When you file for Chapter 7 bankruptcy, you will be required to sell much of your property in order to pay back your creditors. However, bankruptcy law exempts certain property from being sold off. If you are filing Chapter 7, you should know what property you may be entitled to keep through bankruptcy. Read on to learn more from the Virginia bankruptcy lawyers at the Law Office of Steven D. Barnette, P.C.
What Is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy, also called liquidation bankruptcy, is a process that allows an individual to resolve their debts by having a bankruptcy trustee sell-off, or liquidate, the individual’s non-exempt assets to generate money that is then used to pay the individual’s creditors according to the provisions of the Bankruptcy Code. If any balances remain on eligible debts, the bankruptcy court will usually discharge those debts, which means the debtor is no longer responsible for paying them.
To file for Chapter 7 bankruptcy, an individual must qualify under the means tests. The means test calculates whether the individual’s disposable income is enough to repay creditors over the course of a repayment plan. Filers who do not qualify for Chapter 7 must instead file under Chapter 13 of the Bankruptcy Code.
Why Is Some Property Exempt in a Chapter 7 Bankruptcy?
Chapter 7 bankruptcy involves liquidating your assets to generate funds to pay your creditors. However, the law recognizes that you should be allowed to keep some property that you need for basic living. You will also be allowed to keep some assets to help pay for ordinary, ongoing expenses like rent, utilities, and groceries. By exempting property from your Chapter 7 bankruptcy, you’ll have some property to help you as you make a fresh start.
State vs. Federal Exemptions
While federal bankruptcy law provides a list of exempt property in a Chapter 7 bankruptcy, states are also permitted to maintain their own list of Chapter 7 exemptions. Some states that have adopted a list of Chapter 7 bankruptcy exemptions allow filers to choose between either the state list or the federal list. However, in Virginia, you must use the state Chapter 7 bankruptcy exemptions.
What Are the Chapter 7 Bankruptcy Exemptions?
Virginia allows the following per-person exemptions in a Chapter 7 bankruptcy:
- Up to $25,000 in value of a primary residence (known as a homestead exemption)
- A personal vehicle worth up to $6,000
- Up to $10,000 of books, tools, equipment, machines, motor vehicles, vessels, and aircraft that you use in your job
- Arms, uniforms, and equipment of military servicemembers
- Up to $5,000 of real estate or personal property, or $10,000 for filers aged 65 or older, with an additional $500 for each dependent of the filer and an additional $10,000 for disabled veteran filers, plus up to $5,000 of an unused homestead exemption
- Clothing that totals up to $1,000
- Household furnishings that total up to $5,000
- Firearms, up to an aggregate value of $3,000
- Family heirlooms, up to an aggregate value of $5,000
- A family Bible
- A burial plot
- Engagement and wedding rings
- Medically necessary equipment and aids
- Any compensation recovered in a personal injury claim
- Assets in health/medical savings accounts, spendthrift trusts, and college savings trusts
- Retirement benefits exempt under the Internal Revenue Code
These exemptions are per person, which means that married couples can effectively double their exemptions. For example, an experienced attorney could help a married couple protect up to $50,000 of a house.
Contact Us If You Are Thinking About Filing for Bankruptcy in Southeastern Virginia
If you are considering filing for Chapter 7 bankruptcy, you should understand your legal rights to exempt property from liquidation. Contact The Law Office of Steven D. Barnette, P.C. today for a confidential consultation to find out how a Virginia bankruptcy attorney from our firm can assist you through the process.