What Is Chapter 7 Bankruptcy In Virginia?
People are much more alike than they are different. That’s why we relate to how you feel right now. Having debt can be overwhelming. Filing a Chapter 7 case is a very quick mechanism to get out of your debts. It’s fast. It’s easy. It takes 90 to 110 days, at the end of which you receive a “discharge”. A discharge is a forgiveness of all your debts, all debt except for four kinds. First, you can’t get out of spousal support and child support. Second, are taxes, unless they are income taxes that are more than three years old, and the return was filed more than two years prior to the bankruptcy filing. And, they have to be assessed or assessable for the last 240 days. Third, is fines and restitution in a criminal case, such as a parking ticket. The fourth kind is any student loans, which is so unfortunate.
We had somebody who owed the local community college because she had backed out of her classes. She can get out of that debt because that is not a student loan. That is tuition. Tuition is not a student loan. With a student loan the lender typically writes the borrower a check, and then you can use it for books, food and rent. Typically, it is used for tuition, but the point is, it is an actual loan. When you owe a school directly, that’s not a student loan.
There is an exception for student loans, and that is a showing of hardship. In the state of Virginia, the judges have ruled consistently that the hardship level has to be extremely high. For instance, we had a lady come in yesterday who had a disability. A disability could present itself as an extreme hardship. But, it turns out that the debt she wanted to get out of was not hers; it was her husband’s debt. So, we are not going to be able to help her. Too often we are not able to get people out of their student loans.
There is a fifth category of non-dischargeable debt, and that is debt incurred by a fraud. The typical definition of fraud would be any debts of more than $500 incurred within the 90 days prior to filing, for luxury goods or services.
The Requirements For Filing A Chapter 7 Bankruptcy In The State Of Virginia
When Congress enacted the new bankruptcy law on October 17th of 2005, they implemented something called the Means Test. The Means Test has, as its first “test”, if you will, “Do you, that’s you and everyone in your household, do you make more or less than the median income for the state in which you live, dependent upon your household size?” And household size sometimes starts with what we call “heads to beds”. On the other hand, if we have a guy living with his girlfriend, we do not need to count the girlfriend has a household member. So, we would simply have him as a household size of one.
The median income figures change every November 1st and April 1st. This last April 1st the median income in Virginia for a household size of one rose to $55,055. For a household size of two, it is $69,277. A household size of 3 is $79,965. A household size of 4 is $92,733. When you go to a household size of 5, 6, 7, 8, 9 and so on, you simply add $8,400 to that $92,733 for each additional household member.
There is a class that you have to take before you file your bankruptcy and another after you file. The one after you file is called Debtor Education. It’s actually very educational. It’s a two hour class that can’t be done in less than two hours. It is intended to teach you how to build wealth, how to build for retirement, and how to rebuild your credit, which is what this whole experience should be about. The class before you file is called Credit Counseling and it takes about an hour to complete. When Congress changed the law in 2005 they had in mind that people might have an alternative to filing a bankruptcy by going into credit counseling. Instead, a cottage industry arose where for a small fee, they provide you something called a credit counseling certificate. Both Credit Counseling and Debtor Education results in a PDF document that simply says you did it. It is a government form that is same for all fifty states and four territories. They send that form to us by email, so that the client doesn’t need to download it or print it out. They must take this class before they file.
Last year the Virginia State Bar issued an ethics opinion that said that a Chapter 7 attorney in Virginia should not file the case unless they have first been paid their fees in full. The concern is that if you owe your attorney on the day you file, then your attorney is technically a creditor, and this creates a conflict of interest.
The number one rule of bankruptcy is, if I tell you nothing more important today, the number one rule of bankruptcy is that you must list all creditors: “father, mother, sister, brother” The second rule is you must list all your assets.
We get a lot of people calling who say, “Can I just file on my medical bills?” No, there is no such thing as a medical bankruptcy. They ask, “Can I transfer my real estate out of my name to my brother and then have my brother transfer it back to me after my bankruptcy?” No, that is fraud, you cannot do that. Sometimes we are asked if you have to put the house on the bankruptcy petition, and the mortgage company. We tell them that the creditor will get a notice, but remember, “You pay you stay; you don’t you won’t!” So sometimes they are reluctant. They don’t want their mortgage company to know that they filed. But it’s routine. The mortgage companies are used to getting notices; and as long as they get their payment, you’re not going to have any trouble with them. Also, if you’re behind on your mortgage, you can do a Chapter 13 to catch up on the payments.
We just stick to our guns and remind everyone that you must list all debt and you must list all assets. When asked, we let folks know that it’s OK to pay creditors after you file bankruptcy. It’s OK to pay your dentist after you file, but you have to list the debt.
For more information on Chapter 7 Bankruptcy In Virginia, a free initial strategy session is your next best step. Get the information and legal answers you are seeking by calling (540) 788-2273 today. Call today. You’ll be glad you did!