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Filing Chapter 13 Bankruptcy In Virginia

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Chapter 13 bankruptcy is a reorganization of the debitors assets. Generally, the debitor will be required to pay back all or a portion of the non-excludable debt over a period of 3-5 years. However, special circumstances must be met to file bankruptcy under chapter 13.

The debitor must have regular income that can support the payment plan the trustee provides over the next 3-5 years. Also, the debitors secured debts must not exceed $1,149,125 and unsecured must be lower than $383,175; otherwise bankruptcy must be filed under a different chapter. To determine if the debitor is eligible for chapter 13, they must take an online credit rating test required by the courts.

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The difference between chapter 7 and chapter 13 can be confusing, that's why we've outlined some key differences here for a better understanding:

  Chapter 7 Chapter 13 Comments
How long will I be in bankruptcy? Approximately 130 days from filing to completion. 36 months to 60 months.
What is the "Means Test" Congress has determined that those individual who are consumer Debtors and can pay back a material amount of their debt must file a Chapter 13 case rather than chapter 7. The means test is complicated, but in simple terms if you are over the "mean" income for your geographic area, and your budget indicates that you can pay more than $ of the course of the case you must proceed in chapter 13.
Automobiles Can be "reaffirmed" or "Redeemed" if you want to keep the car or "surrendered" if you don't If the vehicle was purchase within 21/2 years of when you file your case, the interest can be modified to approximately 5% and you keep the car. If purchase more than 2 1/2 years ago, you can modify the interest to 5%, AND only pay the value of the car rather than the total amount owed.
Your Home A chapter 7 filing will automatically cancel all foreclosure activity, for a while. In chapter 7 you cannot modify your home loan at all. If your home loan is in arrears (you are behind) the Mortgage company can foreclose during your case with the permission of the Court or once your case is over. You can catch up your "first mortgage" arrearages over time and the mortgage company has to accept those payments. You have to make all of your regular first mortgage loan payments when they are due. In addition, if you have a HELOC loan which is really "unsecured based on the value of your home, you can "strip off" the loan, so that it is no longer a lien. Saving your home is perhaps the primary reason to elect to file a chapter 13 bankruptcy. In order to be successful we must obtain an appraisal form a qualified appraiser. As a rule of thumb, real estate values are coming in under the city assessment for tax purposes.
Tax Debts Most (but not all) tax obligations are "non-dischargeable" A Chapter 7 bankruptcy will stay or stop collection by the IRS while the case is pending but will not prevent the IRS or the State from collecting once the case is over. Chapter 13 could allow you to pay non-dischargeable tax debts over the term of the plan, or 36 -60 months
Co-Debtors Chapter 7 doesn't protect people who have guaranteed your debts. In many cases, Chapter 13 protects family and friends who have guaranteed your debts provided you are proposing to pay those debts during your plan.
Credit Rating A chapter 7 bankruptcy stays on your credit report for 10 years after you receive your discharge in bankruptcy. Because you will discharge virtually all of your debts, your "Loan To Income (LTI)" ratio will improve immediately and LTI is an important element of your credit score. A Chapter 13 bankruptcy stays on your credit report for 7 years after you receive your chapter 13 discharge in bankruptcy. Because chapter 13 plans are a minimum of 3 years long, there is no difference as to how long a bankruptcy filing stays on your credit report. Nevertheless, the existence of the bankruptcy does not mean that you cannot get credit or even buy a home. Your credit will begin to improve within months of receiving your discharge

Fililng a chapter 13 bankruptcy requires an attorney with experience and knowledge in the field. If you are considering filing for bankruptcy and would like to discuss your unique situation with an experienced Hampton Roads bankruptcy attorney, please contact our offices immediately for a free initial consultation. Our office is open Monday through Friday from 9:00 am to 5:00 pm and on Saturdays per request. We also welcome any foreign or non-english speakers. Please contact our office by email or at 757-233-0045

NEWS & PUBLICATIONS

5/23/14 | The Essentials To Starting Over Read More


3/15/14 | Is The Act Of Filing Bankruptcy Immoral? Read More


1/24/14 | Difference Between Filing a Chapter 7 and Chapter 13. Read More


7/14/14 | The Virginia Chapter 7 Means Test Read More

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