Virginia Bankruptcy Law:  Changes after 2005 hit Northern Virginia

People in Northern Virginia were hit hard by the 2005 bankruptcy law.  That law set a new test for eligibility to file Chapter 7 bankruptcy.  Instead of looking to see if you can really afford to pay your debts, the bankruptcy court uses an average budget to decide if you should be forced to pay.

People in Northern Virginia and the 2005 Bankruptcy Law

For the first two years under the new law, that average budget took into account the high cost of living in places like Northern Virginia.  In January 2008, those cost of living calculations got thrown out.

Northern Virginia has five of the twelve highest income counties in America.  (Stafford, Fairfax, Loudoun,  Arlington and Prince William.)  That means people in Northern Virginia are at a big disadvantage trying to qualify for Chapter 7 bankruptcy.

Here’s the good news:  We have eleven years of experience helping people in Northern Virginia with the 2005 bankruptcy law.  We’ve figured out how to get most people approved who need bankruptcy.

So, the Bankruptcy Reform Law Isn’t So Bad?

Actually, it’s terrible.  The law makes it very hard to get rid of debts you promised to pay in a divorce or separation.  The bankruptcy law is much tougher–it was already tough–on people who owe back taxes.  The bankruptcy law now says you can’t get rid of non-government student loans.  That opened up a whole new field for bogus schools offering bogus student loans. (I talk more about bankruptcy student loans here.)

For everybody, the bankruptcy paperwork is a lot harder. You’ll need to find six months of pay stubs and last year’s tax forms.  You’ll need to take two bankruptcy classes.  (You can do these classes on the internet; we suggest Moneysharp.)  You have to come to your hearing with your Virginia 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 make filing bankruptcy harder.

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 bankruptcy eligibility.

The Virginia Bankruptcy 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 May 2016, the averages for Virginia are:

Virginia Bankruptcy Law:  Means Test Chart by Virginia Family Size as of May 2016

 

One person            $55,055

Two persons          $69,277

Three persons       $79,956

Four persons         $92,733

Five persons        $101,133

Six persons          $109,533

 

If your family income, based on the last six months, is below those Virginia averages, you have automatic income eligibility to wipe out your debts with Chapter 7.   If you are over those averages, you have to prove why you should be allowed to file Chapter 7 bankruptcy.  Over by a little, it’s not hard to prove. (The high rent in Northern Virginia is usually the proof you need .)  Over by a lot means we have to show unusual factors. (I talk about those factors, here.)

The main goal of the 2005 bankruptcy law was to force people over average income into five year chapter 13 payment plans.   My goal, as your lawyer, is to qualify you for a Chapter 7.  (If Chapter 7 is better for you, like it is for most people.  I explain the disadvantages of Chapter 13 here.)

With ten years of new law experience, we now know of a lot of ways to show those factors.  About twenty percent of the bankruptcies filed in Northern Virginia are Chapter 13′s.  Only about five percent of mine 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 averages are not too hard on single people and two person Virginia families.  They get a whole lot harder as the family size goes up.  So a family of six in Virginia is allowed double what a single person gets.  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 Virginia families with lots of kids.

An Experienced Lawyer for Virginia Bankruptcy Law

One more thing

If you haven’t read our client reviews be sure you do. When you read what people in Virginia say about filing bankruptcy with me, you can see the smiles.

Northern Virginia has five of the twelve highest income counties in the country.  They are Stafford, Fairfax, Loudoun and Prince William.  I have an office in four of those.  That means, I’m one of the most experienced lawyers in America, getting high income people approved for Chapter 7 bankruptcy.

In 2013, thirty percent of my clients were over median income families who got approved for Chapter 7 bankruptcy.

So, call to make an appointment at one of my four Northern Virginia locations.  Annandale, Woodbridge, Sterling and Stafford, Virginia.  703-335-7793.

Hope to meet with you in person, soon.