In many cases, filing for bankruptcy is one of the most stressful financial issues with which a person can be confronted. Even before COVID-19, many people would ask us: “How do you file for bankruptcy in Virginia?” because it’s a complicated process.
With the help of a TPI Group tax attorney in Virginia, filing for bankruptcy is easy and straightforward.
What Is Bankruptcy?
When you have amassed a high amount of debt, either personally or in business, and you can’t find a way to pay it back, bankruptcy is a possible solution.
The purpose of bankruptcy is to give you, the debtor, a chance to make a fresh start by paying debts off in increments, restructuring them, or eliminating them. Bankruptcy is a two-way street; it also allows creditors to get the money owed to them.
How Do I File for Bankruptcy?
To start the process, you must pay a filing fee and file a petition with the bankruptcy court. Next, the Office of the United States Trustee, a division of the Justice Department, will appoint you with a trustee from their list.
Trustees (also called panel or bankruptcy trustees) are private individuals and often lawyers or accountants who are experienced with this type of bankruptcy. You are not permitted to choose your trustee, as they are expected to remain fair and impartial.
You will need to provide and certify your financial information, including a list of your debts. The trustee will:
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- Review your petition and documents for accuracy and fraud
- Collect, hold, and administer your assets
Some of the trustee’s tasks are performed at the Meeting of Creditors, which you are obliged to attend where you will be required to answer questions under oath.
Prior to filing for Chapter 7, Chapter 13 or any other type of bankruptcy (more on this below), you are required to participate in consumer credit counselling, which will be carried out through a nonprofit agency.
Filing for a Virginia bankruptcy provides you with some room to breathe while you get your finances in order. This is called an automatic stay, where most collection actions against you or your company are temporarily stopped, and creditors must get the approval of the Federal Bankruptcy Court before they can pursue you again.
What Are the Different Types of Bankruptcy?
To accommodate every kind of case and filer, the U.S. created a Bankruptcy Code that divides each type of bankruptcy by chapter. Certain chapters are designated to personal debt, such as Chapters 7 and 13, whereas corporate debt corresponds to Chapters 7 and 11.
Businesses that file for Chapter 7 bankruptcy are typically interested in shutting down their business, whereas with Chapter 11 bankruptcy, the goal is to restructure business so it can remain in operation.
What Is Chapter 7 Bankruptcy?
Chapter 7 focuses on liquidation, and enables individuals and businesses to be relieved of heavy unsecured debts, such as credit card and medical bills. Unlike the Chapter 13 personal bankruptcy, a Chapter 7 bankruptcy does not usually involve paying debts back.
However, while Chapter 7 ultimately will eliminate your existing debts, there are some debts that cannot be removed (and must be paid), such as:
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- Alimony and child support
- Fraudulent debts
- Student loans
- DUI claims
For a personal Chapter 7 bankruptcy, some assets are exempt from being sold to pay off your debts. These include items such as household furniture, food, personal items and clothing. Any assets that are not exempt are collected and sold, with the proceeds of the liquidation split among your creditors.
Businesses filing for Chapter 7 do not get to claim exemptions – everything must go!
What Is Chapter 13 Bankruptcy?
This type of bankruptcy allows for a reorganization that you will repay through a repayment plan for the next three to five years if you have a regular income with some money available each month.
If you’re a sole proprietor or a high-income individual, a Chapter 13 bankruptcy offers benefits that Chapter 7 does not, including keeping property and catching up on debt payments.
A Chapter 13 process is complete once you’ve fulfilled your repayment plan.
What Is Chapter 11 Bankruptcy?
While individuals and businesses can file under this Chapter, it’s mostly designed for larger businesses, and only in some cases can high-income individuals use it, ones who have too much debt and do not qualify for a Chapter 13 bankruptcy.
Under Chapter 11, the debtor must provide a reorganization plan under a timeline that can last anywhere from 4 to 18 months. Under this plan, creditors are paid back on a priority basis, with some paid before others, and are the priority.
Debtors may maintain control of their property, during this process.
Get Financial Advice from Our Team in Virginia
TPI Group will determine which type of bankruptcy your case falls under and provide you with legal advice. We will walk through the processes and ensure that your finances are in order, whether you need to file for bankruptcy, begin estate planning, or work on tax preparation.
If you have a temporary loss of income and want to avoid having something repossessed, we might steer you towards Chapter 13 bankruptcy. Conversely, if you’re having trouble making ends meet because of wage garnishments due to overdue bills, Chapter 7 might be a better fit.
What is most important is realising that bankruptcy is nothing to be ashamed of. Getting a fresh start is necessary sometimes, and that’s why getting in touch with us is always a good idea. We can help put you on the right path, which gives you the most important thing of all: peace of mind.