What Happens When I File for Bankruptcy in West Virginia?

Chapter 7 Generally

• Chapter 7 bankruptcy, referred to as "liquidation" bankruptcy, is the most common type of bankruptcy filed in West Virginia. Chapter 7 bankruptcy is what most people think of when they refer to bankruptcy. In short, under Chapter 7 a bankruptcy trustee will sell most of your property and use the sales proceeds to pay off some or all of your outstanding debts. The remainder of your debts are, for the most part, wiped away so that you essentially start from ground zero financially. No property and no debts.
  
  

Chapter 13 Generally

• Chapter 13 provides a financial fresh start, but it is not quite as extreme as Chapter 7. Instead of a liquidation, Chapter 13 is a debt adjustment and repayment form of bankruptcy. When you file for Chapter 13 in West Virginia you will prepare a proposed debt repayment plan. The bankruptcy court will review your repayment plan and, if it finds the plan acceptable, approve the plan. You then make a single monthly debt payment to the bankruptcy court, and the bankruptcy court pays your creditors a certain amount as set forth in the approved plan.
  
  

Liquidation And Exemptions

• Liquidation refers to the process by which the bankruptcy trustee sells most of your property. Important, though, West Virginia state law allows you to claim numerous exemptions to protect some of your most vital pieces of property. You can, for example, claim a $25,000 exemption for the value of your home, and a $2,400 exemption for your car. Similarly, you can claim an exemption for household furnishings, retirement accounts, and work equipment (tools, computers).
  
  When you claim an exemption the bankruptcy trustee will not sell the exempted property, at least as long as the property value does not exceed the amount of the exemption. If the value does exceed the exemption amount, then the trustee will sell the property and give you cash equal to the exemption amount. Again, liquidation only occurs under Chapter 7. The bankruptcy trustee does not sell any property in a Chapter 13.
  
  

Debt Discharge

• One of the essential functions of Chapter 7 bankruptcy is the legal debt discharge that occurs when the court approves your bankruptcy. A discharged debt is a debt that you are no longer legally required to pay for, and creditors cannot pursue collect of. The general rule in West Virginia is that all of your debts are discharged under Chapter 7. There are a few exceptions, though. For example, the law does not discharge student loan debt except in very rare circumstances, and the law does not discharge taxes or family support obligations, such as child support or alimony.
  
  

Debt Adjustment

• Similar to debt discharge under Chapter 7 is the debt adjustment that occurs under Chapter 13. When you prepare a Chapter 13 debt repayment plan you will probably propose repaying your debts in a reduced principal amount, at a lower interest, or over an extended repayment period. Essentially, you repay some of the debt but not all of the debt. As long as the bankruptcy court approves your repayment plan, then your creditors cannot dispute the payment they receive under that approved plan. The legal term for this process is called debt adjustment. Debt adjustment is common in a Chapter 13 filed in West Virginia.