Virginia residents who have substantial debt and a steady stream of income may consider using Chapter 13 bankruptcy to resolve their obligations. However, there are many things they should consider before entering bankruptcy, which can last for years.
One thing to think about is the differences between Chapter 7 and Chapter 13. A Chapter 7 bankruptcy tends to take only a few months to complete, but it requires that debtors liquidate their assets to pay off their debts. A Chapter 13 bankruptcy, also called a reorganization bankruptcy, will last three to five years, and it requires that debtors show the court that they can afford their payments. Debtors may be deemed ineligible for Chapter 13 bankruptcy if their income is irregular or not enough or if they have too much debt.
Before filing for Chapter 13 bankruptcy, debtors have to go through credit counseling. The counseling must be received from an approved agency, which is allowed to charge for the service. However, they are also required to provide the counseling at a reduced rate or for free if the debtor is unable to pay.
The repayment plan for a Chapter 13 bankruptcy will detail how a debtor’s debts will be paid. Priority debts, such as alimony, certain types of taxes and child support, will have to be paid in full. Secured debts, such as mortgages or auto loans, will be included in the plan. The income that remains after these payments will be applied to unsecured debts, such as credit cards.
An attorney who practices bankruptcy law may advise clients on how a Chapter 13 bankruptcy can help them protect their property, stop wage garnishments, stop creditor harassment, stop repossessions and provide debt relief. The attorney may assess a client’s debts and income and may assist with filing the petition for bankruptcy.