If you are struggling under the weight of financial obligations you can no longer afford to keep up with, bankruptcy could be a powerful tool to help you achieve a clean slate. While you might be aware of how bankruptcy could help you long-term, you might be concerned about how long it will stay on your credit report.
Here, our Virginia bankruptcy lawyers at The Law Office of Steven D. Barnette, P.C., discuss the different types of bankruptcy and how long it might impact your credit.
Types of Bankruptcies and How Long They Last
The most common bankruptcy is a Chapter 7. In a Chapter 7, the debtor’s non-exempt assets are liquidated. Then, some creditors are paid, and the remainder of the debts are discharged. The pros and cons of a Chapter 7 are:
- Almost all debts are dischargeable in a Chapter 7 (student loans are among the few that are not).
- In most states, nearly all assets are exempt from liquidation. For instance, in Virginia, you may keep household furnishings up to the value of $5000.
- Your homestead and personal vehicle are usually exempt up to certain limits.
- Property covered by a loan is exempt if the loan payments are current.
- Chapter 7 bankruptcies remain on your credit record for ten years.
A Chapter 13 bankruptcy is sometimes known as a “reorganization.” In this type of bankruptcy, the debtor and creditors negotiate a plan that lets the debtor repay the debts over a period of time, usually three to five years. At the end of that period, if the debtor has stayed current with the payment plan, any remaining debt is discharged. The advantages and disadvantages of a Chapter 13 are:
- You can keep nearly all your property with a Chapter 13 since you will be repaying the debts.
- Chapter 13 bankruptcies stay on your credit record for seven years.
- It is easier to repair your credit rating after a Chapter 13.
- If you default on your repayment plan, you will be liable for the remainder of the outstanding debt.
- You must have sufficient disposable income to qualify for a Chapter 13.
How Does a Bankruptcy Attorney Help?
If you believe filing bankruptcy would be in your best interest, consult a bankruptcy attorney. Bankruptcy law is complex, and there are several steps you must take before the actual filing to protect your assets.
For example, before you file for a Chapter 7, you must take a qualifying means test. If your income is above a certain amount, or if your debts consist primarily of consumer debts (such as credit card debts), then you will need to take a means test to determine whether you could pay back some of your debt via a Chapter 13.
To file a Chapter 13, you must show you have a sufficient income that will allow you to make your personal expenses and meet your payment plan each month. If your secured and unsecured debts are above the statutory limit, you cannot file a Chapter 13. The statutory limit changes periodically, which is another reason to consult an attorney.
If you are presently involved in a foreclosure, eviction, or other court case involving your finances, filing for bankruptcy places an automatic stay on those proceedings while the bankruptcy is pending. This also means that any creditors must cease collection efforts until the bankruptcy is discharged.
At the Law Offices of Steven D. Barnette, P.C., our Virginia bankruptcy attorneys are well versed in the complexities of bankruptcy laws and can help you determine which of these options is best for you. We can negotiate with creditors and other attorneys on your behalf and assist you with the complicated paperwork and deadlines associated with the bankruptcy.
When you have your bankruptcy hearing, one of our attorneys can appear on your behalf and provide the support you need to make it through this process. Contact us today at the Law Offices of Steven D. Barnette, P.C. to discuss your financial status and bankruptcy options.