Bankruptcy Chapters
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Being a bankruptcy attorney provides the rare opportunity to be an advocate, a planner, a protector, and a shoulder to cry on. You would think hearing so many stories of loss, poor health, and poor planning would discourage dedicating a career to bankruptcy, however I can make a difference in client's lives through listening, understanding, and using the law to protect and plan. Seeing my clients walk out of that first meeting two or three inches taller because the weight of insurmountable debt has been lifted off their shoulders is an incredibly rewarding experience, and I would not want to do anything else. Call 703-421-7111.
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In 2005, Congress re-wrote major portions of the Bankruptcy Code. Bankruptcy is a federal law, and should be uniform across the United States; but how you can file bankruptcy can depend on the state you live in. It can even depend on your county.
This is information about factors that affect people filing bankruptcy in here Loudoun County, Virginia. (For more general information, you can go to virginiabankruptcylaw.info.)
If you live in Purcellville, Leesburg, Ashburn, or Sterling, here are some of the things you might need to know:
Most people when they need personal bankruptcy, need to file a chapter 7 bankruptcy. Chapter 7 says, "Sorry, I just can't pay." Then debts like credit cards, medical bills, repossessions and foreclosures are wiped out. For most people, the alternative to Chapter 7 is Chapter 13. (Chapter 11 you hear about in the news because people like General Motors, Trump Atlantic City, Delta Airlines file Chapter 11. It probably doesn't apply to you.)
Chapter 13 can sometimes help people fix problems you can't fix in a Chapter 7. For example, the value of your house has dropped enough, we may use Chapter 13 to permanently remove your second mortgage from your house. You can see more about that at virginiasecondmortgagerelief.com. You can be forced into Chapter 13 if you own too much or make too much. That's what we are talking about here. That's where the state and county rules apply.
Owning Too Much?
Although bankruptcy is set up by the federal government, each state is allowed to set a limit on whether you can keep what you own. People who want to file a Chapter 7 bankruptcy but know the court would take things they need to keep, often end up filing Chapter 13. In Chapter 13 you can make payments to the court and buy back whatever the court would otherwise take.
One place this shows up is the amount of equity you are allowed to keep in your house. The federal government sets a limit of $20,000 (per person) in real estate equity, but the states are allowed to change that better or worse.
A lot of states allow people way more than the $20,000 federal limit on real estate equity. In Texas, for example, you can keep any amount of real estate equity in your home, as long as it's on less than 200 acres. Florida allows 160 acres. That's called your “homestead.”
Some states allow a lot less than the $20,000 federal limit on real estate equity. In Virginia you are limited to $5,000.00 in equity. ($10,000 if you are over 65.) Real estate owned by married couples has a much better rule. This limit was set at $2000.00 right after the Civil War and it hasn't been raised much. Of course many people since the real estate crisis have no equity, but you get the idea that Virginia law does not go out of its way to help you.
Virginia also allows you a paid for car worth up to $2000.00. Now 40 years ago, $2000 could buy a new Volkswagen, but it's not much car now. People who have no equity in their real estate, that's a lot of people now, often use that $5000.00 Virginia homestead to protect their car.
One job of a bankruptcy lawyer is to shelter everything you have under the limits you are allowed. About half the people I see in my Sterling office need to do something to rearrange what they have, so they don't lose it to the bankruptcy court. With proper planning, nearly everybody I see gets through bankruptcy without losing anything they don't want to lose. (Of course, you still have to make your house payment if you want to keep your house.)
All this about owning too much goes back to the 1978 bankruptcy law—actually back to the 1898 bankruptcy law.
Making Too Much?
The 2005 change in the bankruptcy law was aimed at people Congress thought were making too much to file bankruptcy.
Congress has the census bureau track by each state how much the average family makes. If you are making less than these amounts then you aren't making too much for a Chapter 7 bankruptcy. If you are over these limits, Congress wants you to have a problem.
So in Virginia, for each family size, here are the limits:
One Person |
Two Person |
Three Person |
Four Person |
|
Virginia |
$48,362 |
$65,122 |
$74,151 |
$85,939 |
Maryland, you can see, is a good deal higher.
One Person |
Two Person |
Three Person |
Four Person |
|
Maryland |
$55,238 |
$73,061 |
$85,455 |
$101,803 |
If you are under that income, based on the last six months, you are income-qualified to file a chapter 7 bankruptcy and wipe out your credit cards, medical bills, repossessions, and most debts. So, if you are a family of three making $80,000 per year, you are qualified for Chapter 7 if you live in Frederick, MD. You have a problem if you live in Leesburg, VA.
If you are over those incomes, the U S Justice Department will try to push you into a five year repayment plan. If you can't afford a five year re-payment plan, you and your lawyer need prove you can't afford to pay.
I enjoy working as a bankruptcy paralegal because at the end of the day I feel like I have helped my client. Going to a job where you know you are changing someone life for the better is extremely rewarding. As I see the client go through the process, I can slowly see how the clients smile and energy comes back to their face as they get through each meeting. Bankruptcy provides you with relief, a fresh start, and peace of mind. In these hard economic times it becomes a balancing act to decide what to do and what is right, and that is why it is important that you get the correct advice. Call us today you have nothing to lose and no obligation. If anything you will walk away empowered and better informed about the how the bankruptcy process works. We look forward to providing you with our friendly service with a smile! |
Can I Qualify for Chapter 7 Even If I'm Over the Income Limit?
I see about fifty people every month who can still get qualified for Chapter 7, even though they are making more than the income limits.
If you are making more than the income limits you can still qualify for Chapter 7 bankruptcy if Bankruptcy Form 22—called the means-test—shows that you can't afford to pay. The means test is a budget Congress makes you fill in. Some of the numbers are assigned by Congress and unchangeable. Some Congress sets a floor but you can go higher if you can prove it. For some, what you really spend determines.
Suppose you rent. If you are renting, you get an assigned budget and what you actually spend basically doesn't matter. That's set by county, for every county in the country.
Here's Loudoun:
One Person |
Two Person |
Three Person |
Four Person |
Five Person |
|
Loudoun County |
$1,467 |
$1,723 |
$1,815 |
$2,024 |
$2,057 |
You can see this is a pretty good rent allowance for one person; it's very tight for a family of five. If you are renting, there's no changing it, you are stuck with these numbers.
Now if you make a house payment instead of rent, different rules apply. You can take the rental allowance if your house payment is less; if your house payment is more, you can take the actual house payment. (So if you are thinking of giving up your house because the payment is too high, talk to a lawyer and don't move out of the house!)
Another budget item you cannot change is the operating cost for your car. Car operating costs are set by metro area—and for the DC area it's $260 per month. That's what you have in Congress's budget to spend on gasoline, car repair, and insurance. No changing that one. If you live in Leesburg and work in Leesburg, that $260 is probably ok. If you live in Ashburn and work in Rosslyn, that $260 isn't remotely enough. But you can't change it.
Utilities are set by county with a minimum, but you can ask the court to approve more for your “energy costs.” Utilities include phone, cell phone, water, gas, electric and for some people propane or firewood. (Your internet is on a separate budget.)
Here are those numbers for Loudoun County:
One Person |
Two Person |
Three Person |
Four Person |
Five Person |
|
Loudoun County |
$367 |
$431 |
$455 |
$507 |
$515 |
You can see that this is a good utility allowance for one person; it is very low for the big families. But, unlike the rental allowance, if you can prove more, you can claim more.
Those are the main numbers that are determined by where you live, which is what I'm talking about here.
Let me just give you a quick rundown on some of the other factors. Just to give you and idea of what's involved in your bankruptcy case.
- Food and clothes—assigned budget
- Child care—what you actually spend
- Internet—what you actually spend
- Medical co-pays and deductibles—assigned budget or more if you can prove it
- Car payment—assigned budget
- Health insurance—what you actually spend
- Life insurance—what you actually spend
If you are making more than the income limits, you and your lawyer will have to go over what you actually spend in detail, to make sure you can put together a budget that proves your are eligible.
Here's one more question I get asked a lot by people in Loudoun County.
Is my bankruptcy hearing in Leesburg?
No, bankruptcy is run by the federal courts. The bankruptcy hearings are in Alexandria, 115 S Union Street. (This is an office building with a shoe store, Birkenstock, in front. There is a small federal annex in back. Room 206, in that annex.) You can get there by getting on Rt 7 in Leesburg and driving all the way to the Alexandria waterfront. (Going around the beltway, though, is usually quicker.)
Some people wish it was closer to home; others are glad no one will see them going in. Either way, Alexandria is where it is.
Do We Need to Talk?
If you want to know more about my law firm and how we work, please visit robertweed.com. When you are ready, you can call my Sterling Office to make an appointment at 703-421-7111.
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