Virginia Bankruptcy Laws: What are the Laws Regarding Bankruptcy in the State of Virginia?
Since bankruptcy is controlled by federal law, if you wish to file for bankruptcy in Virginia, you will have to follow steps and procedures like in every other state. The main difference lies in the property which is exempt from being seized by the creditor or trustee, as this is under the jurisdiction of the state of Virginia.
That being said, here, we will discuss the laws and other important details that are related to bankruptcies in the state of Virginia.
Chapter 7 and Chapter 13 bankruptcy
Chapter 7 and Chapter 13 are the two most common bankruptcy cases, but how do you know which one to file for? When many Virginia residents find their debts piling up, the best way to regain their financial foothold is to file for bankruptcy. Generally, most debtors file for Chapter 7, as this is specially designed for people with low income. If you file for Chapter 7, a trustee will collect your non-exempt assets, liquidate them and provide the net proceeds to your creditors, thereby clearing your debts. Any exempted amount is then given to you.
However, if your income is higher than the median income of a household your size in the state of Virginia, you cannot file for Chapter 7 bankruptcy in Virginia. Your best option here to file for Chapter 13, where you will have to come up with a three to a five-year repayment plan you will propose to your creditors. During the stipulated time, you can use your future income to pay your debts. Chapter 13 is ideal for people who wish to prevent a foreclosure on their house, pay back taxes, make up for the missed mortgage or car payments, keep the valuable non-exempt property, stop interest from piling up on your tax debt, whether local, state or federal, and many more.
Since your whole repayment plan depends on your future income, this means that you must have a regular income source, on top of having a disposable income you can use to pay your creditors.
Filing for bankruptcy in Virginia
As the two most common types of bankruptcy cases, filing for either Chapter 7 or Chapter 13 are the most popular options for residents of Virginia, who find themselves drowning in debt. The debtor must pay a filing fee and file a bankruptcy petition with the bankruptcy court. Critical financial information such as income, assets, debts, and a list of all creditors with their addresses should be provided. This allows the court to notify the creditors that the debtor has filed a bankruptcy petition. Whether you file for Chapter 7 or Chapter 13, you must first go through credit counseling with an approved non-profit agency before you can file your petition.
Additionally, Virginia bankruptcy laws require the debtor to share with their trustee, copies of their federal tax returns for the tax year ending before the petition was filed, as well as certain copies of their pay stubs.
Virginia Bankruptcy Exemption
Virginia bankruptcy laws allow you to protect all or some of your property while going through bankruptcy. This includes $1,000 of the value of clothing items, $6,000 of the value of an automobile, $5,000 of the value of home furniture, $5,000 of the value of tools of the trade, wedding and engagement rings and more. If any property is held as “joint tenancy by the entirety,” then it is protected from the debt of either one of the spouses. In most cases, this exemption is used for the protection of equity in a marital home.