What have I got myself into?Bankruptcy Frequently Asked Questions
The discharge that comes at the end of a Chapter 7 or Chapter 13 bankruptcy is a permanent injunction that prohibits your creditors from ever collecting on the debts owed. It is often referred to as “wiping out” or “eliminating” your debt. Once you have been granted a discharge by the Bankruptcy Court, your creditor cannot attempt to collect from you a discharged debt. Your creditor is also prohibited from reporting to credit bureaus the status of discharged debts.
A debtor does need to “qualify” for a chapter 7. In general, a Chapter 7 bankruptcy requires a debtor calculate household income based on the last 6 months of gross income. This amount includes income such as bonuses and retirement income. It also includes income of a non-filing spouse that lives with the debtor. If the debtor’s income is too high, it may raise the issue of abuse.
In general, upon filing a Chapter 7 or Chapter 13 bankruptcy, the automatic stay goes into effect. The automatic stay is the powerful tool that stops your creditors’ actions against you and your property. It stops garnishments, repossessions, foreclosures, and harassing collection phone calls.
A typical secured debt has two components – the note and the lien. The note establishes your personal liability for the debt. In other words, it allows your creditor to sue you when you fail to pay according the note that you signed. The lien gives your creditor the right to repossess or foreclose on the collateral when you do not pay according to the note.
In a bankruptcy, your personal liability for a secured debt is effectively ended with the discharge order. However, liens usually survive a bankruptcy, which means your creditor could still repossess or foreclose on the collateral under certain conditions.
A reaffirmation agreement allows your creditor to reestablish your personal liability for a debt, which means failure to pay according to the reaffirmation agreement may result in you being sued and garnished even though the debt was included in your bankruptcy. Whether you should reaffirm a debt will depend on the facts of your case. Speak with an experienced attorney before reaffirming your debts in a bankruptcy.
Virginia has opted out of the federal exemptions provided under the Bankruptcy Code, which means it elected to provide its own set of exemptions/protections to its residents. However, there are some federal exemptions available to Virginia Residents. Well advised debtors use available state and federal exemptions to protect their assets.
- A Chapter 7 bankruptcy can stay on your credit report for up to 10 years.
- A Chapter 13 bankruptcy can stay on your credit report for up to 7 years.