Virginia is the only state that has a life time limit on the amount of assets that can be protected under the Homestead Exemption, often referred to as a wild card exemption. This can cause significant problems for an individual who has no ability to repay the debts that they have incurred, often through no fault of their own such as medical debt. If the individual has a modestly priced car, they can risk losing it simply because it is worth more to much. If a family has been responsible and made their mortgage payments for several years, they can risk losing their house even though they are current on the payments simply because they have acquired equity in the house by making those payments over the years. A widow or widower risks losing life insurance proceeds from the death of their spouse simply because they have too much left. A hard working mother can risk losing her tax refunds because she receives earned income credit and will get a large refund due to this benefit.
When an individual in Virginia files a Chapter 7 bankruptcy, they also have to file a Homestead Deed with the state court to protect many of the assets that they have. If they have to file another bankruptcy, no matter how many years later, they will be required to provide a copy of the Homestead Deed that was filed at the same time as the first case. Any amount claimed on the previous Homestead Deed under the Homestead exemption, or Wild Card exemption as it is frequently called, cannot be claimed again. This can severely limit an individual's ability to protect necessary assets in a 2nd Case. Virginia is the only state that makes debtors file a Homestead Deed and limits the exemptions to a life time limit.
While this is not a popular topic with lawmakers, our legislature needs to take a serious look at how life time Virginia residents are being hurt by this limitation.