What Types of Debts can be Discharged in a Virginia Bankruptcy?
You just got laid off from your job. You owe hundreds of thousands of dollars in debt. You try to pay down your loans, but all you do is dig a hole deeper and deeper into debt. Should you consider bankruptcy?
Bankruptcy has helped many Virginians start over financially because it enables many of their debts to be erased for good and gives them a fresh start. However, it is important to understand that bankruptcy is not a magic cure for all your debt. While most debts can be discharged in bankruptcy, some debts will remain. Read on to learn more about how bankruptcy will affect your debts.
Types of Bankruptcy
The type of bankruptcy you choose determines the debts that can be discharged. Most consumer bankruptcy cases fall under Chapter 7 or Chapter 13.
A Chapter 7 bankruptcy is for debtors who want to wipe out their debts and have little to no excess income after monthly living expenses are paid. Ideally, to fall under this category, you have very few assets and want to get rid of unsecured debt. In a "no-asset" Chapter 7 bankruptcy case, there are no non-exempt assets to liquidate to distribute to creditors. In an "asset" Chapter 7 bankruptcy case, non-exempt assets will have to surrendered. Most of these cases are "no-asset" Chapter 7 cases. However, if you have assets to protect or you make too much money, you may still qualify for bankruptcy, but it may have to be under Chapter 13.
A Chapter 13 bankruptcy is primarily geared toward those who have a high regular income and can pay back a portion of their debt. Your debts are reorganized and a new payment plan is created for you. The good news is that you get to keep your assets.
You can discharge the following debts in bankruptcy:
Credit card debt
Past due utility bills
Bad checks (unless resulting from fraud)
Deficiency balances from repossessed cars
Anything owed under contracts or leases
Car accident-related claims (except those resulting from drunk driving)
Certain tax debts
Some attorney fees
Social Security overpayments
Veterans assistance loans and overpayments
Unless a creditor challenges dischargeability, a bankruptcy will also discharge these debts:
Debts or creditors not listed on your bankruptcy paperwork
Debts caused by embezzlement or larceny
Debts caused by willful malicious acts causing injury to a person or property
Debts arising from fraud or cash advances
The following debts can never be discharged during bankruptcy:
Back Child support
Alimony or debts related to family support
Fines or penalties for breaking the law including traffic fines and restitution in criminal cases
Income tax debts that are less than three years old and other tax debts