The information presented in this website is intended to be used by persons considering whether they should talk to an attorney about filing bankruptcy. It should not be construed as legal advice.  You should see an attorney to discuss the specific facts of your case.

What is Chapter 7?
Chapter 7 bankruptcy is what some people call “Straight Bankruptcy.” It is a way to get rid of your unsecured debts (e.g. credit cards, medical bills, personal loans, payday loans, etc.) and get a fresh start in life. In return for getting rid of your unsecured debts the court has the right to sell any property you own that you cannot protect. The court does this by appointing a trustee to take possession of whatever property you own that you cannot protect, sell it and use the money to payoff as much of your unsecured debts as possible. After the money from the sale of your things is gone, the remaining debts are discharged (i.e. wiped away) and your personal obligation to pay them in the future is gone. Your case is then closed.

How long does Chapter 7 take?
The average case takes 90 days from filing to discharge.

What is the standard procedure after filing a Chapter 7 case?
The case is filed with the court. The court appoints a trustee and sends a notice to all of your creditors that you have filed bankruptcy. The notice also informs the creditors that they cannot take any action against you (i.e. call, write, file suit, etc.) unless they have the court’s approval. About 30 days after filing you must attend a meeting of creditors. At that meeting, the trustee asks you questions under oath about what you own, who you owe, and what you’ve done with your money and property over the past couple of years. In addition, any creditor of yours has the right to ask you questions as that meeting. Typically no creditors ever show up. The meeting takes about 10 minutes and after it is completed, you are free to leave. Then there is a 60 day waiting period, in which the trustee decides whether you own any property that he wants to sell and your creditors can object to their debt being discharged. Typically nothing happens (i.e. the trustee decides that there is nothing for him to sell and your creditors agree that their debts can be discharged). When the 60 days are over without anything happening, your debts are discharged and your case is closed.

How much property can I protect from the trustee?
If you have lived in Virginia for the past two years straight, you can claim Virginia homestead exemptions to protect your property. Virginia law generally allows each person that files bankruptcy to protect the following items up to the following amounts:
1) $1,000 of clothing;
2) $5,000 in prepaid funeral expenses or a burial plot;
3) $5,000 of household goods and furnishings;
4) $2,000 of equity in a vehicle;
5) Wedding ring;
6) Engagement ring;
7) $10,000 of tools of the trade; and
8) $5,000 of family heirlooms.

Virginia law also allows each resident of Virginia to exempt up to $5,000 of any other property (including land) that you own. However this $5,000 is cumulative, and once it is used up you cannot claim it again.

If you have not lived in Virginia for the past two years it is possible that another state’s homestead exemptions or the federal exemptions apply in your case. In order to determine which exemptions apply, a case by case analysis is required.

What documents do I need to file a Chapter 7?
Please see this document.

Is there a minimum amount of debt I must have in order to file bankruptcy?
No. There is no minimum amount of debt you need to have to file bankruptcy, but if the amount of the debt is small enough in relation to your income you may decide to try to pay it off outside of bankruptcy by yourself or with the help of one of the credit counseling agencies approved by the Bankruptcy Court for the Western District of Virginia.

Is there a maximum amount of debt that I can have to file bankruptcy?
Not in Chapter 7 cases, but in Chapter 13 cases you cannot have over $300,000 (approximately) in unsecured debt (e.g., credit cards, medical bills, payday loans, etc.) or over $1,000,000 (approximately) in secured debts (e.g., mortgages, car loans, boat loans, etc.).

Can I keep my house in Chapter 7?
If the fair market value of your home is equal to or less than the sum total of your mortgages (i.e., first mortgage, second mortgage, etc.) then you will not lose your house if you file a Chapter 7, so long as you stay current on your payments. Even if the fair market value of your home is greater than the sum total of your mortgages, you may be able to keep your house if the excess can be exempted using your homestead exemption (See How much property can I protect from the trustee?), or if you are married, own your home with your spouse as tenants by the entirety, and you and your spouse have no joint unsecured debts.

Can I convert my Chapter 7 to a Chapter 13 during my bankruptcy case?
Yes. If, after you file a Chapter 7, you decide that you would prefer to be in a Chapter 13, you can convert your case at any time prior to the court entering an order discharging your debts and closing of your bankruptcy case.

Can I convert my Chapter 13 to a Chapter 7 during my bankruptcy case?
Yes. If, after you file a Chapter 13, you decide that you would prefer to be in a Chapter 7, you can convert your case at any time prior to the court entering an order discharging your debts and closing of your bankruptcy case.

Can I dismiss my Chapter 7 at any time?
No. You cannot dismiss your Chapter 7 without court approval. If you want to dismiss the Chapter 7 because the trustee is trying to take some of your property that you don’t want to lose, the court will likely not allow you to dismiss your case but will let you convert your case to a Chapter 13 and file a plan to pay back some of your debts. (See Can I convert my Chapter 7 to a Chapter 13 during my bankruptcy case?).

Can I keep my vehicle in Chapter 7 if I am still paying for it?
Yes. You can keep your vehicle if you are current on the payments when you file and stay current on the payments thereafter. You can also pay off the loan with another loan from a different lender.

Do I have to list everyone to whom I owe money?
Yes, you cannot pick and choose who you include in your bankruptcy. You must include everyone to whom you owe money, including your family and employer.

Can I keep credit cards that have a zero balance when I file bankruptcy?
Yes. But if you are in a Chapter 13 you cannot use any credit cards during your case. In addition, some credit card companies search the bankruptcy filings and cancel the card of any cardholder that filed bankruptcy.

Can my employer fire me for filing bankruptcy?
The United States government is prohibited by law from discriminating against its employees who filed for bankruptcy. However, private employees are not prohibited by law from doing so. In my experience, very few employers will fire a good employee for filing bankruptcy. The only exception are for persons who have a security clearance or handle large amounts of cash for their employer.

What debts are not dischargeable in bankruptcy?
1. Certain types of tax debts, including income tax debt;
2. Any debt incurred through fraud;
3. Undisclosed debt;
4. Debt owed for fraud or deflection while acting in a fiduciary capacity;
5. Debt owed to spouse, former spouse or child;
6. Debt owed for willful and malicious injury to another or property of another;
7. Government fine, penalty or forfeiture;
8. Debt owed for death or personal injury due to operating of a vehicle while intoxicated;
9. Debt that could have been discharged in another prior case of the debtor, or was denied discharge in a prior bankruptcy case of debtor;
10. Debt owed for fraud or defalcation while acting in a fiduciary capacity, associated with a depository;
11. Debt owed for malicious or reckless failure to fulfill any commitment owed to a federal depository institution;
12. Criminal restitution;
13. Any debt owed that was incurred in order to pay tax debts;
14. Debt related to court costs; and
15. Student loan debt.

Can a hospital refuse to treat me if I included their debt in my bankruptcy?
A hospital supported by public funds (e.g. UVA Medical Center) cannot deny treatment because the patient is in bankruptcy or has discharged a debt owed to that hospital in the past. Private hospitals, on the other hand, can deny treatment, but will usually treat the patient if he or she has health insurance.

Is my bankruptcy a public record?
Yes, but few individuals take the time to look. Some newspapers in the publish the names of persons who file bankruptcy, so you should look in your local newspapers to check.

How will the bankruptcy affect my ability to get credit in the future?
Bankruptcy will make it more difficult to get credit for 2-3 years, but will generally improve your credit score. Most lenders look at the last 2-3 years credit history when making a loan. Consequently, most debtors who do a good job rebuilding their credit after filing bankruptcy are able to get a car or home loan within 2-3 years after their bankruptcy.

Can I modify my mortgage?
As of this time, the bankruptcy laws do not allow bankruptcy courts to modify mortgages. There is legislation pending before Congress to allow bankruptcy courts to modify mortgages, but it has not yet been passed by the Senate. If it does pass the Senate, President Obama has said he will sign it.

Can I turn my second mortgage or equity line of credit into an unsecured debt in bankruptcy?
Yes, but only in a Chapter 13. The bankruptcy court can turn a second mortgage or equity line of credit into an unsecured debt (like a credit card) in a Chapter 13 if the fair market value of the home is less than or equal to the payoff amount of the first mortgage.

Can I modify my vehicle loan in bankruptcy?
Yes, but only in a Chapter 13. The bankruptcy court can reduce the interest rate being paid on the vehicle loan, and in some situation reduce the outstanding balance owed to the lender on the vehicle loan. If you took out the loan when you purchased the vehicle, the outstanding balance can be reduced by the court to the vehicle’s fair market value if you took out the loan more than two and half years before filing bankruptcy. If you have refinanced the loan on your vehicle since you bought the vehicle or took out a vehicle title loan, the outstanding balance can be reduced by the court to the vehicle’s fair market value, no matter when you bought the vehicle.