Newport News Chapter 7 Bankruptcy Attorneys

The Means Test Explained

First, we look at your current monthly income over the past six months and calculate your annual income.We then compare that figure to the median income for a household of your size in Virginia. For example, a single person's median income is different from that of a family of four. If your income is below the state median, you automatically pass the means test and are eligible to file for Chapter 7. If your income is above the median, we proceed to the second stage of the test.

The second stage involves your disposable income. This calculation takes your income and subtracts certain allowable living expenses, such as housing, transportation, and healthcare costs. The IRS sets the standards for many of these expenses, and we also factor in any required payments on secured debts, such as a mortgage or car loan. The result is your disposable income. If this disposable income is low enough to meet the legal threshold, you may still qualify for Chapter 7. The idea is that even if your gross income is high, your necessary expenses may leave you with little to no money to pay back your unsecured creditors.

How Does Liquidation in a Chapter 7 Bankruptcy Work? What Can I Keep?

In a Chapter 7 bankruptcy, liquidation is the process of selling your non-exempt assets to pay back your unsecured creditors. This sounds intimidating, but it's important to understand that many people who file Chapter 7 bankruptcy don't lose much or even any of their property. 

Virginia law provides specific exemptions that allow you to protect certain assets from being liquidated. These exemptions recognize that you need certain property to maintain a basic quality of life and get back on your feet. The goal of the law is to give you a fresh financial start, not to leave you with nothing.

Some of the most common exemptions available in Virginia include:

• Homestead exemption. This is one of the most powerful exemptions. It allows a single person to protect up to $50,000 of equity in their primary residence or a property where their dependents live, with an additional $500 for each dependent. For example, if you have a home in the Huntington Heights area and your home equity is less than the exemption amount, we can protect your house.
• Motor vehicle exemption. You can protect up to $10,000 in equity in one vehicle. This exemption can help you keep the car you need to get to work, take your children to school, and run errands. If you have a car worth less than your exemption amount, you can keep it.
• Wildcard exemption. Virginia’s wildcard exemption gives you $5,000 in value to protect any asset or assets you choose. You can put this amount toward protecting your home or car, for example. If you are at least 65 years old, the wildcard exemption doubles to $10,000. You also get an additional $500 in value for every dependent you currently support.
• Household goods and furnishings exemptions. You can protect up to $5,000 in value of household items, including furniture, electronics, and appliances. You can also protect family heirlooms and family portraits up to $5,000 in value, clothing up to $1,000 in value, and firearms up to $3,000 in value.
• Retirement account exemption. You can fully protect most types of tax-exempt retirement accounts, including 401(k)s and 403(b)s. 
• Tools of the trade exemption. If you need specific tools for your job, you can protect up to $10,000 of their value. This can be especially helpful for contractors and mechanics.

Our attorneys can strategically apply these and other exemptions to protect your property, whether it's your home, your car, or your savings. We can help you use the law to your advantage so you can keep as many of your possessions as possible while still eliminating eligible debts.