Consumer Bankruptcy

Bankruptcy offers a "fresh start" in the economy to individuals in financial distress.  If the relief is appropriate, it is usually either by liquidation under Chapter 7 of the Bankruptcy Code (the "Code"), or by reorganization under Chapter 13.  A proper filing results in an "automatic stay" of certain ongoing actions against the filer, unless the court lifts the stay.  Note that if a debtor filed for bankruptcy in the past, the Code may deny the full benefits of another filing for a number of years.  Sudeb can suggest options and help with the preparation and filing of forms.  Sudeb also provides representation before the Trustee, at the § 341 meeting with creditors, and in court.  Please note the disclaimer at the end of this page.

Chapter 7

A debtor who qualifies to enter a Chapter 7 liquidation retains certain assets, called "exempt assets".  The rest become part of the bankruptcy estate, to be sold (converted into cash) and distributed to creditors according to rules in the Code.  In return, the filer obtains a discharge in bankruptcy.  If a debt is discharged, the filer no longer has to repay it.  However, there are limitations to discharge.

Bankruptcy typically does not discharge debts that are secured by valid liens, such as the typical mortgage on a home and the auto loan, but the court may approve some form of relief, or relief may be available under the Code in certain cases.  The Code identifies other debts that cannot be discharged under Chapter 7, such as domestic support obligations (child support, alimony payments), most taxes, student loans, personal injury debts from driving while intoxicated, debts that the filer did not identify in the bankruptcy filing, and so on.

In addition, the court may deny discharge to a filer who destroys or conceals property or records, or lies under oath, in connection with the bankruptcy proceedings.

Chapter 13

Chapter 13 is generally for qualifying filers who want to pay their debts and not have their assets liquidated as in a Chapter 7 proceeding.  A few more types of debt can be discharged in Chapter 13 than in Chapter 7.  In Chapter 13, the filer proposes a payment plan over five years or less to the court.  If the court approves the plan, it will supervise the parties as the filer makes payments under the plan.  Any discharge that occurs will take effect at the end of the plan.  If the filer is unable to continue payments under the plan due to circumstances beyond the filer's control, the court may at its discretion grant a "hardship discharge" before the plan ends.

Chapter 11

Chapter 11 is usually more appropriate for businesses than for individuals.  But it can be used if the filer does not qualify for Chapter 7 or Chapter 13, or if Chapter 11 offers some advantage to the filer over Chapter 13, and so on.

Filings in:

• Eastern District of Virginia, with courts in Alexandria, Richmond, Newport News, and Norfolk.