This article explains how bankruptcy works in Virginia, covering the automatic stay, key consumer chapters (Chapter 7 liquidation with exemptions and Chapter 13 repayment plans), and which debts are non-dischargeable. It outlines Virginia’s state-only bankruptcy exemptions, such as what equity you can protect in your home, vehicle, personal property, tools, wages, insurance, pensions, public benefits, support, and other assets, including wildcard options, along with typical limits.
It notes that exemption amounts and eligibility can vary based on factors like age, dependents, and marital status, and that Virginia generally requires use of state rather than federal exemptions. It concludes by emphasizing the importance of consulting an experienced Virginia bankruptcy lawyer.
Bankruptcy is a legal proceeding that allows a business or an individual to resolve some of their debts with their creditors. It may provide the debtor with a fresh financial start while still allowing their creditors to establish rights on certain claims. Under Virginia bankruptcy law, these same core principles apply when filing bankruptcy in Virginia, though specific procedures and exemptions are governed by state rules.
Usually, a creditor is not permitted to collect on a debt amount once a bankruptcy is filed. The creditor is required to wait until after the bankruptcy is complete before they resume any collection efforts.
The bankruptcy court will issue what is called an automatic stay for this purpose. The reasoning behind this stay is that in a bankruptcy, debt payment terms are commonly re-evaluated and reorganized during the process.
A bankruptcy is often considered a last resort for an individual or business that is struggling to meet their financial obligations. The bankruptcy process often allows a debtor to restructure their debt agreements, reduce the amount of debt they owe, and, in some cases, eliminate part of their debt.
There are several issues an individual or business should consider prior to filing for bankruptcy. One of the main considerations is that there are certain debts that cannot be discharged in a bankruptcy.
There are different types of bankruptcy that are available, depending on what the individual wants to do with their property. For an individual that is filing for consumer bankruptcy, there are two main options, Chapter 7 and Chapter 13. These are the primary types of bankruptcy in Virginia for most consumers.
A Chapter 7 bankruptcy is also known as a liquidation bankruptcy. In this bankruptcy, the debtor will sell, or liquidate, their property in order to satisfy their debts. Not all of their property is liquidated, as there are some exemptions. Discussions of Chapter 7 often include Virginia Chapter 7 exemptions that may protect certain assets from sale.
A Chapter 13 bankruptcy is known as a reorganization bankruptcy. This type of bankruptcy allows the debtor to use alternative options to re-arrange their finances so they can afford their payments.
In a Chapter 13 filing, a debtor’s debts are not discharged. Instead, they keep their property and agree to a payment plan. This type of bankruptcy is often used by individuals with higher incomes who wish to keep their property, and it is a common approach for personal bankruptcy in Virginia when a filer wants to retain assets.
What Debts Cannot Be Discharged in Bankruptcy?
A non-dischargeable debt is a debt that is not forgiven during a bankruptcy proceeding. There are three general categories of non-dischargeable debts, including:
Debts that are not discharged unless the debtor can successfully argue that they should be
Debts that are not discharged only when a creditor successfully argues that they should not be
Debts that are non-dischargeable
From these categories, an individual can determine which category their debt falls under. There are debts that will not be discharged, known as non-dischargeable debts. These include:
Student loans
Federal, state, and local taxes
Any money borrowed on a credit card to pay taxes
Fines or penalties for breaking the law
Child support or alimony
Personal injury debts arising out of a drunk driving vehicle accident
Debts arising out of tax-advantaged retirement plans
Condo or cooperative housing fee debts
It is important to note that a creditor may be able to create a non-dischargeable debt if they can convince the court why the debtor should still owe it. A creditor must request that the bankruptcy court determine whether the debt is dischargeable or not. If the creditor fails to raise the issue of dischargeability issue or if the creditor raises the issue but the court determines the debt is dischargeable, the debt will be discharged.
These types of debts may include credit card purchases for luxury goods, cash advances, and debts obtained by fraud or false pretenses. For example, an individual may not be able to discharge a debt they incurred due to injuring another individual or another individual’s property.
What Are Bankruptcy Exemptions?
Bankruptcy exemptions permit the debtor to keep certain property or assets even after they file for bankruptcy. These exemptions are defined by statute. Any exempt property cannot be seized or sold in order to satisfy the debts of the individual filing for bankruptcy. Under bankruptcy laws in Virginia and federal law, exemptions determine what equity in property you can protect.
Any debtor who files for bankruptcy may file for bankruptcy exemptions. Exemptions are available in both Chapter 7 and Chapter 13 bankruptcies.
Exemption limits apply to equity a debtor has in their property and the amount of equity that is exempt. Equity is the difference between the fair market value and the unpaid balance of the property.
For example, a house valued at $200,000 with a loan of $150,000 has an equity value of $50,000. If the homestead exemption in the state is $50,000 or greater, the debtor would be exempt from liquidating, or selling, the $50,000 in equity in their home to pay off their debts.
There are other factors that may affect exemption limits. For example, marriage may permit couples in some states to double their exemption limit amounts. Filing with a head of household status or having a certain number of dependents may increase certain exemption amounts.
The exemptions the debtor may claim vary from state to state. There are also federally-created exemptions. Some states permit the debtor to choose between federal and state exemptions and some states require the debtor to use the state exemptions.
It is important to note that the debtor may only choose the exemptions from one statute. Under the state of Virginia bankruptcy laws, debtors generally must use Virginia’s state exemptions rather than federal ones.
What Are Bankruptcy Exemptions in Virginia?
Below is an overview of Virginia bankruptcy exemptions under state law. Virginia is one of the states that only permits the debtor to use the state bankruptcy exemptions. The figures listed below may be higher for married couples. The Virginia bankruptcy exemptions include:
Homestead, or the equity in the dwelling used as a residence:
Up to $5,000 plus $500 for each dependent
Up to $10,000 if the debtor is 65 or older
Up to $15,000 if the debtor is a surviving spouse or minor
Automobile equity:
Up to $6,000 in vehicles
Personal property:
Up to $5,000 in household furnishings
Up to $5,000 in family portraits and heirlooms
Up to $3,000 in firearms
Up to $1,000 in clothing
Engagement and wedding rings
Family Bible
Household pets
Health aids
Up to $5,000 in a burial contract or a burial plot
Tools of the trade:
Up to $10,000 in trade implements
Horses or mules with gear
A wagon or cart
One $3,000 tractor
Other farming equipment for agricultural work as a householder
Military equipment
Wages and cash:
75% of weekly disposable earnings or 30 times the minimum wage, whichever is greater
Group life insurance benefits, policies, and proceeds
Fraternal benefit society benefits
Burial society benefits
Industrial sickness benefits
Pensions and retirement:
Tax exempt retirement accounts
City, county, and town employee pensions
State employee and judicial pensions
Some ERISA benefits
Public benefits:
Worker’s compensation
Unemployment compensation
Public assistance
Crime victim’s compensation
Alimony and child support:
All spousal support
All child support
Other:
Personal injury or wrongful death settlements or awards
Health or medical savings accounts
Prepaid tuition contracts
Trusts for continuing care
Property of a business partnership
Wildcard exemption, or an exemption for personal property of the debtor’s choosing:
Any portion of an unused homestead exemption
Up to $10,000 in case or property for a disabled veteran
These amounts are subject to change under bankruptcy laws in Virginia, and you must follow bankruptcy laws Virginia when claiming them.
Do I Need a Bankruptcy Lawyer?
Yes, it is essential to have the assistance of an experienced Virginia bankruptcy lawyer for any bankruptcy issues you are facing in Virginia. As noted above, there are different types of bankruptcy and many exemptions available.
An attorney can review your financial situation, determine which type of bankruptcy best suits your needs, and represent you during any court proceedings. Your attorney can help you keep your exempt property and expedite your bankruptcy by avoiding common filing errors.
Jennifer joined LegalMatch in 2020 as a Legal Writer. She holds a J.D. from Cumberland School of Law and has been a member of the Alabama State Bar since 2012. She holds a B.A. in Criminology and Criminal Justice and a B.A. in Spanish, both from Auburn University. Jennifer’s favorite parts of legal work are research, writing, and helping individuals understand their legal options. Jennifer enjoyed being a Law Clerk for a distinguished Circuit Judge in Alabama. She is a work-from-home mom and homeschool teacher of three children. She enjoys reading as well as coffee dates with her husband, a distinguished member of local law enforcement.
