Virginia Homestead Laws

A common concern for some who file bankruptcy in Virginia is the possibility of losing their home. While the trustee in a Chapter 7 bankruptcy case may force a sale of your real property, Virginia law offers some protection. You have the option of claiming the Virginia homestead exemption when you file bankruptcy. This exemption allows you to protect some or all of the equity in your principal residence.

This article examines and explains Virginia’s homestead laws, including the exemption amount, eligibility requirements, and exemption restrictions. It also shows how to claim the exemption. If you’re thinking about filing a Chapter 7 liquidation bankruptcy, consider consulting an experienced Virginia bankruptcy lawyer.

How Does the Homestead Exemption Work?

All but two states offer bankruptcy filers a way to protect the equity in their home, and federal laws provide the same type of asset protection in bankruptcy. This protection comes in the form of bankruptcy exemptions.

In general, bankruptcy exemptions allow debtors to protect a specific amount of equity in their home, motor vehicle, bank accounts, and personal property. The courts are strict when it comes to the amount of equity you can protect and who can claim them.

The homestead exemption allows homeowners to protect a significant amount of equity in their primary residence. As long as you meet the eligibility requirements to claim the homestead exemption, you’ll have a chance to keep your home.

Whether you can depends on how much home equity you have. If the exemption covers all your equity, the trustee has no reason to sell your house. Issues arise when your home equity exceeds the exemption amount. If you have $200,000 equity in your house and the exemption is only $100,000, the bankruptcy trustee may decide to sell your home and use the extra $100,000 equity to pay your secured and unsecured creditors.

Homestead Exemption in the Commonwealth of Virginia

Virginia law offers debtors a homestead exemption of up to $50,000. Married couples can claim up to twice that amount, $100,000. The exemption protects the equity in your home, not the fair market value of your real estate. If you have more equity than covered by the Virginia exemption amount, there’s a possibility the trustee may force a sale of the house and use the excess to pay creditors.

While the exemption amount is only $50,000, there are some additional exemptions. These include:

• Dependent children living at home increase your homestead exemption amount by $500 for each one
• People who are disabled or over 65 years of age are eligible for an additional $5,000 in wildcard protection, up to a total of $10,000

If you’re a householder who plans on filing Chapter 7 bankruptcy, contacting an experienced Virginia bankruptcy lawyer is a good idea. They’ll help you maximize the benefits of the homestead exemption.

How To Claim the Homestead Exemption in Virginia

If you’re uncertain about anything concerning the Virginia homestead exemption, consider retaining a skilled bankruptcy attorney to ensure that you take the necessary steps to claim your exemption and maximize your protections. To claim the homestead exemption in the Commonwealth of Virginia, you must take the following steps:

• Confirm that you meet the eligibility requirements for the exemption, such as the 730-day residency requirement
• List your principal residence on your Schedules A/B, including the current assessed value of your home and your total home equity
• Claim the homestead exemption on your Schedule C form
• Indicate that you intend to keep your home while filing out the “Statement of Intention” form, which should be included with your bankruptcy petition
• Submit all of the above paperwork with your bankruptcy forms

Once the trustee receives your petition and accompanying papers, they’ll rule on whether you can claim the exemption. If they approve your request, they’ll determine how much equity remains in your home after they apply the exemption. If there is little to no remaining equity, your house should be safe. Otherwise, they may decide to force a sale of your home and use the proceeds to pay off your creditors in order of priority.

Virginia Homestead Exemption Requirements and Restrictions

Not all debtors qualify for the homestead exemption. You must meet certain eligibility requirements to take advantage of the exemption. These include:

• Living in-state for at least 730 days (two years)
• Providing protection for your principal residence

If you meet the above criteria and claim the exemption on your bankruptcy paperwork, the trustee will review your request. As long as there aren’t any issues, such as a property tax lien or pending foreclosure, the trustee should approve your claim.

Types of Property Eligible for the Homestead Exemption

Virginia bankruptcy laws are broad when describing the type of property you can protect with the homestead exemption. As long as you can demonstrate that the property is your primary residence, be it real or personal property, you can apply the homestead exemption.

The Code of Virginia allows homeowners to apply the exemption to the following types of property:

• Single-family home
• Condominium
• Townhouse
• Mobile home/Manufactured home

The exemption laws should protect you as long as you list the property on your Schedule A/B and claim the exemption for the property on Schedule C.

Is There a Federal Homestead Exemption?

There is a federal homestead exemption. According to the U.S. Bankruptcy Code, each individual bankruptcy filer can claim up to $31,575 of protection for the equity in their home. Married couples filing jointly can claim double protection in the amount of $63,150.

Virginia is an “opt-out” state, which means debtors can’t claim federal exemptions instead of state exemptions. Your only option is to use the Virginia bankruptcy exemptions.

The Virginia homestead exemption is greater than the federal homestead exemption. Under federal law, a bankruptcy filer can only protect $31,575 of the equity in their home. Virginia law allows debtors to protect up to $50,000 of their home equity, with the amounts doubled for joint filings by married couples.

Disclaimer: State laws change frequently due to new legislation, higher court rulings, and other means. While FindLaw strives to provide the most current information, consult a local bankruptcy attorney to verify your state laws.

Seek Legal Advice From a Virginia Bankruptcy Attorney

It’s true that you have every right to file bankruptcy without the help of an experienced bankruptcy lawyer. Things can become quite complicated, especially if real property is involved. With that in mind, consider contacting a Virginia bankruptcy attorney before filing your petition with the bankruptcy court. They’ll help ensure that you complete your bankruptcy petition correctly and claim your state homestead exemption on your bankruptcy forms.