Bankruptcy in Virginia
Filing for bankruptcy in Virginia proceeds in the same way as other bankruptcy cases throughout the United States since bankruptcy generally is controlled by federal law. The main exception relates to which property of the debtor is protected in bankruptcy, and that is determined by Virginia state law. The locations for filing bankruptcy generally are determined by the federal district in which the debtor resides.
Chapter 7 Bankruptcy in Virginia: Exemptions
Persons filing bankruptcy in Virginia have a right to protect some property but are limited to selecting from the state law schedule. The most important Virginia bankruptcy law exemptions are as follows:
- $1,000 of the value of clothing. As a practical matter, trustees in Virginia never ask for the turnover of any of the debtor’s clothing (unless you have one of Elvis' original scarves).
- $2,000 of the value of an automobile. This is applicable to the equity (profit) in the car. If the loan on the car exceeds its value, it’s “underwater” and will be of no interest to the trustee. Where the net value significantly exceeds $2,000 (after estimated costs of sale and auctioneer fees), you can apply some of your “wildcard” toward the car. (See homestead exemption below.) Or, with the consent of the trustee, “buy the equity” – pay the trustee the amount of unprotected equity and, in that way, keep the vehicle. Of course, to keep the car, you also must continue to pay the lender’s loan on the car if it’s financed, and probably reaffirm the debt.
- $5,000 worth of home furniture. Like clothing, unless you have valuable antiques that can easily be sold and converted to cash, the trustee in Virginia will not be interested in taking this from you.
- Wedding and engagement rings.
- Federally-qualified retirement plans, such as 401Ks, and IRAs (up to a maximum of $1,171,650). This exemption comes from applicable federal law.
- $5,000 of value of "tools of the trade". Decisions by state court judges interpreting Virginia bankruptcy laws have held that this exemption is applicable only if the “tool” is used directly in the specific trade. For example, a carpenter’s truck would not be exempt, but a professional mover’s truck would be.
- $5,000, plus $500 for each dependent, of anything, under the “homestead” exemption. This a “wild card” used to protect any property that is not specifically described above, generally cash or cash-equivalents such as tax refunds, stock and bonds, accounts receivables, life insurance with cash value, etc. There is an absolute deadline of five days after the creditor’s meeting to file a “homestead deed” in the debtor’s county of residence to claim the exemption.
- Property held as a “joint tenancy by the entirety” is protected from the debts of one of the spouses. This exemption generally is used to protect equity in the marital home. If there is equity in the home, you need to be very careful and work closely with your bankruptcy attorney to plan your use of the exemption. There can be risks. For example, if you have any joint debts with your spouse, the house can be taken by the trustee and sold to pay that debt off.
NOTE: The Virginia bankruptcy exemptions list above is NOT complete. It includes only the most common exemptions. There are traps for the unwary. For example, under the new bankruptcy law you must qualify to use the exemptions of the state in which you reside, generally it’s a two-year residency minimum. Another example of a potential hazard is selling or transferring property shortly before the filing. The transaction can be reversed by the trustee and can also result in the court denying you a discharge of your debts. Once a Chapter 7 bankruptcy case is filed, you can dismiss the case only with the approval of the judge who, generally, will not permit dismissal if he or she finds you have property that can be sold to pay creditors. Consult only experienced Virginia bankruptcy lawyers to plan your specific case.
Chapter 13 Bankruptcy in Virginia: Exemptions
When filing for Chapter 13 bankruptcy in Virginia, bankruptcy exemptions are of less concern. So long as the debtor proposes to make total installment payments in the Chapter 13 plan equivalent to what creditors would have obtained in a liquidation of all of the debtor’s unprotected property in a Chapter 7 bankruptcy, the debtor’s property is fully protected.
Bankruptcy Court For Northern Virginia
In Northern Virginia, the federal bankruptcy court, where this bankruptcy law firm files cases, that covers residents of the cities of Alexandria, Fairfax, Falls Church, Manassas and Manassas Park, and the counties of Arlington, Fairfax, Fauquier, Loudoun, Prince William, and Stafford, is as follows:
U.S. Bankruptcy Court
Eastern District of Virginia
200 S. Washington Street
Alexandria, VA 22320