Bankruptcy is a legal procedure that allows people who cannot pay their debts get a fresh start. Federal law provides for several different types of bankruptcy, although only two are commonly used by individuals. Chapter 7 is the traditional form, where the courts liquidate all nonexempt assets to pay your debts. Chapter 13 allows you to keep most of your assets and pay off your debts over time with a court-approved payment plan.
Although the federal courts handle all bankruptcy cases, living in Virginia will impact certain aspects of your case.
Where Are Virginia's Bankruptcy Courts?
Virginia has two federal court districts. The main bankruptcy court for the Eastern District is in Richmond, and the one for the Western District is in Roanoke. Each district also has multiple division offices that you may use, but you must choose one where you live.
Is Chapter 7 Bankruptcy an Option for You?
Eligibility for filing Chapter 7 bankruptcy is generally limited to people whose average monthly income for the six months prior to filing is less than Virginia's median income for a family of the same size. For 2012, that is $90,260 annually or $7,521 monthly for a family of four. If you make more than the median, you may still qualify for Chapter 7 if you pass a stringent means test.
Chapter 13 Plan Duration
The required length of your Chapter 13 repayment plan also depends on how your income compares to Virginia's median. If you make less than the median, your plan should be 36 months. The court may extend it to as much as 60 months for good cause. If your income at least matches the median, your plan will usually be 60 months, unless you can pay off all your debt, including unsecured debts, in less time.
Property You May Keep in Bankruptcy
Although both state and federal laws outline property called exemptions that you may exclude from your bankruptcy filing, Virginia has opted out of allowing you to use the federal exemptions. You must use the state exemptions. However, if you have lived in Virginia for fewer than two years, you may need to use the exemptions from your previous state of residence.
Virginia's exemptions include:
- Family bible
- Family heirlooms up to $5,000 in value
- Pre-need funeral arrangements up to $5,000 in value
- All prescribed health aids
- Tools of your trade up to $10,000 in value
- Up to $2,000 of equity in one motor vehicle
The state also provides a homestead exemption of up to $5,000 of equity, or $10,000 for those 65 or older, plus $500 for each of your dependents.
Get Qualified Legal Advice
This article provides a general overview of the bankruptcy process in Virginia. It cannot take into account the specific details of your unique situation. If you are considering bankruptcy, please talk with a Virginia bankruptcy lawyer.