Before filing for bankruptcy, you'll want to know whether you can keep valuable property—especially your home. If you qualify to use the Virginia homestead exemption, you'll be able to protect some equity in your house. In this article, we explain:
For more information, read How to File for Bankruptcy in Virginia. Not only does it explain the process, but you'll find helpful checklists and a link to an interactive bankruptcy quiz. Or, for a comprehensive bankruptcy guide, try What You Need to Know to File for Bankruptcy.
Under the Virginia exemption system, a homeowner 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, as well as 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 years of age or older. This type of exemption is often referred to as a "wildcard" exemption. So you'll have $25,000 you can use to protect your home, plus an additional $5,000 to $10,000 you can 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 of your choosing.
Keep in mind that you'll need to meet other requirements to protect your home and that the rules differ depending on whether you file for Chapter 7 or 13. For help, consider reading Your Home in Chapter 7 and Your Home in Chapter 13.
A couple who is married and filing jointly can double the total amount of each exemption and claim up to a $50,000 homestead exemption. Spouses can double the wildcard portion, as well.
In Virginia, you must file a homestead declaration (a form filed with the county recorder's office to put on record your right to a homestead exemption) before filing for bankruptcy to claim the homestead exemption. Contact your county or city recorder for information about the procedure.
If the property is held as a tenancy in the entirety, the property is jointly owned as a single marital entity, not as individuals. 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 be sure to consult with a local bankruptcy attorney.
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. You can find the Code of Virginia online on the Virginia General Assembly website. To learn how to find state statutes, check out Laws and Legal Research.
Updated July 9, 2021