Bankruptcy means you ask the court to excuse you from your duty to repay money you owe your creditors. A creditor is a person or business to whom you owe money. Bankruptcy allows you to discharge (get rid of) or reorganize most of your debts, but also to keep a certain amount of property. Two kinds of bankruptcy are available to individuals and married couples not in business. These are a Chapter 7 (or “straight”) bankruptcy and a Chapter 13 (“debt adjustment”) bankruptcy. All bankruptcies are filed with your local United States Bankruptcy Court.

Under Chapter 7, you may not have to repay any of your debts before they are discharged (forgiven). Under Chapter 13, you must repay a portion of your debts –– before they are discharged. Chapter 13 bankruptcy is most helpful in saving a home or a car, as you generally need to be caught up in your payments on secured assets you intend to keep before filing a Chapter 7 bankruptcy. Chapter 13 allows your spread your payment arrearage out over as much as 60 months, and can stop a foreclosure so long as it is filed prior to the foreclosure sale.

The type of bankruptcy you can file depends on whether your household is above or below the state “median income.” The median income for a family of four in West Virginia is $66,401 for bankruptcy cases filed on or after May 1, 2014. (Please note that this amount changes each year.) Your income is determined by the six-month period before you file bankruptcy.

People in households with incomes above the state median usually cannot file a Chapter 7. They must file a Chapter 13. People in households with incomes below the state median may file either a Chapter 7 or a Chapter 13.

Before you file for bankruptcy, you must get individual or group counseling from an approved consumer credit counseling agency. You must do this within 180 days before you file bankruptcy. In emergency cases, you can file bankruptcy before you do credit counseling. However, you must start credit counseling within 30 days after you file bankruptcy. If you don’t, your bankruptcy will be dismissed. A list of approved credit counseling agencies can be found on the Internet at this website. Some agencies offer phone or internet counseling. After you file for bankruptcy, but before you’re granted a discharge order in bankruptcy, you will also be required to take a financial management course

Some debts can’t be discharged in either a Chapter 7 or Chapter 13 bankruptcy. These include the following things:

• Fines and court ordered restitution,
• Taxes for which no return was filed, taxes for which a fraudulent return was filed, as well as some other taxes,
• Child support, spousal support (or alimony), and non-support obligations resulting from a divorce or separation,
• Debts due to fraud,
• Debts due to wrongful and harmful acts,
• Loans from your pension plan, and
• Student loans, unless you can show extreme hardship. It is nearly impossible in West Virginia to show extreme hardship.

You can’t discharge credit card charges or other installment contract purchases to a single creditor totaling more than $550 for luxury goods or services you bought within 90 days before you filed bankruptcy. You also can’t discharge cash advances totaling more than $825 you got within 70 days before you filed bankruptcy. Thus you should always quit using credit for at least 90 days prior to filing a bankruptcy.

A bill, debt, or judgment can appear on your credit report for seven years, but a bankruptcy can appear for ten years. However, if you need to file bankruptcy, you probably have a bad credit report anyway. Because bankruptcy wipes out many of your debts, you should be better able to pay current bills. This may make you a better risk to a creditor.

After you receive your discharge in bankruptcy, you should send a letter to the three major credit reporting agencies, along with a copy of the discharge order, so that your credit report shows you are no longer obligated to pay the debts that they may have listed for you. Then, in about six to nine months, ask for a free copy of your credit report (you are entitled to receive one per year). If your credit report does not show the bankruptcy discharge by that time, then you should send a another letter to the credit reporting agencies to dispute their records. If you need further assistance with this, you should call legal aid or another lawyer.

Here’s the website where you can get more information about the three credit reporting agencies, and how to dispute their records.

You may be able to file bankruptcy without an attorney, but bankruptcy is difficult. You may lose income, property, or other rights if you don’t know the law. To see if you qualify for free legal help with bankruptcy you can apply for help from Legal Aid of West Virginia.