If you are faced with insurmountable debt, you are probably concerned about your financial future. Depending on the circumstances, one option may be to file for Chapter 7 bankruptcy protection. Available to both individuals and businesses, this form for bankruptcy is designed to eliminate most of your unsecured debt. Nonetheless, filing for bankruptcy has serious long-term consequences, not the least of which is its effect on your creditworthiness. This is why the advice and guidance of a trustworthy bankruptcy attorney is invaluable.
Alavi Law, PLLC provides comprehensive debt relief services to clients in Vienna and throughout the Commonwealth of Virginia. By understanding your unique circumstances and objectives, we will help you explore all of your debt relief options and advise you on whether you are eligible for bankruptcy protection. If filing for Chapter 7 bankruptcy becomes necessary, we will assist with gathering the necessary financial information, prepare and file the petition and related legal motions, and guide you through the legal system. We also work with clients on the other end of the spectrum by advising on credit repair strategies and reorganizing their financial future.
What is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is also referred to as a liquidation bankruptcy because some of your property and/or assets may be sold to pay off as much of your unsecured debt as possible. Unsecured debt is an obligation with no specific property as collateral like a house or a car. Any remaining debt is subsequently eliminated or discharged.
Am I eligible for Chapter 7 bankruptcy?
To be eligible for Chapter 7 protection, your income must be lower than the median income in the Commonwealth of Virginia. If you earn more than the median income, you must undergo a means test to show that your disposable income is insufficient to cover your debts. If you pass the means test, the bankruptcy can proceed. On the other hand, you cannot file for Chapter 7 bankruptcy under the following conditions:
- Previous debt was discharged under Chapter 7 within the past eight years
- Previous debt was discharged under Chapter 13 within the past six years
- You defrauded, or attempted to defraud, creditors or the bankruptcy court
- You failed to attend credit counseling prior to filing the bankruptcy petition
Debts That May Be Eliminated Under Chapter 7
A Chapter 7 filing may eliminate unsecured debt such as:
- Credit cards
- Personal loans
- Medical bills
- Debts arising from lawsuits/civil judgments — including personal injury claims
Depending on the circumstances, a Chapter 7 bankruptcy may also eliminate certain tax liabilities — for tax periods that are at least three years old — as well as penalties and interest on other tax debt. It is worth noting, however, that other debts such as student loans, spousal maintenance (alimony), child support, and criminal fines cannot be discharged in a personal bankruptcy.
Will I lose all my property if I go bankrupt?
One misconception about bankruptcy is that you will lose all of your property and possessions. This is not the case, however, since certain types of property are protected, or “exempt,” from being sold to pay off unsecured debt. This includes your home, automobiles, as well as personal property such as furnishings, clothing, and jewelry. Other property is not exempt, however, including cash, bank accounts, stocks, bonds and vacation homes.
How do I file for Chapter 7 bankruptcy?
Before you are permitted to file for Chapter 7 bankruptcy, you are required to undergo credit counseling with an agency approved by a bankruptcy trustee. After you have completed the course, you will be allowed to file a petition with a local bankruptcy court. Once your petition is filed, the court will issue an order referred to as an automatic stay which bars creditors from proceeding with debt collection activities. This includes repossessions, foreclosures, garnishments, and civil lawsuits without permission from the bankruptcy court. The automatic stay is effective until the bankruptcy is either dismissed or discharged.
Additionally, a trustee will be appointed to oversee your bankruptcy case. In addition to attending credit counseling, you must also appear at a meeting of creditors known as a 341 Meeting. Although creditors are permitted to attend the meeting and question you about your financial situation and property, most creditors do not attend. The trustee is responsible for conducting the hearing at which you are questioned about the petition and the accuracy of required information. If any financial information is missing, you must quickly provide whatever was lacking, otherwise, the bankruptcy may be dismissed.
Contact A Chapter 7 Bankruptcy Attorney
In sum, a Chapter 7 bankruptcy allows you to eliminate much of your unsecured debt and gives you a much needed second chance. At the same time, the potential loss of some of your property and damage to your creditworthiness means that seeking bankruptcy protection is a serious consideration.
At Alavi Law, PLLC, we routinely prepare and file Chapter 7 bankruptcy petitions on behalf of clients and assist with compiling and submitting the required financial information. This includes income, expenditures, secured and unsecured debt, a list of exempt property, as well as details of prior property sales. If you are financially pressed and struggling with debt, our experienced bankruptcy attorneys can help. We offer knowledge and compassion while also delivering an exceptional client experience. When you’re ready to make a fresh start, get in touch with us by calling the office or completing the convenient contact form on our website.