It Pays to Read Carefully

The debtor otherwise qualified for Chapter 7, but had a little more than $4,000 in his bank account and no exemptions left to protect it. His bank account clearly would be seized by the trustee. A close reading of Virginia law however revealed that the statute expressly allowed debtors to take non-exempt property, use it to purchase exempt property before bankruptcy, and not be considered a fraud against the creditors. We advised the debtor. He took money from the account and purchased furnishings for his home, backed by receipts, up to the $5,000 maximum allowed by Virginia law.

Result: The debtor protected his $4,000 by converting it into exempt home furnishings, which he was free to keep or sell post-bankruptcy as he wished.