Many people who struggle with debt worry they may lose their home in a bankruptcy filing. In fact, most filers can keep part or all of their home equity if they can continue to make mortgage payments. 

Learn more about the homestead exemption that applies when filing for bankruptcy in Virginia. 

Amount of homestead exemption

Virginia homeowners have an exemption of up to $25,000 in real estate that serves as a primary residence. They can exempt an additional $5,000 as a homestead exemption, or $10,000 for disabled veterans and Virginians older than age 65. Homeowners can also add a $500 homestead exemption per dependent. 

If you file for Chapter 7 bankruptcy, the bankruptcy court will order the liquidation of equity or real estate holdings exceeding these limits. The proceeds of the sale will go to your creditors. 

With Chapter 13 bankruptcy, the court will reorganize your debts based on your available income to repay creditors. If you can afford to catch up on past-due mortgage payments and continue to pay off the home loan, you can arrange to keep your primary residence with this type of filing. 

Tenancy by entirety

Though Virginia has a lower homestead exemption than most other states, many residents benefit from tenancy in entirety. Under this law, the bankruptcy court cannot order the sale of real estate that belongs to both spouses when only one spouse files for bankruptcy. 

Based on these provisions, single Virginia homeowners who struggle with debt often file for Chapter 13 bankruptcy. However, Chapter 7 filing can work for couples in which only one person will file for bankruptcy, individuals who do not own a home and those who have less than $30,000 in home equity. 

You must file a homestead exemption declaration with the court before filing for bankruptcy. Other exemptions in Virginia include up to $6,000 for a vehicle, $5,000 for household furnishings and $1,000 for clothing.