Many people have debt. Often this debt is due to credit cards and other major purchases in their lives. Unfortunately, changes in a person’s life, such as a loss of job or illness, can make it difficult to keep up with the payments of this debt. In very little time, this debt can become very high and difficult to manage. It can put at risk a person’s ability to get credit, rent or buy home, or even get a job. Fortunately, bankruptcy law firms provide options to help get out from under this debt.
In the state of Virginia, a means test is utilized for those wishing to claim bankruptcy to get out of debt. This test assesses a household’s income and determines whether they qualify for chapter 7 or chapter 13 bankruptcy. If the household income falls below the state median, then chapter 7 is approved. If it is above, other factors and possessions may be assessed to determine the filer’s ability to repay their debt.
Chapter 7 bankruptcy
If income is below the median or the means test proves necessary, a chapter 7 bankruptcy can help with the household’s overwhelming debt. In this form of bankruptcy, a trustee will collect all non-exempt assets and sell them. Properties, such as a home or personal vehicle, may be exempt from this liquidation. This money will be used to pay back a portion of the debt the filer has. Any remaining debt is dismissed. After the bankruptcy process, the filer gets a fresh start on their life without the hindrances of debt.
Chapter 13 bankruptcy
If a household’s income is above the median and they are not exempt for other reasons, they can file a chapter 13 bankruptcy. In this form of bankruptcy, there is no requirement to sell off property. A household’s income is reviewed and compared to their debt. A 3-5 year payment proposal is developed by the filer to pay all or part of their debt. The amount of payments is determined by the household’s disposable income. At the end of the payment plan, any remaining amount owed is discharged.
Although many people try to avoid bankruptcy, it can be very beneficial to those who are drowning in debt. It provides a method to get out of debt completely and prevent further issues from arising.