Medical expenses and overwhelming credit card debt can paint Virginia residents into a financial corner. If you feel you have few options, bankruptcy can help you get your finances under control and move forward with the rest of your life.
According to the Virginia State Bar, an automatic stay goes into effect as soon as you file the bankruptcy petition. This injunction prohibits most debt-collection efforts against you.
Protection during bankruptcy
Both Chapter 7 and Chapter 13 use the automatic stay. It doesn’t require judicial review and effectively stops harassing creditor calls and letters. If you pass the means test and qualify for Chapter 7, a court trustee negotiates a settlement amount, sells nonexempt assets and pays creditors. Once paid, you have no further responsibility for the debt. In Chapter 13, the trustee negotiates with creditors and works out a three- to five-year repayment plan.
The automatic stay remains in effect throughout the bankruptcy proceedings. In Chapter 7, this may last six months; with Chapter 13, it remains in place for the duration of your repayment plan.
Debts covered by the automatic stay
The goal of bankruptcy is to help you get back on your feet. This becomes nearly impossible if the bankruptcy court liquidates every asset or sets unreasonable repayment terms. As a result, certain property remains exempt or protected from the proceedings. Your home, car and home goods may qualify as exemptions.
If your mortgage lender began foreclosure proceedings before your filing, the automatic stay pauses the process. Wage garnishments stop, and if the utility companies threaten to shut you off, the automatic stay prevents that as well. The Bankruptcy Code also protects a percentage of income, retirement accounts and various personal property. The unique details of your situation determine which type of personal bankruptcy works best for you.