When most people in Virginia hear about bankruptcy, the first inclination is to think of it as an action taken by a failing business. While some businesses buried in debt do explore this option, bankruptcy is also becoming an increasingly common step taken by individuals and families looking to get a break from overwhelming debt. According to one study, more older adults are filing for bankruptcy to deal with significant debt under certain circumstances.
Bankruptcy refers to the legal process of relieving financial burdens by reviewing debts and liabilities, tracking assets, making repayment arrangements when possible, providing help with non-dischargeable debt, and reducing or completely eliminating some debts. Potential filers are typically urged to determine if they are legitimately unable to meet their debt obligations because bankruptcy may affect credit scores and the ability to obtain loans in the future. While meant to provide a fresh start for debt holders, bankruptcy is still widely considered to be an action that should be considered only as a last resort.
There are several different types of bankruptcy. With Chapter 7, also known as liquidation bankruptcy, the debtor works with a trustee to liquidate non-exempt assets and divide that money among various creditors. Chapter 11 allows businesses to restructure their debt. Chapter 13 is an option for families or individuals not able to qualify for Chapter 7 bankruptcy. However, there is no requirement to liquidate assets. Instead, debts are restructured and the debtor uses their disposable income to make monthly payments to creditors. Common reasons individuals file for bankruptcy include emergency medical situations and substantial student loan or credit card debt.
The process of filing for bankruptcy involves several specific requirements that must be fulfilled before debts are discharged. An attorney may explain the process to a business owner or individual considering this option. Requirements for individuals normally include submitting certificates of completion for credit counseling and debtor education courses. A petition also has to be filed and approved. A lawyer may identify the relevant forms a client needs to submit and provide representation in bankruptcy court.