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A Guide to Virginia Bankruptcy Laws

A Guide to Virginia Bankruptcy Laws

When the unemployment rate begins to rise, many Americans that are out of work may be having a difficult time making ends meet. Their priority will be to pay their mortgage, car loans, utilities and put food on the table. Purchasing any luxury items or taking a vacation is the last thing on their mind. As people struggle to meet their financial obligations, they often turn to using credit cards in the interim. While this may be a good idea at the time, it could result in mounting debt that may be impossible to pay off.

Choosing to file for bankruptcy is not an easy decision, but one that may be necessary when facing foreclosure or threatened with lawsuits or wage garnishments from aggressive collection agencies. Individuals that have very little property and limited financial resources may be able to qualify for Chapter 7 bankruptcy. This would allow them to discharge nearly all of their unsecured debts and retain certain types of property through state exemptions.

Virginia State Exemptions

When individuals file for either Chapter 7 or Chapter 13 bankruptcy, they are allowed to keep certain property as exempt. This means that the trustee cannot take an asset and sell it off to pay the creditors. Some states allow petitioners to choose between using federal or state exemptions. Those who file for bankruptcy in Virginia must use the state exemptions, which are listed below:

  • Homestead (must file homestead declaration before filing for bankruptcy) — $5,000 plus $500 per dependent (over age 65 the amount is increased to $10,000)
  • Motor Vehicles — $2,000 ($10,000 if needed for occupation or school)
  • Household goods and furnishings — $5,000
  • Tools of the trade — $10,000
  • Family heirlooms and portraits — $5,000
  • Wild card exemption (unused portion of homestead or personal property exemption — $10,000 (amount may be doubled for disabled veteran)
  • 75 percent of all disposable wages and income
  • Wearing apparel (clothing) — $1,000

In addition, there is no limit on the value of wedding and engagement rings and any retirement plan. All animals owned by the family as pets are also exempt property. The state exemptions are available to people that are have lived in Virginia for the past two years prior to filing their bankruptcy petition.

The Differences Between Chapter 7 and Chapter 13

The federal government passed new bankruptcy laws in 2005. The Bankruptcy Abuse and Prevention Consumer Protection Act makes it more difficult for individuals to qualify. Debtors must pass a means test to determine if their income level is within range. If their monthly income is less than the median income where they reside, they will be able to file Chapter 7 and discharge their debts. People that own a lot of property and have a regular income most often choose to file under Chapter 13. This allows them time to reorganize their debts and formulate a repayment plan better suited to their financial situation.

When to Hire a Virginia Bankruptcy Lawyer

Trying to understand the different types of rules that apply to state and federal bankruptcy laws would give anyone a headache. The laws periodically change to adjust for inflation. Each person’s financial situation is different and figuring out which chapter is appropriate may be difficult and time consuming. When you retain the services of a bankruptcy attorney, they can examine your current predicament and make a legal recommendation. Bankruptcy lawyers will usually charge one flat fee to help the petitioner through the entire case. This can be a huge comfort when facing many challenges ahead.

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