Bankruptcy, Garnishment, Foreclosure, Chesterfield, Richmond, Henrico, Mechanicsville,by John G. Merna, Esq.

The Big Exemptions – Your House & Tax Refunds

When it comes to Virginia Bankruptcy Exemptions you could spend all day talking about protecting a lot of little thing.  I have already talked about vehicle, so that leaves just two other things people are concerned about: their home and their tax refund.  A person’s home is usually their greatest lifetime asset while their tax refund is generally their largest annual asset.  So let’s talk about how they can be protected in bankruptcy.

Virginia Bankruptcy Exemptions – Protecting Your Home

Protecting your house is complicated in many ways.  I will do my best to simplify it.  What you are protecting in a house is any equity.  Equity is the difference between what a house is worth and what is owed.  Example1: $200,000 house with a $150,000 mortgage = $50,000 of equity that needs to be protected.  Example2: $300,000 house with a $350,000 mortgage on it = no equity and nothing to protect.  You get the idea.

No equity = nothing to protect.

Next level of analysis is what protection are you using?  If it is the homestead you have only $5,000 if you are under age 65.  What happens if you have more than $5,000.  You could be okay if… are married and your wife is on the deed with you.

NOTE: The Virginia homestead exemption was increased in 2020 to $25,000 per title owner for equity in a primary residence.

Tenants-by-Entirety Protection In Virginia

In many state the law has provided an added level of protection for married couples who hold the deed of their house as “tenants-by-entirety”.  If you are married and the deed to your house is in both your wife’s and your name then you have an added level of protection.  Whether you have complete protection depends on whether you have any joint unsecured debt with your spouse.  If not then all the equity in the house is protected from your unsecured creditors.  If you do have some joint debt with your wife it becomes more complicated.  You will definitely need an attorney in that situation.

Virginia Bankruptcy Exemptions – Protecting Your Tax Refunds

Protecting your tax refund on the surface seems straight forward.  The protect comes from the homestead deed we talked about in Part 2.  Remember that $5,000?  A few issues, you have to begin protecting your tax refund the year prior to receiving it.  The way the bankruptcy court looks at is you have to start protecting an ever increasing pro-rated portion as you get closer to the date you receive it.   And just a word of warning, don’t pay any relatives back with your tax refund.  The trustee may be able to get that money back from your relative.

Well, that is the short version of the rules.  They are more complicated and there are some twists.  Just make sure you use an attorney and tell them everything.  I am available if you have a protection issue you want to discuss.


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