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Bankruptcy: Virginia

Filing bankruptcy in Virginia endeavors to give petitioners an opportunity to recover from overwhelming debt, and give creditors an opportunity to recoup some payments based on the value of the debtor’s property or future earnings.  36,890 bankruptcies were filed in Virginia in 2010, ranking Virginia 25th in the nation for the number of bankruptcy filings per capita.  68% of Virginia’s bankruptcy petitions in 2010 sought protection under Chapter 7 bankruptcy.

Filing Bankruptcy in Virginia

Bankruptcy in Virginia is governed by federal law and Virginia bankruptcy cases are filed in the US Bankruptcy Courts in:

  • Virginia Eastern District Court: Alexandria, Newport News, Norfolk, Richmond
  • Virginia Western District Court: Abingdon, Big Stone Gap, Charlottesville, Danville, Harrisonburg, Lynchburg, Roanoke, Staunton

Though federal courts have jurisdiction over bankruptcy proceedings, Virginia law prohibits petitioners from choosing exemptions listed in the U.S. bankruptcy code, instead all exemptions must be claimed under the Virginia state code. With the expert counsel of a bankruptcy attorney Virginia petitioners can be made aware of what personal property the debtor may keep in bankruptcy, and what must be sold.

Chapter 7 Bankruptcy, Virginia

Chapter 7 bankruptcies in Virginia account for the majority of the state’s bankruptcy filings. Chapter 7 is suitable for debtors who lack substantial assets, such as significant investments or equity in a home, since a Bankruptcy Trustee may liquidate personal property that is not protected by Virginia’s bankruptcy exemptions. Liquidation occurs when the Trustee converts personal assets to cash for distribution to creditors. Virginia’s Chapter 7 bankruptcy law allows petitioners to keep some essential property; the exempt assets cannot be accessed by creditors seeking repayment.

The vast majority of Chapter 7 cases are “no-asset” cases where no property is taken.

Virginia Bankruptcy Exemptions

Virginia’s state laws list specific property exemptions allowing petitioners to maintain certain personal property and assets so that debtors can successfully recover from bankruptcy, not be driven further into insolvency.  Bankruptcy in Virginia lets petitioners to choose exemptions from the state list.

Personal property exemption values are subject to change, so it is recommended that petitioners meet with a well-informed Virginia bankruptcy attorney to establish how bankruptcy will affect their financial situation.  Virginia bankruptcy exemptions include:

Virginia Homestead Exemption

  • Must file homestead declaration before filing for bankruptcy
  • May include mobile home
  • Rents and profits are exempt
  • $5,000 total: Plus $500 per dependent
  • $5000 total: Sale proceeds; $10,000 total: if 65 or older (Husband and wife may double)
  • $15,000 total: May be claimed by surviving spouse; if no surviving spouse, minor children may claim exemption
  • Property held as tenancy by the entirety may be exempt against debts owed by only one spouse

Virginia Personal Property Exemption

  • $5,000 total: Household furnishings
  • $5,000 total: Family portraits and heirlooms
  • $1,000 total: Clothing
  • $6,000  total: Motor vehicle; $10,000 if needed for occupation or education
  • Health aids
  • Wedding and engagement rings
  • Pets
  • Prepaid tuition contracts and savings trust accounts
  • Personal injury causes of action and recoveries
  • $3,000 total: One firearm
  • Bible
  • Burial plot

Virginia Tools of Trade Exemption

  • Uniforms, arms, equipment of military member
  • $10,000 total: Tools, books and instruments of trade, including motor vehicles
  • $3,000 total: For farmer, pair of horses, or mules with gear; one wagon or cart, one tractor
  • $1000 total: fertilizer; 2 plows and wedges; one drag, harvest cradle, pitchfork, rake

Virginia Wage Garnishment Exemption

  • 75% of weekly disposable earnings or 40 times the federal minimum hourly wage, whichever is greater; (Low-income debtors may qualify for more)
  • $1,750 per month: Parent with household gross income, including any support payments for children living in the home, can exempt from wage garnishment:
    • $34 per week for one child
    • $52 per week for two children
    • $66 per week for three or more children

Virginia Public Benefits Exemption

  • Aid to blind, aged, disabled; general relief
  • Workers’ and Unemployment compensation
  • Payments to tobacco farmers
  • Crime victims’ compensation unless seeking to discharge debt for treatment of injury incurred during crime

Virginia Insurance Exemption

  • Accident, sickness and industrial sick benefits
  • Fraternal benefit society benefits
  • Cooperative life insurance benefits
  • Group life insurance policy or proceeds
  • Group life or accident insurance for government officials
  • Life insurance proceeds
  • Burial society benefits

Virginia Pensions and Retirement Savings Exemption

  • State, city, town and county employees
  • Judges and state police officers
  • IRAs and ERISA-qualified benefits to same extent permitted under federal bankruptcy law

Virginia Miscellaneous Exemption

  • Property of business partnership

Virginia Wild Card Exemption

  • $10,000: Any property for disabled veterans
  • Unused portion of homestead or personal property exemption

Chapter 13 Bankruptcy, Virginia

In 2010, ­32% of petitioners filed for protection under Chapter 13 bankruptcy laws in Virginia.  When a debtor files Chapter 13 bankruptcy in Virginia, a court-appointed Trustee assumes responsibility for reorganizing debts and executing a 3-5 year repayment plan, by which creditors are repaid using the debtor’s future earnings.  Chapter 13 petitioners in Virginia keep most – or all – of their property.

How to File Bankruptcy in Virginia

A key consideration for petitioners filing for bankruptcy protection is to determine if the debtor qualifies for essential property exemptions. The goal of petitioning for bankruptcy is for the debtor to keep major assets and for their debts to qualify for discharge.  Because every case is different from the last, a Virginia bankruptcy attorney can evaluate a debtor’s personal circumstances and provide counsel as to whether Chapter 7 or Chapter 13 bankruptcy is a viable option for their financial situation.

Bankruptcy Attorney: Virginia

It is important that debtors know their rights and duties as bankruptcy petitioners.  Personal bankruptcy cases can be complex and stressful; as such, a Virginia bankruptcy attorney can explain how the federal laws and state exemptions apply to the financial circumstances of the petitioner and counsel debtors how to protect their assets and recover from debt.