Bankruptcy Q & A

Please read before your appointment.  Any questions will be answered when we meet.
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1.  How much does it cost to file bankruptcy?

The bankruptcy court costs are $306.00. The costs to file the Homestead Deed are $21.00. My usual fee is $990.00 in the Western District (Wincheser/Harrisonburg area) and $1200.00 in the Eastern District (Fairfax/Herndon area).

2. Can I keep my car if I file bankruptcy?

Usually, Virginia law allows you to keep a vehicle worth up to $6,000.  If you are still financing the car, you are entitled to equity in the car up to $6,000. (Equity is equal to the value of the car less what you owe to the financing company).  Even if this is more than $2,000 you may still be able to keep your car by protecting the rest of your equity in the car under your $5,000 Homestead Exemption.

3. Will the finance company take back the car?

Usually not as long as you are current on your car payment. If you are not current, I may still be able to negotiate a deal to let you keep your car, but you will usually have to sign a “Reaffirmation Agreement” if that happens.

4. What property can I keep?

Under Virginia law, each individual may keep household goods (i.e. furniture, dishes, silverware, appliances) up to a value of $5,000. You are also entitled to keep an additional $5,000 under the homestead exemptions, as well as other things including your clothes, wedding and engagement rings, and tools of trade. A married couple is allowed twice the amount for each exemption (household goods would be up to $10,000, homestead would be up to $10,000 etc.). If you are over the age of 65, you may keep an additional, $5,000.

5. Is someone going to go through my house and my things?

It would be very unusual for the bankruptcy court to go through your house and things, although this may be possible, particularly in cases involving fraud.

6. What is the “Homestead Exemption”?

Under Virginia law, each individual is entitled to keep up to $5,000 in either real estate or personal property in addition to the items listed above.  This can be equity in your home, your tax refund, equity in a mobile home, a second car, cash or any other property that doesn’t qualify for another exemption.  You are entitled to another $500 for each dependent. There is an additional exemption for disabled veterans as well.

7. Do you mean that I get $5,000 in household goods, $6,000 equity in a car, my clothes, wedding rings, AND another $5,000 under the Homestead Exemption?

Yes.

8. Is there an extra exemption if I am over 65?

Yes, you are entitled to an additional $5,000 of homestead exemption. If you are married and are both over the age of 65, you and your spouse are each entitled to keep $10,000 in homestead exemption.

9.  Can I keep any family heirlooms?

Yes. Virginia has a special law that allows you to keep family heirlooms up to a value of $5000 if they came from at least as far back as a grandparent.

10. What about my wedding and engagement rings?

You may keep your wedding and engagement rings.

11. Can I keep my house?

Maybe, depending on how much equity you have in your house, and whether you are current on your mortgage payments.  You may keep the amount of equity allowed under the Homestead Exemption explained above.  After we meet, I may suggest that you get a certified appraisal on you house.  There are also some exceptions that may allow a person to keep their house in certain situations. If you are behind on your mortgage payment, we try to negotiate with the creditor.  However, depending on the amount of arrearages on the mortgage, it some times may be financially impossible to keep it unless you file a Chapter 13 bankruptcy. This is something that should be discussed at our meeting.

12. Can the bankruptcy court take my retirement funds?

Usually not. 401 (k) and similar plans are protected including IRAs.

13. Can I file suit on just some bills and keep others?

ALL DEBTS MUST BE LISTED ON THE BANKRUPTCY PETITION. You may decide to pay certain bills after the bankruptcy, but all debts must be listed. If you do not list a debt with an address, it will probably not be discharged! You must list creditors even if you plan to repay them. If you have potential debts for which no one has yet made a direct claim against you, list them. If in doubt as to whether a credit should be listed, list them. LIST ALL OF YOUR DEBTS. If you plan to pay any bills after filing bankruptcy, you should discuss this at your appointment so that we can talk about your choices.

14. What is a reaffirmation agreement?

Even if a debt can be discharged, you may have special reasons why you want to promise to pay it.  For example, you may want to work out a plan with the bank to keep your car or house.  To promise to pay that debt, you must sign and file a reaffirmation agreement with the Court.  You do not have to pay a secured claim if the debt is discharged, but the creditor will take the property. If you want to reaffirm the debt, you, the creditor, and me sign a new contract agreeing to pay that specific bill which is entered by the Bankruptcy Court. The reaffirmation agreement makes you legally responsible for the bill despite your bankruptcy. If you sign the reaffirmation agreement and then later cannot pay, the creditor can still collect from you despite your bankruptcy. The creditor can take back the secured goods like your car, house, furniture or appliances, sue you, and garnish your wages just as if you had not filed bankruptcy. You have the right to surrender any property you do not want to pay for and keep.

The law requires that I certify to the Court that you can afford to make payments for whatever bill you want to reaffirm. Reaffirmation agreements are subject to special rules and are voluntary.  They are not required by bankruptcy law or by any other law.  Reaffirmation agreements must not place too heavy a financial burden on you and must be in your best interest. You can cancel a signed Reaffirmation Agreement anytime before the court issues your bankruptcy discharge or within 60 days after the agreement is filed with the Court, whichever gives you the most time. A reaffirmation agreement is prepared by the creditor, if required, sent to me for review, and then forwarded to you. If you do not sign a Reaffirmation Agreement, a creditor may be able to take back secured property like a car or a house. Please note that a bankruptcy lasts approximately 90 days so there is ample time to take care of reaffirming chosen debts.  The agreement does not have to be completed prior to your 341 hearing.

15. Can I file a medical bankruptcy?

While medical bills are one of the main reasons that people file bankruptcies, there is no special category of “medical bankruptcy”.  You file the same petition as anyone else.

16. Can my husband and I file together?  Do we both have to file?

You and your spouse may file a joint petition but you do NOT have to BOTH file if the debts are only in one spouse’s name.  You are each entitled to the exempt property listed above.

17. I have a student loan.  Can this be discharged?

No, but you have to list it on your bankruptcy petition any way.

18. I owe the IRS.  Is this dischargeable?

Maybe. Income taxes that are over three years after the date you filed your tax return are probably dischargeable. If you did not file a tax return, the taxes are generally not dischargeable in a Chapter 7 bankruptcy. Penalties and interest on more recent debts may also be dischargeable. If you owe the IRS money for other types of taxes or state sales taxes, these types of taxes may not be dischargeable. You should discuss this matter at our meeting to see if your tax debt can be discharged. All tax debts must be listed on your bankruptcy petition, even if they are not dischargeable.

19. Will the bankruptcy stop a garnishment on my paycheck?  Can I get the money back?

You need to let me know that you are being garnished, and bring in the most recent garnishment documents.  I can ask the court to stop the garnishment after you file your bankruptcy petition.  The court will usually order the garnishment stopped within one week.  If you employer still has the money, they should return it to you.  If the creditor already received the money, I may be able to get it back for you depending on how much money they received and when they received it. It can take several weeks to get the money back. You may also need to go to the state court hearing to request the court to turn the funds over to you. It is your responsibility to do this as I do not represent you in state court hearings. You should discuss this situation at your appointment to see if you will need to go.

20. How often can I file bankruptcy?

You can only be discharged in a Chapter 7 every eight (8) years. A Chapter 13 may be available sooner to you.

21. What is the difference between a Chapter 13 and a Chapter 7 Bankruptcy?

Most people file a Chapter 7 bankruptcy.  This gives you a “fresh start”.  It wipes out unsecured debts and gives you a choice of surrendering or paying for secured property.  An example of a debt you might wish to keep is your car debt or home mortgage.

A Chapter 13 bankruptcy is also called a wage earner plan.  It is for those individuals who have enough regular monthly income to pay all their living expenses plus have money left over to pay some bills or all of their debts. If you earn more than a certain amount of money each year, you may be forced to file a Chapter 13 bankruptcy any way. This issue will be discussed at your consultation.

22. Do I have to go to court?

YES! You do have to go to court.  Court is usually in Woodstock, Virginia.  I will be there with you.  If you do not show up, the Court can dismiss your case.  Usually the 341 meeting (the court hearing) is only a few minutes long, but the court often runs behind in getting to your case.

23. I have some store credit cards like Kays Jewelers and Radio Shack.  Are store credit cards treated differently?

YES!  When you applied for these cards, you probably signed an application form that gave the store a secured lien on anything you bought at the store.  If you don’t pay the store, they have the right to take the property back.  Usually this does not happen if you bought consumable goods.  However, tools, appliances, crystal, jewelry and other “hard goods” are usually secured.  IF YOU WANT TO WIPE OUT THIS DEBT, YOU MUST RETURN THE SECURED GOOD OR PAY THE FAIR MARKET VALUE FOR IT. Otherwise, you may only be able to wipe out part of the debt to the store.  You also have the right to buy the good from the store for its “fair market value” which is what a person would pay for the good in its current condition.  You and the store must agree on the fair market value.

24. I bought some furniture at the local furniture store and charged it on my account at the store.  I don’t have it anymore.  What happens?

If you sold the furniture, you may still have to pay the store for it because it is probably secured.  You will have to pay the current fair market value of the furniture.  If the furniture was stolen, destroyed or taken by your spouse or a third party, you may not have to pay for it.  This is something you should discuss at your appointment.

25. What if I charged more than $500 on my credit card or received a loan for over $750 in the last 90 days?

If you charged more than $500 on your credit card, or took a cash advance of over $750, or received a loan for over $750 in the last 90 days, you may not be able to discharge the amount charged in the last 90 days for that creditor.  You may choose to wait to file your petition until 90 days has elapsed from the time you made the charges or received the cash advance. You should bring this up this issue at your appointment.

26. I paid back a relative money that I borrowed with in the last year.  Is that a problem?

It may be.  You are not allowed to prefer your relatives to your other creditors.  The bankruptcy court has the right to take money you paid to a relative away from them so they can pay some of it to all of your other creditors. This depends on how much money you paid back to the relative, and whether you were making current monthly payments to all of your creditors at that time.

27. I have a judgment against me.  Will bankruptcy take care of this?

Yes unless you own real estate. If you own real estate, bankruptcy will prevent the judgment creditor from going after your wages or personal property.  It still becomes a lien on any real estate you own now, and the creditor can collect (plus interest) if you ever sell the real estate, refinance it, or after your death.  If this situation applies to you, be sure to ask about your options at your appointment.

28. Can the Court deny my discharge?

The Judge can deny your discharge if you do something dishonest in connection with your bankruptcy case, such as destroy or hide property, falsify records, or lie, or if you disobey a Court order. It can also be denied if you do not provide information requested by the Court in a timely manner, or if you do not qualify for bankruptcy. When you meet with me, I will review your financial information to determine if you qualify. If your information is complete and accurate, I can determine if you qualify for bankruptcy.

29. Will I have to pay any debt that is discharged?

No one can make you pay a debt that has been discharged, but you can voluntarily pay for any debt you wish to pay.  You do not have to sign a reaffirmation agreement or any other kind of document to do this.

30. Will bankruptcy discharge all of my debts?

A discharge is a court order from the bankruptcy court stating that you do not have to pay your debts.  Some debts cannot be discharged.  Examples of debts that cannot be discharged are:

  • Certain types of tax debts, including income tax debt.
  • Any debt incurred through fraud, including fraud while acting as a fiduciary.
  • Undisclosed debt.
  • Debt owed to spouse, former spouse or child like alimony and child support.
  • Debt owed for willful and malicious injury to another or property of another.
  • Government fine, penalty or forfeiture.
  • Debt owed for death or personal injury due to operating of a vehicle while intoxicated.
  • Debt that could have been discharged in another case of the debtor, or was denied discharge in a prior bankruptcy case of debtor.
  • Debt owed for malicious or reckless failure to fulfill any commitment owed to a federal depository institution.
  • Restitution owed under title 18, United States Code.
  • Any debt owed that was incurred in order to pay taxes.
  • Debt related to court costs.
  • Student loan debt.
  • Certain obligations in a Property Settlement or Marital Agreement with your spouse or ex-spouse.

31.       Do I have to list all of my assets on my bankruptcy petition?

Yes. List all of your assets! You will probably be able to keep most of them but you will jeopardize your bankruptcy petition and commit perjury if you fail to list any asset. If you have questions about an asset or if something is an asset, ask at your consultation. In order to help you get the relief to which you are entitled, you must make full disclosure of al your financial affairs.