ROBERT WEED

Bankruptcy gives a fresh start to honest debtors. That's what the Supreme Court said more than seventy years ago, a fresh start to honest debtors and a clear field for the future. 

My office assists people who are looking for that fresh start, guides them through the process and helps them find protection from creditors while they are starting over. We know it's not easy to discuss financial difficulties with a stranger. We understand. 

There are a number of reasons why hard working, well meaning people may consider bankruptcy. Medical bills, injuries, and becoming a caretaker of someone who is chronically ill are leading reasons for many to file for bankruptcy protection. Losing employment, downsizing, and job changes are other frequent reasons for people to have problems meeting financial obligations. In some cases, people simply get in over their heads and find they can't support the bills they incurred. This is especially true when coupled with life changes like a divorce or the death of a spouse.

The real estate crisis, changes in home values, and rising minimum payments on mortgages and credit cards are impacting many people who find they no longer can keep up.

If you are facing debts that you simply cannot find a way to pay, we may be able to help you through this process. It can be confusing for our clients, so we have brought together information that addresses some of their most common questions about bankruptcy for you here.

Which Bankruptcy Chapter is Right for my Situation?

There are two main choices under the bankruptcy law--Chapter 13 and Chapter 7.

You hear in the news about Chapter 11. Chapter 11 is for business--usually big business. Chapter 11 is a plan to pay some debts, wipe out others, and keep the business going.  People who owe a million dollars on their house may be required to file Chapter 11--we're starting to see some of that now. Generally, people file under Chapter 7 or Chapter 11 as individuals.

How does the New Law Affect Eligibility and the Process?

The new bankruptcy law sets a new test for eligibility to file Chapter 7 bankruptcy.  Instead of looking at your budget to see if you can afford to pay, the court now looks at an average budget to see if you should be able to afford to pay.   

For the first two years under the new law, this average budget took into account the high cost of living in high cost of living areas like Northern Virginia.  In January 2008 most of the cost of living calculations got thrown out.  Fortunately, we now have three years experience with the new law, and we're developing ways to present your case that should still get most people who need bankruptcy approved.  

For everybody, the paperwork is a lot harder.  The purpose of these paperwork requirements to to throw you out of bankruptcy, so your creditors can keep chasing you. You'll need:

• Six months of pay stubs
• Last year's tax returns
• Proof of attendance at a credit counseling briefing and a budget class. (You can do these classes on the internet; we suggest Hummingbird at www.hbcce.org.)
• Driver's License or other picture ID
• Social Security Card
• You will need to show the Court your bank statements

The rigid paperwork means rigid deadlines.  When you meet with me, we'll work out a schedule of paperwork and deadlines.  It will be much harder if those deadlines slip.  If you get behind, your work will have to be redone and that will cause a start over fee.  For some people, keeping to the paperwork deadlines will be one of the toughest parts of the new law.  Missing an appointment can easily mean losing your eligibility. 

The new law uses a "Means Test".

Under the new law, you are automatically eligible to wipe out your debts with a Chapter 7 bankruptcy if you are below the average income for your family size in Virginia.  Effective March 2009, the averages for Virginia are:

If your income, based on the last six months, is below those numbers, you have automatic eligibility to wipe out your debts with Chapter 7.   If you are over those numbers by a little, you can still usually get approved.  Over by a lot may mean you are forced into a Chapter 13 payment plan, unless we can show an unusual factor, like an on-going medical situation.  With three years of new law experience, we now know of a lot of ways to show those unusual factors apply. 

You'll also notice that these numbers are not too hard on single people and two person families.  They get a whole lot harder as the family size goes up.  So a family of six is allowed double what a single person gets.  I'm angry about the unfairness of that, and I do everything I can do to try to help families with lots of kids.

Most people keep everything. Virginia law allows you to keep your furniture, clothes, and car up to certain limits of value. The law also gives you the right to protect other assets: bank accounts, expensive cars-- again up to certain limits. 

The Virginia limit on paid for cars is quite low: $2,000.00; and often requires some planning to work around.

Single people who still have some equity often require a Chapter 13 to keep their house--Virginia is tied for worst of the fifty states in the protection for single people in bankruptcy, allowing equity of $5,000.00.  (It was set at $2,0000 for a hundred years, and raised about 30 years ago but has not kept pace with home values.) Married people can more often keep their house with equity in Chapter 7.  If falling real estate values have wiped out the equity in your house, then you don't need to worry about that.

Especially under the new bankruptcy law, it's smart to see a lawyer right away if you are in financial difficulties and own real estate in Virginia.  We can usually put together a plan that works if you come to see us early enough.

If you have something valuable that the court can sell and get more than about $5,000.00 for, the court will sell it to help pay off your debts. About one person out of a hundred has the bankruptcy court sell something they own. Here's what each person is allowed to keep under Virginia law from the court.

• Your clothes-- worth up to $1000.00 at thrift store prices.
• Your household goods-- up to $5000.00 at thrift store prices.
• Your car-- worth up to $2000.00 more than you owe on it.
• Cash-- or whatever else you want, up to $5000.00
• Your wedding or engagement ring--regardless of what it's worth
• Your 401(k), IRA or retirement--regardless of how much (I did a guy ten years ago who had $950,000 in his 401(k).)

Recently real estate values have been falling here, which is a help in some ways.  Virginia allows single people to file Chapter 7 and keep their house only if you have very little equity.   Virginia does provide much better protection for married couples who own a house. The sooner you come to see us the more strategies we can try.

What's The Worst Thing That Usually Happens?

Filing for Chapter 7 Bankruptcy is better for your credit than getting help from credit counseling. Bankruptcy is better for your credit than sending late or partial payments.

There is no truth to the urban legend that you have to go for seven years with bad credit. Bankruptcy will be on your credit report for 10 years, but even so you can have good credit in just three years.

We're one of the pioneers in after-bankruptcy credit reporting law. If necessary, we sue the creditor or credit bureaus to get your credit report right after bankruptcy.We make sure you know to do the things you need to do to get good credit in three years.  

With a year rebuilding credit, you will start getting approved for $1000 and higher credit cards again. (You should probably get three or four credit cards, use each one for one or two tanks of gas a month.)

For the first two years after bankruptcy, you will have terrible credit. After two years of rebuilding credit, you can get a car at around 13%; after three years around 8%.  That 8% will save you $10,000 in finance costs compared to what you would pay if you go out and get a car right after the bankruptcy.  

With three years of rebuilding credit, you will be able to finance a house at a good mortgage rate (if you are making enough money).  Two years if you have veterans' eligibility.

Ninety percent of your credit score is based on what you've done the last three years.  So once you have three good years after bankruptcy, you'll have a good credit score.

Filing bankruptcy does not force you to close your bank account, although many credit unions will fire you as a customer.  If your credit is already so bad you can't open an account, try TD Bank, a new bank in Northern Virginia.  Another option to try is Wood Forest Bank, in some of the larger Walmarts, including the one on Liberia Avenue in Manassas.

Filing for Bankruptcy will not hurt your immigration status. You can still get a green card-- you can still become a citizen, exactly the same as before.

Filing for Chapter 7 Bankruptcy will not stop your tax refunds.

Filing Chapter 7 Bankruptcy will not involve your employer.

Filing for Chapter 7 Bankruptcy does not mean you will be garnished-- it makes it illegal for your credit cards and medical bills to garnish you.

Will I Lose My Security Clearance?

Bankruptcy by itself cannot be used to deny a security clearance; but it can be used against you in  combination with other problems. People who are addressing their situation generally are better regarded in the process than those who do nothing to deal with their problems.

 I've done bankruptcies for hundreds of people who have security clearances. Some of them were told by their security people that they would lose their clearance unless they filed bankruptcy.  Having trouble paying your debts can be automatic grounds for losing your clearance--because the government does not want you desperate for money and selling things that don't belong to you.

I have known only five people who lost their clearance after filing bankruptcy.  Two of those had been ignoring their bills and dragging around bad credit for years without doing anything about it.  At their review, the government said they were just too stupid to be trusted.  Of the other three, one worked at perhaps the most secure location in government.  The other two I can't explain.

I have seen several people who did not have clearances and who were denied interim clearances when they applied because of the bankruptcy. I fought one of those to the Fourth Circuit, but lost.

As a general rule, people who already have a clearance and who aren't in trouble for anything else do not lose their clearances because of bankruptcy.   People who are applying for a clearance for the first time should do everything possible to keep everything current until the clearance is approved. 

In some parts of government and certain jobs, filing a Chapter 13--and paying back some of your debts--is better than filing a Chapter 7. 

Is Bankruptcy My Only Option?

The credit card companies really sold Congress on how these counseling services were better than bankruptcy.  After the new law passed, the best ones closed down.  I guess I shouldn't be surprised at that, but I am. Please take care when looking into credit counseling and debt reduction schemes as some are not reputable.

If you want to try to work out lower payments with your creditors, I used to recommend Consumer Crediting Counseling Service at 1-800-747-4222.   They used to have offices around Northern Virginia where you could meet somebody in person and go over your choices. 

Now, they have been taken over by Money Management International at the same phone number.

I met a representative from Clear Point, when we did a little panel for the Northern Virginia Better Business Bureau.  She seemed very nice.  Their number is 877-422-9040. 

Sometimes doing nothing will work.  For elderly people with nothing but social security, simply telling creditors to call your lawyer may be all you need to do. If I can work out a plan to fix your debt situation without a lawyer, there's no charge.  But I do make you listen to my favorite lawyer joke.

How Can I Pay The Legal Fee?

We offer payment plans. Most clients take four months. Occasionally there's a reason we can't wait, if you put off seeing me for too long.

How much will it cost?  That varies with the facts of your case.  If my job gets harder, your price does go up.  Under the new law, Chapter 7, with filing fees, costs and legal fees, you can expect to pay a little over $2,000.00.  If your situation is complicated, it can cost close to $3000.00. 

Ordinary Chapter 13's are $3000.00; Chapter 13's where we strip off your 2nd mortgage are $4500.00. 

Where do I go to court?

The bankruptcy court for all of Northern Virginia is in Alexandria.

The bankruptcy hearings are held at an office building located at:

115 S Union Street, Alexandria, Virginia 22314. Here's a link to google maps:

Is It Time to Talk to a Virginia Bankruptcy Lawyer?

If financial problems are interfering with your sleep, your health or your life, call today. My number is 703-335-7793. For more information, click Northern Virginia Bankruptcy Lawyer.

For links to lawyers in other states who are also members of the National Association of Consumer Bankruptcy Attorneys, go to NACBA

For information on bankruptcy laws in other states, go to bankruptcyaction.com.

For other Virginia bankruptcy lawyers, in Richmond Virginia, check out Charles Krumbein or H Darden Hutson.   In Lynchburg, I can suggest Cox Law Group.  If you live in Culpepper or Spottsylvania counties, call Dale Adams at  (540) 371-5101.