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John Merna Discusses Virginia Bankruptcy Exemptions

Virginia Bankruptcy Exemptions – A Quick Glance – Part 1 of 3

by John G. Merna

The first question asked by most people facing bankruptcy is “Will I lose any property?”  In a large majority of the cases, when a bankruptcy client is represented by an attorney, they do not lose any property when filing bankruptcy with the proper use of Virginia bankruptcy exemptions.

The process of protecting a person’s property in bankruptcy is through the use of “exemptions” under the laws of the State of Virginia and in some unusual cases federal law or laws of other states.  In Virginia, the bankruptcy exemptions can be found in the Code of Virginia.  In this blog I will go over some of the more common exemptions and more common concerns I have heard from clients.

Before I begin, I need to clarify what you are “protecting” when you say “I want to protect my property.” You are not protecting the property per se.  You are protecting the value or equity in the property.  Example 1: A ring worth $1000. Value: $1000. Example 2: A car worth $1,000 but owing $1,000 to a company with a lien on the car. Value: $0.  Example: House worth $200,000 with mortgage of $210,000. Value: $0.

You get the idea.  The value or equity is the “market value” minus any secured debt or lien.  It is not the sentimental value you place on the item.  The value is what a person will pay for it.  Sorry to say but a baby blanket or daughter’s baby shoes may be priceless to the owner, but they have no value to anyone else.  So when you consider the value, think reasonable value not fantasy value.

“Will I Lose My Car?”

Most of my clients have vehicles with loans secured against them.  When you subtract what is owed from the value these cars generally have little to no equity.  In Virginia there is $6000 per person of protection for vehicle equity and an additional $5000 or more available under the Homestead Exemption, which is discussed below.

“Will I Lose My Furniture?”

Generally, normal furniture, meaning non-antique, middle-to-low-end furniture, has very little resale value.  For example, no one will pay full price for a used couch.  A sober assessment of the value of your household furniture is the first step.  A bankruptcy client can protect up to $5,000 per person for home furnishing.  There is additional protection available.

“Will I Lose The Money In My Bank Account?”

The value of money is the easiest thing to calculate.  Protection for liquid assets is under the $5,000 homestead exemption.

“Will I Lose My Retirement?”

Retirement accounts such as 401(k)s, IRAs, and other retirement accounts acknowledged under the IRS code as ERISA-qualified retirement accounts are protected.  IRAs have up to $1,000,000 of protection.

Stay tuned for the continuation of this blog next week.


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