According to statistics compiled for 2019, Virginia had a bankruptcy filing ratio of 2.7 persons per 1,000 residents, with a total of 23,071 filings that year. That ranking put Virginia among the top 20 states in the nation for bankruptcy filings.
With the pandemic sweeping the nation for the past year-plus, and with the resulting lockdowns, unemployment has risen and some businesses have lost customers or even been forced to close permanently. Economic pain has affected many people, and it wouldn’t be a shock to see bankruptcy filings rise as a result.
If you’re facing insurmountable debt and thinking of filing for bankruptcy, and you’re in or near the Falls Church or Alexandria, Virginia areas, contact our team of bankruptcy attorneys at Vivona Pandurangi, PLC. We can discuss your situation with you and present your options to get rid of your dischargeable debts and obtain a fresh start in life.
Once you’ve made the decision that bankruptcy is the key to resolving your financial woes and letting you plan for a debt-manageable — or even debt-free — future, there are many do’s and don’ts to follow.
On the “do” side, make sure you file and pay your taxes and continue to pay for the essentials in life, including your electricity and utility bills, as well as your car and home payments. Being behind on the basics of life can only complicate your bankruptcy filing. Depending on which route you choose, Chapter 13 or Chapter 7, it’s best not to have missed payments on your record if you wish to keep your home or car.
Meanwhile, you can quit paying your unsecured debts such as credit cards, or even personal loans from friends. As soon as you file for bankruptcy, the court will place an automatic stay on these debts. Your creditors will have to cease all collection efforts and defer to the bankruptcy trustee appointed by the bankruptcy court.
You also need to avoid paying some unsecured debts and not others, which is why you shouldn’t pay back family or friends at this point. This is known as preferential or selective treatment, and it can raise a red flag among other creditors and the bankruptcy trustee as well.
Meanwhile, you will need to begin compiling a list of both debts and assets, as they will need to be submitted with your filing. You will also need to take and pass an authorized credit counseling program before filing.
Your best option is to retain a bankruptcy attorney to see you through this process, but you can begin by following the steps listed above.
On the “don’t” front, you need to avoid what’s called “The Three G’s”: going on a spending spree, giving away your property, or getting tangled in lies or deception.
What you do in the three months before filing — and sometimes even years before — can have a profound effect on how the court and trustee will treat your filing.
If you go out and spend all your cash or run up your credit cards on expensive items or lavish living, that can raise creditors’ eyebrows and those of the trustee as well. You might end up having those assets seized, sold off, or disallowed as a debt discharge. In a worst-case scenario, such actions could end up getting your bankruptcy filing thrown out entirely.
Likewise, if you seek to protect assets, such as a car or home, by turning the title over to a spouse, child, or another relative, that can be another red flag. The trustee can disallow the transfer as “fraudulent” and use the property as collateral in paying off your debts.
Similarly, don’t sell your assets for less than they’re worth just to avoid having them in your name, especially if there’s some kind of hidden agenda to get your property back after discharge.
This brings up the final “G.” Do not lie or try to deceive the trustee and the court by hiding assets or making up stories about how you got into debt trouble. Truth and good faith are essential in a bankruptcy filing. If your filing is dismissed, you could find yourself in even hotter water.
Also, never use your retirement funds to pay off your unsecured debts. This is always a bad idea. Talk to an attorney first before touching any funds that the bankruptcy process already protects.
After filing, you will be required to attend a meeting of creditors, who may or may not show up, but if you don’t attend, the most likely result will be having your filing dismissed.
The two types of personal bankruptcy filings are called Chapter 13 and Chapter 7. A Chapter 13 filing is like a reorganization plan. The trustee will consolidate your debts, often by lowering what’s due, and come up with a manageable payment plan to repay the debt within three to five years.
Chapter 7 is a liquidation plan that sells off some of your nonexempt assets to pay creditors, but it’s also extremely quick, with a debt discharge in just a few months’ time.
The type of filing you should choose depends on your income, living expenses, and assets. A knowledgeable attorney can help guide you to the proper filing, especially when it comes to preserving assets.
Call us today at Vivona Pandurangi, PLC, if you’re considering bankruptcy, or even if you just don’t know what to do to handle your debt.
We can assess your situation, discuss your options with you, then handle any bankruptcy filing from start to finish, while you prepare for your fresh start.
In addition to Falls Church and Alexandria, we also offer our services in Arlington, Fairfax, Manassas, Prince William, and Loudoun, Virginia. Reach out to us today to take your first steps toward a more stable future.