What property can one keep if one files a Chapter 7 Bankruptcy?
Although bankruptcy law is federal law, the property that you are allowed to keep in a bankruptcy is based mainly on state law. If you have resided in Virginia for at least two years, you are entitled to use the Virginia Exemptions. If you have lived in Virginia for less than two years, the exemptions that you are entitled to are either another state’s exemptions, federal exemptions, or Virginia exemptions. The help of an experienced bankruptcy lawyer is essential to achieve the best results and to avoid inadvertent or unnecessary adverse consequences.
The following is a general listing of Virginia exemptions. The amount that needs to be protected is the value of the item in its current condition.
- All household furnishings up to a total of $5,000.00 in value.
- Wearing apparel up to $1,000.00 in value.
- A motor vehicle not to exceed $6,000.00 in equity.
- Family portraits and family heirlooms up to $5,000.00 in value.
- The family bible and a lot in a burial ground.
- A Firearm not to exceed $3,000.00 in value.
- All pets not raised for sale or profit.
- Medically prescribed health aids.
- Tools, books, instruments, motor vehicles, etc. necessary for use in householder’s occupation or trade, not to exceed $10,000.00 in value.
- Anything and everything else up to a total value of $5,000.00 per individual. ($10,000.00 each for individuals age 65 and over) and $500.00 for each dependent that the individual has.
- Personal Injury proceeds. Compensation for personal injury of the debtor. The compensation might not be exempt from claims for related legal and health expenses.
- Retirement plans. In general retirement plans are exempt. 401(k) plans and other ERISA qualified retirement plans are not part of the bankruptcy estate and are protected.
- Tenancy by the Entirety. The debtor may exempt property owned with their spouse that is held as tenancy by the entirety. This generally requires the deed to state that title is held as tenants by the entirety. This exemption will not, however, be effective as to joint, unsecured creditors.
- Wages. 75% of wages that are owed for work performed are exempt.
- Miscellaneous. There are a number of other significant exemptions including, but not limited to: Social Security benefits, unemployment compensation, and state and federal government pension funds.
- Married debtors: For spouses filing jointly, each spouse is allowed to claim the above-referenced exemptions. Where only one spouse is filing, the value of assets may be reduced to the extent the non-filing spouse holds an interest in the property.
What if all of my assets are exempt?
Most Chapter 7 cases involve debtors who keep all of their assets because all of their assets are exempt. This is a common occurrence and is referred to as a “no-asset” case. If purchasing property with little or no equity, the property may be kept but payments need to continue to be made.
How is one able to retain “non-exempt” assets?
File a Chapter 7 Bankruptcy.
- Pay the Chapter 7 Trustee the equivalent value of the un-exempted portion of your property.
- Take the chance that the Chapter 7 Trustee may elect not to sell the asset if the sale of the asset would generate an insignificant amount of the money.