February 9, 2010
Most people who file bankruptcy can keep everything they own. When filing bankruptcy, a Virginia resident is entitled to keep certain property as exempt from the trustee and creditors. The major Virginia exemptions include:
• Up to $5000 in household goods and furnishings.
• Up to $1000 in wearing apparel.
• Up to $2000 in equity in a motor vehicle.
• Wedding and engagement rings, and the family bible, without a limit as to value.
• Up to $10,000 in “tools of the trade”, plus additional articles if the debtor is engaged in agriculture.
• Up to $5000 in family portraits and heirlooms.
• A burial plot.
• Animals owned as pets.
• Medically prescribed health aids.
• 75% of disposable wages.
• IRAs, 401(k) Plans, and other retirement plans.
• Personal injury and wrongful death claims, awards, and the proceeds thereof.
• Real and personal property held by husband and wife as tenants by the entirety, except to the extent of any joint unsecured debts.
• A “wild-card” exemption, called a “homestead,” for any real or personal property, subject to certain limits. The amount of the homestead exemption depends on several factors. It starts at $5000, plus $500 per dependent, plus another $5000 if the debtor is age 65 or over, plus another $10,000 if the debtor is a disabled veteran with at least a 40% service-connected disability. The homestead exemption, once exhausted, may never be used again during the debtor’s lifetime, so it is important to use it judiciously. To claim this exemption, you need to file a “homestead deed” in the appropriate Circuit Court land records, even if it doesn’t relate to real estate.
Each of these exemptions is separately available to each debtor, so the exemptions are effectively doubled in a joint case. However,
each spouse can exempt only property in which he or she has an interest, so you can’t use your spouse’s exemptions to exempt your sole property.
The Virginia exemptions are available to persons who are Virginia residents at the time of filing, and who have either lived in Virginia for the past 2 years, or who lived in Virginia for the majority of the 180 days before the last 2 years. If you are entitled to use the Virginia exemptions, you must do so – Virginia has “opted out” of the federal bankruptcy exemptions. If you live in Virginia but moved recently and are not subject to the Virginia exemptions, you will use either the federal exemptions or those of your prior state of residence.
In addition to the Virginia exemptions, you are entitled to exempt property that is exempt under federal non-bankruptcy law, including retirement plans, Social Security benefits and many other government programs.
Finally, when filing Chapter 7 bankruptcy, you will be able to keep any property in which you have no equity (above what you can exempt), as the trustee will not be able to sell that for the benefit of your creditors, and you may be able to buy back non-exempt assets. However, to keep your home or your car, when subject to a mortgage or other lien, you will need to be able to stay current on your payments. The same exemptions are available in Chapter 13 and Chapter 11, but under those chapters you can keep other property as well, provided you pay its value into your plan for the benefit of your creditors.
This is not an exhaustive list of what you can keep in a Virginia bankruptcy, but I have attempted to provide a useful outline of the major exemptions available when a Virginia resident files bankruptcy under Chapter 7.