April 01, 2016

Basics of Bankruptcy for Home Owners

Matt Hahne

Reprinted from the March/April 2016 News Briefs of the Group Legal Services Association.

A few months ago, a sweet elderly couple came into my office to discuss their options. They had fallen on hard times because the husband was forced to quit his full-time employment due to his health concerns. It was his full-time employment that kept them current on their debt payments. Now, with only Social Security income and no hope for additional income in the future, this couple was forced to consider bankruptcy. As we sat down and discussed their situation, things began to get very emotional. Husband was a proud man who worked hard every day until the age of 73. The last place he wanted to be was in my office. As he wiped the tears from his eyes, he began to talk about his home. He shared stories and wonderful memories about holidays, birthday parties and major life events that occurred in his home. Then, he looked up at me with tears running down his face and said, “How much longer do we have until we have to be out of the house?” He was under the impression that because they had substantial equity in their property, they were going to have to hand the keys to their home of 45 years over to a Bankruptcy Trustee. As we looked deeper into their situation, we discovered that their home was in both of their names as a married couple. They were entitled to what’s known as the Tenants by the Entirety exemption under Virginia law, which protects property owned by a married couple from individual creditors. Thus, all of their individual creditors could not attach to the equity in their property. They were able to file a bankruptcy and discharge all of their debt while keeping their home. Needless to say, this wonderful couple was beyond thrilled with this news.

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