Chapter 7 Bankruptcy – Northern Virginia

Chapter 7 is the most common and simplest form of bankruptcy. It provides for the discharge of most debts and may involve the liquidation of assets. Although most debts are discharged, a debtor may choose to continue payments on other debts, such as home or vehicle loans.

If you are considering bankruptcy as a solution to your financial challenges, talk to the Chapter 7 bankruptcy attorneys in Northern Virginia at Tyler, Bartl, Ramsdell, & Counts, P.L.C.  We have been providing quality legal advice at reasonable prices since 1986 and can provide you with a free Chapter 7 bankruptcy consultation.  Please call us for an appointment or complete the short contact form to get answers to your difficult financial questions!

Who Can Benefit from Chapter 7

Both businesses and individuals benefit from Chapter 7 bankruptcies.

Individuals must qualify in order to be eligible for Chapter 7 relief. Qualifying is based primarily on household income, and may require application of the “means test” for higher income earning households.  In limited circumstances, an individual may be eligible for Chapter 7 despite their income, so long as the individual’s debts are primarily non-consumer (i.e. taxes, business debts, etc.) debts.  Sometimes individuals are denied a discharge in Chapter 7 if they have been granted a discharge in a prior bankruptcy case.

Individuals are entitled to keep their exempt property.  Exemptions vary depending on the individual’s state of residence, which affects the types of property that may be exempted. In Virginia, some of the exemptions available include:

• 75% of your earned wages
• Household furnishing up to $5,000 per debtor
• Motor Vehicles up to $6,000 of equity per debtor
• Retirement accounts (subject to some limits)
• Clothing up to $1,000 in value per debtor
• Wedding ring with no limit to value
• $5,000 per debtor ($10,000 if over the age of 65) to protect anything else or to supplement the foregoing exemptions.

Assets that cannot be exempted may be sold by the trustee to pay creditors, even if the payoff is only a small fraction of the total debt.

Individuals benefit from Chapter 7 by receiving a discharge of their debt obligations.  Most debts are discharged in Chapter 7, but some survive.  These include:

• Child support
• Most taxes
• Student loans
• Debts incurred through fraud
• Spousal support

Most liens on property also survive the bankruptcy.  This is typical for vehicle or real estate loans.  Although the individual is discharged of the debt, the fact that the lien remains requires the debtor to continue making payments to the lender, or surrender the collateral.

While the future availability of credit depends on a number of issues, a Chapter 7 bankruptcy remains on an individual’s credit report for ten years, whereas a Chapter 13 bankruptcy remains for seven years.  Our firm does not profess to be credit experts and the effect a bankruptcy will have on each individual’s credit varies from case to case.

Chapter 7 is also available for businesses.

If a business gets into a tough financial position without other resources (i.e. cash, lines of credit, etc.) to bail it out, Chapter 7 bankruptcy can provide relief.  Sometimes a business can be forced into bankruptcy by its creditors.  In Chapter 7, the business will cease operations, unless those are continued by a Chapter 7 trustee.

A trustee is appointed immediately and has wide powers to look at the business’ financial situation. Most of the time all assets are sold and the proceeds are distributed to creditors. Employees may or may not lose their jobs.

Secured creditors have the right to property used as collateral for the debt. That right cannot be eliminated due to the bankruptcy filing. However, those creditors do not participate in the distribution of liquidated assets made by the trustee.

A business does not receive a discharge of its debts, but the business entity is dissolved. The bankruptcy offers an informal “going out of business” notice to its creditors and the case closes once all assets have been administered.  The debts may continue to exist until the statute of limitations on those debts expires.  This is important, because for most small business, the individual owners have offered personal guarantees on the debts of the business.  If the creditors seek payment on these guarantees, the individual owners themselves may also need bankruptcy protection.

Why Chapter 7

There are several reasons and advantages to filing a Chapter 7 bankruptcy.

• You get a “fresh start”
• Most debts are discharged
• In most cases, property will be exempt
• You can avoid a repayment plan
• Collection activity stops
• You can convert to a Chapter 13 bankruptcy
• You can also reaffirm some debt to keep the collateral for the debt (i.e houses, cars)

To fully understand the complexities, advantages and disadvantages of bankruptcy as an option for your particular financial situation, talk to our Chapter 7 bankruptcy attorneys in Virginia today!

You won’t know until you give us a call at 703-549-5000 and ask for a free consultation.