Bankruptcy A-Z: E is for Exemptions
December 23rd, 2011 | 
Author: Bankruptcy A-Z: E is for Exemptions.
At the risk of posting information similar to my colleagues, I have decided to post information on exemptions. Exemption laws are founded upon sound public policy and for the public welfare. They were created for the benefit of the wife and children, as well as that of the husband and father. Its manifest purpose is to secure the family a home, notwithstanding the misfortune or improvidence of the husband. The exemptions are, however, not only for the benefit of the family, but for the householder’s benefit also.
OK, so this is arcane language. The point is that bankruptcy law does not leave debtors with nothing. That wouldn’t be a fresh start, now would it?
E is for Exemptions.
Bankruptcy exemptions
Each state has different lists of assets you can keep in bankruptcy. These are called “Exemptions.” In a Chapter 7 case, you generally need to exempt assets that have equity in them to keep them. The availability and amount of property the debtor may exempt depends on the state the debtor lives in (or if multiple states have been lived in the past 2 years, there is a formula for deciding which state’s law applies).
Even if one state’s laws apply, that state’s law may still not apply if you are not a resident. See exemptionsexpress.com for more on this limitation.
The Bankruptcy Code contains its own set of exemptions, but it also gave states the ability to opt out. Like many states, Virginia opted out of the federal scheme (though many of us are trying to change that).
Virginia’s basic exemptions are:
Homestead/Wildcard – Allows for the protection of $5,000 plus $500 for each dependent for all real and personal property. If the householder is 65 years of age or older, the exemption increases to $10,000. Va. Code § 34-4.
Family Bible – Allows for the protection of the family bible regardless of value. Va. Code § 34-26(1).
Wedding and Engagement Rings – Allows for the protection wedding and engagement rings regardless of value. Va. Code § 34-26(1a).
Heirlooms – Allows for the protection of family portraits and heirlooms up to $5,000 in value. Va. Code § 34-26(2).
Burial plots – Allows for the protection of a lot in a burial ground and any preneed funeral contract up to $5,000. Va. Code § 34-26(3).
Wearing Appeal – Allows for the protection of all clothes p to $1,000 in value. Va. Code § 34-36(4).
Household Furnishings – Allows for the protection of all household furnishings including, but not limited to, beds, dressers, floor coverings, stoves, refrigerators, washing machines, dryers, sewing machines, pots and pans for cooking, plates, and eating utensils, not to exceed $5,000 in value. Va. Code § 34-26(4a).
Pets – Allows for the protection of all animals owned as pets. Va. Code § 34-26(5).
Medically prescribed health aids – Allows for the protection of all canes, walkers, glasses and other medically prescribed devices. Va. Code § 34-26(6).
Tools of the Trade – Allows for the protection of up to $10,000 in equipment, which is necessary for use for work. While this exemption, can include a car required for work (not for commuting), it is limited to the one main occupation. Va. Code § 34-26(7).
Motor Vehicle – Allows for the protection of a motor vehicle up to $6,000 (that was just increased on July 1, 2011). Va. Code § 34-26(8).
Retirement Accounts – In addition to employer provided accounts, this exemption allows for the protection of all IRAs. Va. Code § 34-34.
Personal Injury or Wrongful Death Claims – Allows for the complete exemption of personal injury claims and wrongful death claims. Va. Code § 34-28.1.
Wages – Allows for the protection of take home pay up to 40 times minimum wage ($290) per week or 75%, whichever is greater. However, this limit does not apply to child support and taxes. Va. Code § 34-29.
All amounts can be doubled if both spouses are filing.
Nonbankruptcy exemptions
Many other laws exist to protect property. There is the tenancy by the entireties exemption that protects all equity in real estate owned this way by married couples from all individual debts, except for federal taxes. Social Security proceeds are completely excluded from the bankruptcy estate. Virginia’s 529 education plans are considered spendthrift trusts and are exempt as well. Other exemptions can be found in a post here.
Functional exemptions
In addition to legal exemptions, there are also practical exemptions. No trustee is going to see a car that is only worth $500, even if it can’t be fit into other exemptions. Property of little value essentially is exempt, because it is not worth enough for a trustee to administer.
Exemptions are so complex that you should have a knowledgeable attorney assisting you. If you get it wrong, like by failing to list and exempt property, you can lose the property. Did I mention that Virginia requires you to file a deed within 5 days of the meeting of creditors to claim the wildcard/homestead exemption?
If you need to protect your assets from creditors and are in the metro Richmond area, or anywhere in central Virginia, contact bankruptcy and consumer lawyer Mitchell Goldstein at (804) 592-1674 or by email at mitch at mitchellpgoldstein dot com.
Other E posts:
E is for Executory Contract.
E is for Exemptions or Exemptions or Exemptions or Exemptions.
E is for Emergency Filing.
E is for Euphoria.
E is for Equitable Distribution.
E is for Examination.
E is for Eviction.
E is for Early Preparation.
E is for Eligibility.
E is for Everything.
Photo Credit: Scott Coulter
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