Bankruptcy 101

The bankruptcy code provides for six different types, called chapters, of bankruptcy. The most common filings, however, are Chapters 7, 11, and 13.

Chapter 7 Bankruptcy enables you to discharge most of your debts and immediately provides a fresh start. Importantly, you must be under a certain level of assets to qualify for this option and the level of assets is set by West Virginia law. 

Chapter 13 Bankruptcy is bankruptcy for an individual with a regular income. The individual will pay off their debts, often heavily reduced, over a three to five-year period. 

Chapter 11 Bankruptcy is usually reserved for corporations and partnerships. It is a supervised reorganization which allows the business to continue operations while implementing a payment plan. 

There are three more chapters, but they are only used in very specific cases.  

 Chapter 7 bankruptcy is often referred to as a liquidation bankruptcy, or a no-asset bankruptcy. It is quick and gets the debtor onto the path to a fresh start quickly. But to qualify your income must be below a certain level and, failing that, you must not have excess disposable income. You and your attorney can work through the forms to determine whether you are eligible for a Chapter 7 bankruptcy (good news! most people are!)

As an individual, if you don't qualify for Chapter 7, you'll have to file for Chapter 13. Chapter 13 bankruptcy, as known as the wage earner's plan, is required if you fail the means test--generally when you have assets that exceed the exempt amounts or earn too much. Under Chapter 13 the filer must pay secured creditors entirely (usually just continuing their payments) and at least a portion of their unsecured debts over a period of three to five years. The bottom line in a Chapter 13 plan is you will be paying your creditors monthly and after 3 to 5 years the unpaid portions are discharged assuming you met all your obligations under the plan. 

It depends. While attorney fees vary depending on the type and complexity, every filer must pay court costs. If you are filing Chapter 7 bankruptcy, the court charges a $335 filing fee. For a Chapter 13 bankruptcy, you are required to pay a filing fee of $310. And for Chapter 11 bankruptcy, the filing fee is $1,717. Importantly, if you are unable to pay your filing, you may be able to get it waived or pay it in installments.

Attorney's fees will range depending on the type of filing and the complexity of the case. Additionally, there are fees associated with required credit counseling courses (usually between $25 and $100). Regardless, the legal fees associated with bankruptcy are generally far less than the amounts you would be required to pay if you did not file. 

Fundamental to the fresh start is the individual filing for bankruptcy being honest. Bankruptcy fraud is simply fraud taking place within the process of bankruptcy by the filer. Fraud is broadly defined as "a knowing misrepresentation or knowing concealment of a material fact made to induce another to act to his or her detriment." - Black's Law Dictionary.


Bankruptcy fraud takes one of two forms: (1) concealment of assets; and (2) filing false forms. Nearly 70% of all bankruptcy fraud is related to the concealment of assets. Committing fraud during bankruptcy is punishable by up to five years in prison, or a fine of up to $250,000, or both. 18 U.S.C. 157.

This depends on which type of bankruptcy you file and how complex your case is. Generally, Chapter 7 bankruptcies are filed within a few weeks of your first consultation (an emergency bankruptcy petition, however, may be filed a lot quicker), and the debtor may be discharged in few months, if not sooner. 

For Chapters 11 and 13, the debtor not only goes through the initial filing stages but also must make on-going monthly payments over three to five years. Only after completing this payment plan can the debtor obtain a discharge from his debts and obtain the fresh start.

All this says nothing about potential litigation that could slow down the process. For more information on the process, the U.S. Courts' website is a great resource.

You can file bankruptcy as an individual without legal assistance, however, the even the bankruptcy courts note " seeking the advice of a qualified attorney is strongly recommended because bankruptcy has long-term financial and legal outcomes." 

Importantly, before you attempt to file, you might as well discuss your case with an attorney. Check to see if they provide free consultations. We are happy to discuss your case with you for free.

The different types of bankruptcies stay on your credit for different amounts of time: A Chapter 7 bankruptcy remains on your credit report for 10 years, whereas a Chapter 13 bankruptcy only remains on your credit report for 7 years.  

Bankruptcy, unsurprisingly, will negatively impact your credit score. Generally, credit scores drop between 100 and 200 points after a bankruptcy, depending on how high the score is before the bankruptcy, i.e. a score of 700 is going to take a larger hit than a score of 580. 
 
The good news is you can immediately begin working to improve your credit and usually within a few years you are in a much better position. Several websites provide great information regarding bankruptcy and your credit, including: Credit Karma, Experian, and NerdWallet.

Generally, we ask every client to bring the following information to the first meeting:

• A completed financial questionnaire (this will be provided to you);
• All letters from creditor or collection agencies;
• Copies of your last two filed tax returns; 
• Copies of loan documents, deeds of trust, and deeds and titles to automobiles that you have in your possession; 
• Copies of real and personal property tax bills or receipts; 
• Copy of your last bank statement for all checking and saving accounts;
• Copies of all social security, payroll, and pension pay stubs for the past 60 days and income amounts by month for the last six months. 

It is important that you provide as much of this information as possible, as incomplete information could hold up or make a filing impossible. And again, you must make it a point to be honest and open. If you are in doubt, it is better to divulge then try to hide an asset to save it.

Yes and no. Bankruptcy is largely guided by federal law and takes place in federal courts, but some important aspects of bankruptcy are guided by West Virginia law. Specifically, the limits on the amount and types of assets that an individual filing bankruptcy may exclude from the bankruptcy estate. Examples of property that may be excluded under West Virginia law include:

• Interest in a residence or burial plot of up to $25,000;
• $2,400 in interest in a vehicle;
• $8,000 in household items (no single item can be more than $400 in value);
• $1,500 for tools of the trade; 
• $1,000 for Jewelry;
• Social Security Benefits, unemployment compensation; 
• Veteran's Benefits; 
• Disability, illness, or unemployment benefits; and
• Alimony, support, or separate maintenance, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor.

It is important to note that this is not an exclusive list and the amounts are doubled if you file jointly with your spouse.

Yes and no. Bankruptcy is largely guided by federal law and takes place in federal courts, but some important aspects of bankruptcy are guided by West Virginia law. Specifically, the limits on the amount and types of assets that an individual filing bankruptcy may exclude from the bankruptcy estate. Examples of property that may be excluded under West Virginia law include: 

• Interest in a residence or burial plot of up to $25,000; 
• $2,400 in interest in a vehicle; 
• $8,000 in household items (no single item can be more than $400 in value);
• $1,500 for tools of the trade;
• $1,000 for Jewelry;
• Social Security Benefits, unemployment compensation;
• Veteran's Benefits;
• Disability, illness, or unemployment benefits; and 
• Alimony, support, or separate maintenance, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor. 

It is important to note that this is not an exclusive list and the amounts are doubled if you file jointly with your spouse.