Chapter 7 Bankruptcy by a Fairfax Lawyer

The two primary forms of consumer bankruptcy filed in Virginia are Chapter 7 and Chapter 13. For extensive material on chapter 7 bankruptcy, read more at our informational Chapter 13 Bankruptcy page.

What is Chapter 7 bankruptcy

Declaring Chapter 7 bankruptcy in the state of Virginia results in a discharge of all qualifying debts. In some ways it can be viewed as a “new” or “fresh” start as the debtor is not held accountable for the debts after declaring bankruptcy. A large number of debts qualify to be discharged under chapter 7 including:

  • Consumer debts
  • Credit card debt
  • Medical payments
  • Home mortgages
  • Lawsuits
  • Auto loans

Some debts on the other hand cannot be discharged. These include:

  • Alimony
  • Child Support
  • Fraudulent Debts
  • Certain taxes
  • Student loans

Once a bankruptcy case has been approved and debts are discharged, the debtor is able to begin building their credit again. Chapter 7 bankruptcy may only be declared once every eight years.

Declaring Chapter 7 Bankruptcy

Declaring Chapter 7 bankruptcy is a straightforward process although it has numerous steps. In order to determine whether an individual indeed qualifies for Chapter 7, various forms are used.

Means Test – The means test is a mathematical formula which takes into account an individuals income versus all expenses the individual incurs regularly. It can be defined as, “the eligibility for relief for debtors who have sufficient financial means to pay a portion of their debts”. If an individual passes the means test, then it is considered by the court that they do not have the means to pay off their debts. If an individual fails the means test, it means they have the ability to pay off their debts in a more structured Chapter 13 bankruptcy.

During a chapter 7 bankruptcy, all assets are recorded to determine whether they hold any real value. Assets can be seized and liquidated by the court as a way to pay off creditors. This includes real property such as homes. However, declaring a chapter 7 bankruptcy will immediately halt any foreclosure procedures.

Is Chapter 7 right for me?

Those who would benefit from declaring chapter 7 bankruptcy typically have a considerable amount of debt. A good starting place for determining whether or not to declare chapter 7 is by completing the means test, which will show if it is possible for the debts to be paid off in any structured way. Typically chapter 7 is only declared is debts are too overwhelming to manage using a regular payment plan. During the chapter 7 process an income vs. expense report is used as a way to view whether the debtor has any disposable income to put towards debts. Although the most important indicator is still the means test.

Life after Chapter 7

A common misconception surrounding chapter 7 bankruptcy is that an individual’s credit is destroyed completely. Although chapter 7 does impact credit, individuals pursuing a chapter 7 bankruptcy are able to re-build credit following the discharge of their debts. This is done in part through credit counseling which can be accessed through Patel Law firm.

Declaring chapter 7 bankruptcy can greatly improve an individual’s financial situation as it allows for them to discharge sizable debts. It can also improve quality of life by erasing unwanted stress or anxiety stemming from an unworkable financial situation. If debts are putting you in an uncomfortable and stressful financial situation and you have questions, contact us today to learn more on how you can become debt free.