Business Bankruptcy in Virginia: 5 Facts for Richmond and the State's Two Districts

If you have a Virginia business, and your company can’t pay its bills, then bankruptcy can be a sound option to protect the business and you. It always goes into one of two federal district courts, the Eastern District covers Richmond, the other the Western District. One big decision to make is Chapter 11, which is for the business to keep running, Chapter 7 which is for a business to shut down, and Chapter 13 which is only for sole proprietors.

Filing does not automatically mean your business has to close, or that you have failed, only that your company can’t meet its financial obligations. Small businesses can benefit from bankruptcy too, it is not just a legal proceeding for large corporations.

One of the first steps in a bankruptcy case is to find out where to file. There are four courthouses in Eastern District: Alexandria, Richmond, Newport News, Norfolk. And the Richmond Division covers 24 counties, including Chesterfield, Hanover, Henrico, Spotsylvania. It also handles Fredericksburg, Colonial Heights, and Hopewell. The Western District has the Roanoke office and an outpost in Lynchburg for hearings, plus one in Harrisonburg. In the Eastern District, only individuals and married couples may file on their own, while corporations and partnerships are required to hire an attorney.

Chapter 11

You would want to declare Chapter 11 if your business still earns revenue but simply cannot keep up with its debt and other payments. The idea is for the company to keep operating during bankruptcy as a debtor-in-possession. The paperwork goes in to the federal bankruptcy court, and the filing triggers the automatic stay, which pauses all efforts to collect from the company.

Chapter 11 is no quick fix for a debtor that can’t pay its bills. The debtor must first participate in several administrative steps. These include meeting with someone from the U.S. Trustee’s office, filing monthly operating reports, and paying quarterly fees to the trustee, then there is the 341 meeting. Creditors file proofs of claim, which says what they are owed, and your attorney reviews them. If one seems too large or erroneously calls itself secured, you can object, and the judge hears the case.

Regular Chapter 11 bankruptcy gives you an exclusive 120-day period to file your plan. Payment terms are often stretched, and some non-essential assets may be sold. Once the bankruptcy plan is written up, it will sort creditors into classes and offer a schedule of payments for each of them. Along with the plan goes a disclosure statement, sent out for each class to study and vote on. The court makes a final decision to confirm the plan if it is feasible, in good faith, and in creditors’ best interest.

Subchapter V is a streamlined option if a smaller business goes into Chapter 11 bankruptcy. The rules define the company by the limit on its total debt, which is currently $3,424,000. In it, only the debtor files a plan, and it is due within 90 days of the order for relief. Congress passed H.R. 7730 in September 2026 to raise the limit to $7.5 million permanently. The President has not yet signed it. It would apply only to cases filed on or after enactment.

Chapter 7 Is Often the Best Way

If you have decided your company can’t go on, then Chapter 7 is often the best way to manage the legal side of shutting it down. A trustee is appointed to handle the sale of any non-exempt assets, and then proceeds go to creditors by priority. The trustee is expected to schedule a 341 meeting, a gathering of creditors, within 30 to 40 days. At it the trustee will question you under oath about assets and debts, and creditors may also put in questions of their own. But there is no discharge in a corporate or LLC case.

Chapter 13

Unlike a corporation or LLC, a sole proprietorship does not offer a shield of limited liability. It is on you as the owner. Your personal and business debts blur together. As a sole proprietor, you file Chapter 13 as an individual. You get to keep assets, then pay back debts over three to five years according to a plan. One big catch is your unsecured debts cannot exceed $526,700. The first payment to the trustee is due within 30 days after you file, then at 30-day intervals. If you fall behind, that poses a risk of dismissal. But if you complete the plan and the case wraps up successfully, it ends in a discharge of any remaining debt.

Anyone filing as an individual must take a credit counseling briefing from an approved agency within 180 days before petitioning. Virginia does not make use of the federal exemptions, so you look to state law to protect property in bankruptcy.

In the Western District, the filing fee comes to $338 in a Chapter 7 case and $1,738 in a Chapter 11 case. The timing of your filing can matter.

Before an experienced attorney can provide good counsel, you will need to gather key documents: tax returns, income statements, asset and debt information, leasing and loan agreements, and even profit-loss details. Only then can your lawyer explain the process so you can decide on an effective plan.