The cost of living, medical bills and unexpected expenses can make it challenging for Virginia residents to make ends meet. If you rely on credit cards to pay for basics like groceries and utilities and make the minimum required payments monthly, chances are you are not making any headway towards clearing your bills. We often help clients determine if filing bankruptcy can help them get out from under overwhelming debt.
According to the U.S. Courts, Chapter 7 of the bankruptcy code provides for the sale of your nonexempt property and the distribution of the proceeds to your creditors.
Chapter 7 exempt property
The goal of Chapter 7 is to help you get a fresh start. This requires that you retain a certain amount of property, often most of your property. Assets you may keep include the following:
- Household furnishings and clothing
- Tools or equipment needed for work
- A modest amount of equity in a vehicle
- Retirement accounts
- Various cash accounts and other assets under the Homestead Exemption
You must pass a means test, which shows that you are eligible for Chapter 7 before filing a petition with the bankruptcy court. Once approved, the court appoints an official to your case. This trustee takes care of liquidating your nonexempt property and pays your creditors. If you have no priority debt, such as child support, alimony or tax debt, the trustee pays personal loans, credit card balances and utility bills. However, most cases are no-asset cases (meaning all your assets are exempt) in which the trustee does not sell any property or pay any of your creditors.
Chapter 7 benefits
Filing for bankruptcy can help you regain financial freedom and get out from under an overwhelming debt burden. Although chapter 7 bankruptcy can stay on your credit for up to 10 years, it can discharge all your unsecured debt, including medical bills. The entire process can take less than six months, and your credit score may rise quickly afterward.