If you have Filed for a Bankruptcy in Virginia recently, then the term Bankruptcy Discharge will sound like music to your ears. This is because receiving a bankruptcy discharge means that most if not all of the debts you owed before filing the case are eliminated.
What is a Bankruptcy Discharge and in what way does it affect your Virginia Bankruptcy Filing?
There are two major benefits of obtaining a Bankruptcy Discharge from the Bankruptcy Court:
• You (Debtor) are legally released from paying all dischargeable debts to creditors. In other words, the Bankruptcy Discharge Order "discharges" your obligation to pay these debts. Though there are limited exceptions under Virginia bankruptcy law, such as certain tax debts and student loans, most debts are included in the discharge. You should consult with a Virginia bankruptcy attorney to find out what, if any, exceptions to the discharge there may be in your case.
• The Bankruptcy Discharge also bars creditors from collecting debts from you (this is called the discharge injunction). They are prohibited from filing lawsuits against you, sending demand letters and making phone calls.
What Debts are Discharged?
As discussed above, the Bankruptcy Discharge order doesn’t entirely release you from debts. The types and amounts of debts dischargeable through the order depends on the type of Bankruptcy you have filed.
Chapter 7 (No Asset):
In a "no-asset" Bankruptcy Case, all assets you own are exempted under Virginia bankruptcy law - which means you don’t have to give up your assets to pay back your creditors.
In a no asset case, the trustee has to file a report with the court stating that he/she didn't discover any valuable assets which could be sold to pay your creditors. In these cases the creditors receive no distribution and the debtor retains all of his/her property.
Chapter 7 (Asset):
Some of your assets fall under the non-exempt category, or the value of the asset exceeds the allowable exemption, which gives the trustee the ability to gather and sell these assets. The sale of property in a Chapter 7 bankruptcy in Virginia can be a long term process that may take months to years. An "asset" case will certainly last longer than a "no-asset" case.
The process involves selling (liquidating) assets like real estate, vehicles, businesses, or anything that can be reduced to cash.
Apart from that, the trustee might also file lawsuits against creditors.
After the trustee has accumulated all the funds, your creditors will start filing claims in the bankruptcy case for their share of repayment.
If the trustee finds the claims are inadequate or improper, then he/she will file objections in the court. It is up to the court whether it allows the claim of a creditor or disallows it. When all claims are resolved, the trustee will mail checks to all those creditors whose claism have been allowed by the court.
The court will only close the case after it receives the report of the trustee stating the complete claim file, settlement and fund disbursal. This is called the Final Report.
Related - Chapter 7 Bankruptcy
Your trustee has one year to revoke your Virginia Bankruptcy Discharge
You must fully cooperate with the trustee when you file a bankruptcy in VA with non-exempt assets. Your trustee has the responsibility to accumulate, liquidate and distribute your non-exempt assets.
If the trustee discovered that you have obtained your discharge through fraud, then he/she can report this to the court and ask to revoke your discharge even after the case is closed.
Chapter 7 (reopening):
Even after a court closes a Virginia bankruptcy case, it can re-open it under specific circumstances.
• If you forgot to list a debt.
• If you forgot to add a debt and it is not discharged by the court, then, you can ask the court to reopen the case to rectify it and notify the creditor officially.
• If you forgot to list an asset.
• If your trustee or creditors discover that you have not listed an asset, then the court will reopen the case and analyze the liquidation value of the asset for the creditors.
Under this chapter, you are eligible to pay the trustee through a regular payment plan as approved by the court. After receiving the payment, the trustee will disburse funds to creditors pursuant to the bankruptcy code's priority scheme.
This chapter can be better than Chapter 7 bankruptcy in Virginia if you own non-exempt property, as you can save your assets from being liquidated and repay the debt within a period of 3 to 5 years.
Upon completing the payments as per the payment plan, you will receive the discharge order from the court. The court will close the case as soon as the trustee files the final report stating that all the funds have been distributed to the creditors.
Related - Chapter 13 Bankruptcy
You received your Bankruptcy VA Discharge order from the court. You are free from debt. Now what?
After relieving you from debts, the court will mail the copy of the discharge order to you, your creditors, the assigned trustee and trustee’s attorney. The notice comprises legal clauses which bar creditors from contacting you to collect debts.
Make sure to make a copy of the discharge order as you can use it to rectify your credit report issues and deal with creditors. Under Virginia bankruptcy law, if a creditor harasses you for a discharged debt, you can reopen the case by filing a motion with the court and seek sanctions against the creditor for violating the discharge injunction.
Even though the bankruptcy discharge removes your liability for debts, it does not provide the same protection to your co-signers and joint applicants. The Court does not impose any restriction on the creditors as far as collecting debts from a co-signer.
A VA bankruptcy discharge will not impact your credit reporting time limit. The time limit is set for 10 years from Chapter 7 bankruptcy and seven years in Chapter 13 bankruptcy.
Filing Bankruptcy in Virginia is a viable option to obtain a fresh start by eliminating all your financial stress and liberating you from debt collectors.
Its highly recommend you schedule a meeting with a Virginia bankruptcy attorney before applying for Bankruptcy. A Virginia bankrupty lawyer will critically analyze your situation and advises you on the solution that will best fit your needs.