If you're considering filing for bankruptcy in Virginia and want to keep your home, Virginia's homestead exemption will help. In bankruptcy, you can retain property you can "exempt" with a bankruptcy exemption. The homestead exemption protects home equity from creditors in bankruptcy.
In this article, you'll learn how to find Virginia's current homestead exemption amount and apply it in your bankruptcy case. We also explain other requirements you must meet when filing for bankruptcy in Virginia.
Under the Virginia exemption system, homeowners can exempt up to $25,000 of equity in a home or other property covered by the homestead exemption. The exemption applies to real property, which includes your home or condominium and personal property used as a residence, so your mobile home would also be covered.
The Virginia homestead exemption also allows individuals to deduct an additional $5,000 in real or personal property (including cash), or $10,000 if the debtor is 65 or older. This exemption type is often called a "wildcard" exemption. So you'll have $25,000 to protect your home, plus an additional $5,000 to $10,000 to use toward your home or any other property of your choosing.
Example. Suppose your house is worth $100,000. You have a $78,000 mortgage on the property, leaving $22,000 of home equity. If you file bankruptcy, your equity will be fully exempt using the $25,000 residential portion of the homestead exemption. Your creditors won't be able to touch your equity, and you will keep your home. You'll also be able to use the $5,000 wildcard portion toward any other property you choose.
If the property is held as a tenancy in the entirety, the property is jointly owned as a single marital entity, not as an individual. Holding property as a tenancy by the entirety might protect all of the equity in your residence if only one spouse files the bankruptcy case. However, this is one of the trickier rules in bankruptcy, so consult with a local bankruptcy attorney.
You can file for bankruptcy in Virginia after living there for over 180 days. However, you must live there for at least 730 days before using the Virginia exemptions. Otherwise, you'd use the previous state's exemptions.
The calculation is different if you weren't living in one particular state two years before your bankruptcy filing. You'd use the exemptions of the state you lived in for most of the 180 days before the two years immediately preceding your filing. (11 U.S.C. § 522(b)(3)(A).)
Learn more about filing for bankruptcy after moving to a new state.
Virginia's homestead exemption is in the Code of Virginia Title 34. Specifically, the laws in Chapter 2, Sections 34-4 through 34-25 address the homestead exemptions of householders. The Code of Virginia is found online on the Virginia General Assembly website. If you need help finding state statutes, check out Laws and Legal Research.
Bankruptcy mistakes, such as improperly disclosing or exempting assets, can be costly and often occur when filing without a bankruptcy lawyer. A local bankruptcy lawyer's knowledge and expertise will help you avoid losing your home and other valuable assets and ensure you maximize the homestead exemption.
Did you know Nolo has made the law accessible for over fifty years? It's true, and we want to ensure you find what you need. Below, you'll find more articles explaining how bankruptcy works. And don't forget that our bankruptcy homepage is the best place to start if you have other questions!
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Updated October 5, 2023