Quick Answer
Bankruptcy is a federal legal process that lets people and businesses who cannot repay their debts get relief under court protection. For individuals, it either eliminates most debt permanently (Chapter 7) or restructures it into an affordable repayment plan (Chapter 13). Filing immediately stops all collection activity through the automatic stay.
By John G. Merna, Esq. | Last Reviewed: June 2026 | The Merna Law Group, P.C.
If you are dealing with debt you cannot manage — credit cards, medical bills, lawsuits, garnishments — bankruptcy is a federal legal tool that provides a structured, court-supervised way to resolve overwhelming debt and start over financially. It is governed by Title 11 of the United States Code, applicable in every state.
What Bankruptcy Does Immediately
The moment a bankruptcy petition is filed, federal law triggers the automatic stay (11 U.S.C. § 362), which immediately stops virtually all collection activity:
- Wage garnishments stop
- Bank account levies and freezes stop
- Lawsuits and civil judgments are paused
- Foreclosure proceedings halt
- Vehicle repossessions stop
- Creditor phone calls and collection attempts must cease
The Two Main Types of Personal Bankruptcy
Chapter 7 — Liquidation Bankruptcy
Chapter 7 permanently eliminates most unsecured debt — credit cards, medical bills, personal loans, payday loans — typically within four to six months. Most filers keep all of their property because Virginia exemption laws protect home equity, vehicles, retirement accounts, and household goods. To qualify, you must pass the Means Test based on Virginia’s median household income (published at justice.gov/ust).
Chapter 13 — Reorganization Bankruptcy
Chapter 13 is for people with regular income who want to keep property that might be at risk, catch up on mortgage arrears, or repay non-dischargeable debt through an affordable plan. It creates a three-to-five year court-approved repayment plan, after which most remaining unsecured debt is discharged.
What Bankruptcy Does NOT Eliminate
- Child support and alimony
- Most student loans
- Recent income tax debt
- Criminal fines and restitution
- Debts from fraud or intentional wrongdoing
Does Bankruptcy Hurt Your Credit?
Yes, in the short term. A Chapter 7 filing appears on your credit report for up to ten years; Chapter 13 for up to seven. However, most Virginia clients begin rebuilding credit within twelve to eighteen months of discharge. For people already missing payments and facing judgments, bankruptcy often causes less additional damage than continued non-payment — and provides a defined starting point for recovery.
Is Bankruptcy Right for You?
Bankruptcy is not the right solution for every financial problem, but for Virginia residents facing garnishment, foreclosure, repossession, or debt they genuinely cannot repay, it is often the most complete legal path to resolution. A free consultation with Merna Law will give you an honest assessment of all available options for your specific situation.
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Last reviewed by John G. Merna, Esq. | June 2026 | The Merna Law Group, P.C. is a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.
