Changes in Virginia Bankruptcy Laws
What were the Changes in the New Law and How Does this Effect Virginia Bankruptcy Law?
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.
So, the New Law Bankruptcy Reform and Law Isn’t So Bad?
Actually, it’s terrible. The new law makes it almost impossible to get rid of debts you promised to pay in a divorce or separation. The new law is much tougher–it was already tough–on people who owe old taxes. The new law now says you cannot get rid of non-government student loans, which will open up a whole new field for bogus schools offering bogus student loans.
For everybody, the paperwork is a lot harder. You’ll need to find six months of pay stubs and last year’s tax returns. You’ll need to pay for and attend a credit counseling briefing and a budget class. (You can do these classes on the internet; we suggest Hummingbird at www.hbcce.org.) You have to come to your hearing with your drivers license or other picture ID and your social security card. You have to show the court your bank statements. The purpose of these paperwork requirements is to throw you out of bankruptcy so your creditors can keep chasing you.
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.
What is the new law “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 November 1, 2010, the averages for Virginia are:
Means Test Chart
One person $49,484
Two persons $62,586
Three persons $72,078
Four persons $85,586
Five persons $93,086
Six persons $100,586
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. About twenty percent of the bankruptcies filed in Northern Virginia are Chapter 13′s. Only about five percent of ours are. If Chapter 7 is better for you, we work really hard to get you qualified for Chapter 7. (There’s a real reason why you are in trouble, after all.)
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; and while it may not be six times as expensive to have five kids as it is to have none, it’s a lot more than twice as expensive. I’m angry about the unfairness of that, and I do everything I can do to try to help families with lots of kids.
If you haven’t read our client reviews be sure you do. It’s always nice to know that people can and have turned their financial lives around.
