Bankruptcy exemptions protect the equity in your property from creditors and the bankruptcy court—preventing the equity from being used to pay your creditors. Equity is the value of property after you subtract the amount of any liens against the property from its fair market value.

The equity in your home is one such asset in bankruptcy. And bankruptcy exemptions—including the homestead exemption—allow you to protect the property you will need to maintain a home and employment after bankruptcy.

Bankruptcy exemption amounts vary by state, so the amount you will be able to protect will depend on where you live and the type of bankruptcy you file (Chapter 7 or Chapter 13).

In Virginia, bankruptcy exemptions play a crucial role in both Chapter 7 and Chapter 13 bankruptcy filings. These exemptions allow individuals to retain certain assets, up to specific values, without them being liquidated to pay creditors. The Virginia Homestead Exemption is particularly important for homeowners, as it enables them to protect a portion of the equity in their home. As of the knowledge cutoff in 2023, the Virginia Homestead Exemption allows an individual to exempt up to $25,000 of their home's equity. Additionally, Virginia allows a 'homestead deed' to be filed, which must be done in a timely manner to claim the exemption. It's important to note that exemption amounts can be doubled for married couples filing jointly. The exact amount of equity that can be protected will depend on the current state statutes, and individuals considering bankruptcy should consult with an attorney to understand how the exemptions apply to their specific situation.