, there are always opportunities to get out of debt. You may be able to do this by increasing your income, through debt reconsolidating or through financial advice. If none of these options work for you, another option is to file for bankruptcy. Many try to avoid filing for bankruptcy because they believe that it will mean losing all of their assets. The following is an overview of Chapter 7 bankruptcy and the assets that will be protected in your Virginia filing.

What is Chapter 7 bankruptcy?

Chapter 7 bankruptcy is only available to those who do not have the means to pay off their debts through a repayment program. This means that before you qualify for Chapter 7 bankruptcy, a means test will be conducted. This will look at your income and your dependents, and compare it with the state average. Chapter 7 bankruptcy is a preferable option for many because it will likely lead to the complete discharge of all debts in a matter of months. However, to do so, you will have to liquidate much of your assets.

What assets are protected in Chapter 7 bankruptcy?

In Virginia, there is a homestead exemption of $5,000, or $10,000 if the debtor is aged 65 or older. While there are no exceptions for luxury items, you will be entitled to keep clothing and personal items up to a certain amount.

If you are struggling financially in Virginia, make sure that you take action to understand the possibilities you have for filing for bankruptcy.

Do you really have to take a class on credit to file bankruptcy?

2022-09-14T14:20:20Z

You might have seen your financial issues coming. Perhaps your spouse lost their job and your budget took a blow, forcing you to put staples like utility bills and groceries on credit cards. Doing so was a calculated risk, but it is easy to overextend yourself with credit cards. Despite having always been responsible with your money in the past, it only takes a few months of falling behind for all of your previous effort and goodwill with creditors to seemingly evaporate. Companies can quickly become aggressive when budget shortfalls limit whom you can repay each month. Once you realize that bankruptcy is the best solution for your situation, you likely plan to maintain careful control of your finances moving forward. The very fact that you have determined to file bankruptcy likely indicates you understand how credit works and the best way to correct your situation. Do you really have to take credit classes in order to file for bankruptcy?

Individuals filing for bankruptcy have education requirements

If you must file bankruptcy on behalf of a business, credit counseling may not be part of that process. However, for individuals and couples filing for personal bankruptcy protection, credit education is necessary. Federal laws mandate that those filing for bankruptcy must first complete pre-filing credit counseling that gives instruction on finances and budgeting. A certificate documenting your completion of this course is necessary for your initial filing. You will also have a second course obligation before your bankruptcy is over. After your file your initial petition, you will need to complete a debtor education course before you receive your discharge.

Required courses can help set you up for future success

Credit education and counseling may seem like an embarrassing and remedial requirement. To some people, the course might even feel like a punishment. However, the goal is to arm those who have overextended themselves in the past with more information about how to use credit wisely and how to balance a budget. Instead of looking at the education requirements as some kind of penalty, view them as an opportunity to refresh yourself on the jargon involved with credit so that when you need to start rebuilding after your discharge, you will be well-positioned to do so.

3 reasons Chapter 7 bankruptcy is better than you think

2022-09-14T14:20:27Z

Roanoke residents who are carrying a weight of consumer debt on their shoulders can find themselves under enormous stress. That same stress can spill over into all areas of their lives. Stress can jeopardize a job and career path and even tank a marriage. But what can you do? One option is filing for bankruptcy. Certainly, nobody ever dreams fondly about being mired in debt and contemplating bankruptcy. But just because no one aspires to it does not detract from the benefits of filing for bankruptcy.

The advantages of a Chapter 7 bankruptcy

Wherever you are on life’s ladder, you can benefit from getting your financial slate wiped clean. Chapter 7 has some distinct advantages that can help you in the future:

You will go through financial counseling: Learning how to avoid future financial travails is part of the Chapter 7 bankruptcy process, allowing you to emerge debt-free and wiser after the discharge of past debts.
Rebuilding credit isn’t as hard as you think: It’s a foregone conclusion that your credit score will take a deep hit for filing for bankruptcy. But if you are behind in your bills and being dunned by creditors anyway, your credit score is already in the basement or headed there soon. Starting over without a load of debt hanging above you is empowering. Once your debts have been discharged, you will receive offers to rebuild your credit. Select one or two cards with the lowest interest rates and slowly raise your credit score by paying your bill in full each month and living within your means.
The process is swift: Unlike a Chapter 13 bankruptcy where you commit to three or five years of repayment terms, within months your Chapter 7 bankruptcy should be in your rearview window.

Learn more about your options for filing Chapter 7 bankruptcy here in Roanoke to chart the best fiscal course for your future. An experienced advocate can guide you.

What happens at a Chapter 13 confirmation hearing?

2022-09-14T14:20:33Z

You may already know that if you file for Chapter 13 bankruptcy, you’ll need to create a debt repayment plan. That plan needs to be filed with the bankruptcy court within 15 days of your bankruptcy petition. Chapter 13 repayment plans are either three or five years, depending on whether your income is above or below the median income for the state. The payments in the repayment plan are actually made to your bankruptcy trustee. That person then distributes the money to your creditors based on the terms of your plan. The plan must take in to account the various types of claims: priority, secured and unsecured. The repayment plan has to be approved or “confirmed” by a bankruptcy judge. That is done in a confirmation hearing. The judge will review the plan to make sure it complies with the Bankruptcy Code and that it seems feasible.

What does the judge consider?

The judge will hold a confirmation hearing within 45 days of the meeting of creditors. In this hearing, the judge will make sure that the repayment plan meets the following requirements:

It complies with the rules in the Bankruptcy Code.
It seems practical and feasible.
It was filed in good faith.
Unsecured creditors (credit card companies, for example) will receive at least as much as they would have in a Chapter 7 bankruptcy.

During the confirmation hearing, creditors are allowed to appear and raise objections if they have them. So can the trustee. If you have an attorney representing you in the bankruptcy, you likely won’t have to attend this hearing as long as your attorney is there on your behalf. That’s up to you and your attorney. If you have a bankruptcy attorney, it’s wise to rely on them for guidance throughout the process.

Can bankruptcy save my home?

2022-09-14T14:20:39Z

When homeowners fall into debt, they may get into a situation where their mortgage is only one of their many types of debts, and they may struggle to keep up with repayments on this loan as well as others. This is particularly common when a person has unexpectedly lost their job or source of income. If you start to default on your mortgage repayments, you will face the threat of losing your home. When you realize that you will potentially have a problem in making your mortgage repayments, it is important that you take action to inform your lender and to consider the options that you have at your disposal.

Should I file for bankruptcy immediately?

Filing for bankruptcy is not the first thing that you should do after realizing that you may have a problem paying your mortgage going forward. You should first contact your bank and consider what you can do about the issue. They may grant you a holiday from payment obligations so that you can focus on getting back on track, and then filing for bankruptcy will not be necessary. However, if you have complex debt and income issues, bankruptcy may be the best way forward.

Is it possible to file for bankruptcy without losing my home?

This depends largely on the type of bankruptcy you file for and the specifics of your situation. If you file for Chapter 13 bankruptcy, you'll participate in a repayment plan. Therefore, you will not need to liquidate any assets as part of the bankruptcy process. However, if you file for Chapter 7 bankruptcy, you will need to liquidate assets, including property, in order to pay off debts. Filing for bankruptcy will almost certainly delay the repossession of your home because of the automatic stay that is put in place. If you are currently struggling financially, it is important that you take action to understand the options that you have and learn whether bankruptcy is the right choice for you.