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Don’t sit on your Bankruptcy Eligiblity: It’s a moving target
In January, Larry came to talk to me about Chapter 7 bankruptcy eligiblity. He had a car repossession and about $25,000 in charged off credit cards. He was planning to get married and hoped to buy a house in a few years. His fiancé warned him they could never buy a house if he didn’t fix his credit.
Great, I promised, we can do a Chapter 7 bankruptcy to do exactly what you want.
Last month, in August, he came back, ready to go. But meanwhile, he had lost his Chapter 7 bankruptcy eligibility.
In February, Larry got as $4.00 an hour raise. He lost Chapter 7 bankruptcy eligiblity.
How Did Larry Lose Eligiblity?
In January, Larry was making $34.00 per hour. But in February, he got a raise to $38.00 an hour. In Virginia, as of April 2025, $77,420.00 is the cut-off for automatic eligibility for a single person, no children. His raise put him over the limit. Instead of clearing all his debts, he’ is forced to keep paying through the bankruptcy court in Chapter 13 for another five years!
Instead of being easily eligible to get a mortgage in two years (assuming enough family income), he’d need one of the few lenders who will work with him to get court approval. That can be a trap!  Because Larry needs to show the court he can now afford to buy a home, the Chapter 13 trustee can say, Larry now can afford a bigger bankruptcy payment.
(Getting a mortgage in Chapter 13 is not hopeless. Here are two lenders who reach out to people in Chapter 13 bankruptcy: NEXA and Peoples Bank. I don’t know much about either one.)
Conclusion
Trump says his casino bankruptcies are “brilliant.”
Some people say that bankruptcy should be a last resort. On the other hand, Donald Trump says using the bankruptcy laws can be “brilliant.”
Either way, when you get to that point, remember that bankruptcy eligiblity can be a moving target. Whether a billiant move or a last resort, don’t misss your chance.
PS Being over the Income Cut Off Isn’t Always the End of Chapter 7 Bankruptcy Eligiblity
Being a few dollars an hour over the cut off for automatic eligiblity doesn’t always means you can’t file Chapter 7.  We do dozens of those ever year.  But there needs to be unusual budget factors to help you pass the means test.
Those budget factors that can help you get approved for Chapter 7 can include:

1. Child support
2. Help for elderly family
3. Back taxes
4. Major, on-going medical expenses
5. A really, really big car payment

Larry didn’t have any of those. When he lost his automatic income eligiblity, he was stuck in Chapter 13.
 
The post Bankruptcy Eligiblity is a Moving Target appeared first on Robert Weed Virginia Bankruptcy Attorney.

Discharge in Chapter 13 is an Uphill Climb
For most people, most of the time, getting a discharge is the goal of a bankruptcy case. The Supreme Court put it this way.  “The principal purpose of the Bankruptcy Code is to grant a ‘fresh start’  to the ‘honest but unfortunate debtor.’ ” The discharge means the debts are gone.
About half Chapter 13 cases end up dismissed
Nationally, in Chapter 13, only about half the cases get a discharge. The other half get dismissed.
Here in the Alexandria Division, there were 238 Chapter 13 cases filed by lawyers during January through June 2025. Most of those cases, 162 out of that 238 were filed by just six lawyers. Those same top six lawyer also had 88 dismissals.
The two busiest lawyers filed 101 cases and had 66 dismissals. The next four lawyers filed 61 cases and had 22 dismissals. It looks like the busiest lawyers had more than half their cases dismissed; for the next busiest, about a third. (We filed seventeen Chapter 13 cases in the first half of 2025 and had four dismissals.)
(Are you looking for a lawyer to file Chapter 13 and hope to get a discharge? You may want a lawyer who does many, but not too many, Chapter 13 cases.)
The Bad News. Often, Chapter 13 dismissal is a disaster. People can end up losing their homes.
Chapter 13 dismissal sometimes means people lose their homes.
The Good News. Sometimes, people recover from a dismissed Chapter 13, by filing a new case and trying again. Sometimes the problem just goes away. Not all dismissed Chapter 13s are bad.
Examples of “Good Result” Chapter 13 Dismissals
Greg and Sally were falling behind on their mortgage and couldn’t pay their unsecured debts. We filed Chapter 13 to catch the house up. But, that case got dismissed, because they couldn’t afford the payments. Fortunately, Greg then got approved for an 80% VA disability, and they filed Chapter 13 again. With that VA income, they were comfortably to catch up the mortgage and pay their other debts. Sadly, two years later, Sally and then Greg both died a few months apart. Their remaining unpaid debts died with them, so the Chapter 13 was dismissed. (Afterward, their daughter sold the house.)
Marcus was in a divorce dispute with his ex wife about paying her half of the value of an overseas property in his name. He filed Chapter 13 to spread the payment over five years. After the bankruptcy was filed, they worked out a new agreement to just transfer that property to their daughter. That solved the problem and the Chapter 13 was then dismissed.
PS  In case you are wondering, I never use real names in my examples.
The post Discharge and Dismissal in Chapter 13 appeared first on Robert Weed Virginia Bankruptcy Attorney.

 Shenwick & Associates has filed numerous bankruptcy petitions for businesses (LLCs and Corporations) in the Southern District of New York and the Eastern District of New York. We have recently observed a trend where Chapter 7 Bankruptcy Trustees are conducting a "deeper dive" into business finances to initiate avoidance actions (Preference or Fraudulent Conveyance) against business owners or third parties. The Bankruptcy Trustee and their counsel get compensated for bringing these transactions.These actions are permissible under the Bankruptcy Code; however, they can be time-consuming and expensive to defend or settle.Additionally, once a Chapter 7 bankruptcy case is filed, dismissal can be difficult. After the business files for Chapter 7 Bankruptcy, the Bankruptcy Trustee assigned to the case will request bank statements, tax returns, credit card statements, and other financial documents for the business. These will be reviewed by the Bankruptcy Trustee, their counsel, or their accountant.Transactions which will be heavily scrutinized include but are not limited to:1 Preference payments.  Payments or transfers made to creditors within 90 days before filing (or within one year if to an insider, such as a family member or business partner) that give one creditor more than others. The trustee can “claw back” these payments to ensure equal treatment among creditors2 Fraudulent Conveyances Transfers of property or assets made with intent to hinder, delay, or defraud creditors, or made for less than reasonably equivalent value, typically within two years prior to filing (sometimes longer under state law). The trustee can reverse these to recover assets for the bankruptcy estate (“Sweetheart deals to 3rd parties or owner of the business and their friends or family3 Personal expenses  of Owner of business paid by Business such as insurance, car payments, meals or vacations4 Gifts or large transfers to friends/family: Any significant gifts or transfers of value, especially to insiders, are closely examined and can be reversed if deemed improper.5 Sales of assets for less than fair market value: The trustee looks for any sales or transfers where the business did not receive fair value, as these may be considered fraudulent.6 Unusual or inconsistent transactions: Any financial activity that appears out of the ordinary, such as sudden depletion of assets, hidden accounts, or unreported income, will be investigated7 Undervalued transactions: Transfers where the debtor sold or gave away property for less than its fair market value within a set period before bankruptcy (often up to five years). For example, selling a car to a relative for a nominal amount can be voided8 Transfers to defeat creditors: Any transfer made with the intent to hinder, delay, or defraud creditors—such as moving assets to a family member or friend to keep them out of the bankruptcy estate9 Transactions where consideration is given to a third party: If the debtor transfers property to one person but the payment or benefit goes to someone else, this can be voided to prevent circumvention of bankruptcy rules10 Sales or transfers of assets to insiders, officers, family members, or other businesses under common control

These are some transactions that will be scrutinized; if similar transactions occurred previously, one may reconsider a Chapter 7 bankruptcy filing.
Clients or their advisors with questions about chapter 7 business bankruptcy filings should contact Jim Shenwick, Esq  917 363 3391  [email protected] Please click the link to schedule a telephone call with me.https://calendly.com/james-shenwick/15minWe help individuals & businesses with too much debt!

How Quickly Does the Postal Service Deliver Your Chapter 13 payment?
When you are in Chapter 13, you need to make your monthly trustee payments on time–especially in the first four months of the case. So it doesn’t help that our Chapter 13 Trustee in Alexandria, Thomas Gorman, gets his payments at a bank in Memphis.
Memphis Tennesee is scheduled for three day delivery from Northern Virginia.
The Postal Service tries to deliver mail from Virginia to Memphis in three days. Last year, they only hit that three-day-goal 68% of the time. (Down from 75% the year before.)
So in the first four months of your case, you can expect to have at least one payment arrive late.  I’ve often seen them take over a week. And, if the Chapter 13 Trustee doesn’t like your case for some reason, late payments can push him over the edge, He will ask the judge to throw your case out.
Tracking Slows it Down
When you mail your Chapter 13 payment regular mail, it goes straight from the PO box to the bank. If you send it tracking, someone has to scan it in. That can often add another day or even two.
(I recomend mailing your checks using the bill pay feature on your banking app.  That way you at least have proof the check was mailed, because your bank is mailing it. How do you know if a bill pay check arrives? When it clears your bank.)
No, You Can’t us FedEx or UPS
The bank in Memphis gets their mail at a post office box. FedEx and UPS don’t deliver to PO Boxes.
Mail Your Chapter 13 Payments Early
Mail them early. Really, mail the payments early. At least eight days before the deadline. Make sure you have the money in your account--sometimes the mail does get there quickly.
For many people, late mail delivery can be the biggest stress in getting your Chapter 13 plan approved.
The post When Does the Postal Service Deliver Your Chapter 13 payment?   appeared first on Robert Weed Virginia Bankruptcy Attorney.