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.

How Bankruptcy Works in Virginia

Virginia bankruptcy cases are filed in the Eastern District of Virginia, which has courthouses in Norfolk, Newport News, Richmond, and Alexandria. The division where your case is filed depends on where you live. Most Hampton Roads residents file in the Norfolk or Newport News divisions, while residents of the greater Richmond area file in the Richmond division.

After you file, a court-appointed trustee reviews your finances and conducts a meeting of creditors — a brief hearing (typically under ten minutes) where you answer questions about your income, debts, and assets under oath. In Chapter 7 cases, the entire process from filing to discharge usually takes four to six months. In Chapter 13 cases, you make payments to the trustee for three to five years before receiving your discharge.

Virginia has its own set of exemption laws under Virginia Code Title 34 that determine which property you can protect in bankruptcy. These include exemptions for your home, personal property, retirement accounts, and a wildcard exemption that can be applied to any type of asset. Most Virginia filers keep all of their property.

Common Myths That Stop People from Filing

Myth: Everyone will know I filed. Bankruptcy is technically a public court record, but no one is notified except your creditors. It does not appear in the newspaper. Your employer is not contacted. Your neighbors will not find out unless you tell them.

Myth: I will lose everything. Virginia exemption laws protect the assets most people own — your home equity up to the exemption amount, your car, household goods, clothing, retirement accounts, and more. The vast majority of Virginia Chapter 7 filers lose no property at all.

Myth: I will never get credit again. Most people begin receiving credit card offers within weeks of their discharge. With disciplined use of a secured credit card and consistent on-time payments, many former filers qualify for a mortgage within two to three years. Merna Law provides a free credit recovery course to help clients rebuild effectively.

Myth: Filing bankruptcy means I failed. Bankruptcy exists because Congress recognized that honest people face financial hardship through job loss, medical crises, divorce, and other events beyond their control. It is a legal right designed to give people a genuine fresh start — not a moral judgment.

What Happens After Your Bankruptcy Discharge

Once your debts are discharged, creditors are permanently prohibited from collecting on those debts. Any creditor that contacts you after discharge is violating a federal court order and can be held in contempt. You receive a discharge order from the court confirming which debts have been eliminated.

Your next step is rebuilding. Open a secured credit card immediately and use it for small purchases you pay in full each month. Keep your credit utilization below thirty percent. Avoid applying for multiple accounts at once. Within twelve to twenty-four months of consistent responsible use, your credit score will begin climbing significantly. Many Merna Law clients reach scores above 700 within two to three years of their discharge.

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.

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.