People in Virginia who are struggling to make payments on their debts might consider filing for bankruptcy. There are a number of factors they should consider before they file, including the total amount of debt, types of debt and income levels. For most individual filers, there are two types of bankruptcy that might work to discharge their debts: Chapter 7 and Chapter 13.
In a Chapter 7 bankruptcy, the petitioner liquidates his or her assets in order to pay off debts as much as possible. In many cases, the petitioner will be able to keep some important assets like a car or tools of the trade. Not every person can get a discharge via Chapter 7 bankruptcy. The petitioner must first pass the means test by comparing income and allowed expenses to determine disposable income, which must be below a certain amount to qualify for Chapter 7.
In a Chapter 13 bankruptcy, the petitioner submits a plan to pay down debts over the course of three to five years. Once the plan has been completed, the remaining debts are discharged. Chapter 13 is sometimes called wage earner’s bankruptcy because it is designed for people who have regular income but who can’t keep up with debt payments.
Certain types of debts are not usually dischargeable in bankruptcy, including alimony, child support and many tax debts. Some types of debt are dischargeable via Chapter 13 but not Chapter 7.
An attorney who handles personal bankruptcy cases might be able to help people determine what options they have to reduce or eliminate personal debts. The attorney might help organize and categorize assets and liabilities, represent the client during the meeting of creditors or communicate with the bankruptcy trustee. An attorney might also help the client complete required pre-bankruptcy counseling or draft and file the petition for bankruptcy.