Bankruptcy allows an individual or business to get rid of some or all of its debt. Generally, bankruptcy should only be considered when the debt is completely unmanageable, impossible to pay off, and there are no other options. However, in some cases, the benefits of bankruptcy can significantly outweigh the costs. Bankruptcy is governed by federal law and handled in federal courts, so the procedural and substantive rules involved in Virginia are often the same as anywhere else in the U.S. However, individual bankruptcy courts have slightly different rules for items such as exemptions, so it would be a good idea to consult with a local Covington, Virginia bankruptcy lawyer beforehand.
Chapter 7 Bankruptcy in Covington, Virginia
There are 2 common forms of consumer bankruptcy in Covington, Virginia: Chapter 7 and 13. Chapter 7 liquidates some of the debtor's assets. It requires a certain percentage of the debtor's assets to be sold off to pay as much of his or her debt as possible. However, many types of property that most people own are exempt, meaning that they don't need to be sold. This often includes houses, vehicles, insurance policies, and essential personal items, like clothing. These assets are not available to creditors.
Once the eligible property is sold, and the funds transferred to the creditors, the dischargeable debt is excused. Some types of debt, however, can't be discharged in Chapter 7 Bankruptcy in Covington, Virginia. These include student loans, criminal fines, and taxes, among others. If most of your debt can't be discharged, Chapter 7 might not be the best choice for you.
Chapter 13 Bankruptcy in Covington, Virginia
In Covington, Virginia, chapter 13 is very different from Chapter 7, and may or may not be the best option for you, depending on your situation. Chapter 13 bankruptcy does not eliminate debt, it restructures it. This involves a court coming up with a new repayment plan designed to be manageable for the debtor. This new plan sets aside the terms of the original agreements that created the debt in the first place. This creates a new payment structure, usually involving a single monthly payment, that the debtor should find manageable.
Which Type of Consumer Bankruptcy Should I File in Covington, Virginia
Chapter 13 is usually a good option for people who have a steady income, and a large amount of non-exempt property that they can't part with. On the other hand, if most of the debtor's property is exempt, and he or she does not have a steady income, Chapter 7 might be more beneficial.
Regardless of your situation, you should speak with an attorney in Covington, Virginia who is experienced in bankruptcy before making a decision. They will be able to advise you of your options, and the likely consequences of each one, allowing you to make a much more informed decision.