Fredericksburg, VA asked in Bankruptcy and Consumer Law for Virginia

Q: What would happen If I leave my job and collect social security and a small pension and stop paying all unsecured debt?

65 years old. Live in Virginia. Own home with mortgage and would keep current on payments. Own one car with no loan. No savings.

Would I be judgement proof?

My home equity is $300K. But isn’t a primary residence exempt from unsecured debt creditors?

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3 Lawyer Answers
Martha Warriner Jarrett
Martha Warriner Jarrett pro label Lawyers, want to be a Justia Connect Pro too? Learn more ›
  • Bankruptcy Lawyer
  • Santa Barbara, CA

A: Your Social Security and pension are exempt and, depending on where you live, you are eligible to claim a homestead exemption under your state law. Same with your car. If your equity is less than your homestead exemption, you are probably judgment proof. However, that will not keep your creditors from hounding you and possibly suing you. If you can handle the annoyance, go ahead. On the other hand, you can likely keep all of your assets, file a chapter 7 and discharge all of your unsecured dept and leave your creditors behind. I recommend you consult a local bankruptcy attorney and check out your options. Most offer free consultations.

Timothy Denison agrees with this answer

1 user found this answer helpful

Bernard S. Via III
Bernard S. Via III
  • Bankruptcy Lawyer
  • Bristol, VA
  • Licensed in Virginia

A: You should talk with a bankruptcy lawyer in the state you reside. Whether you can file a ch. 7 and hang on to your house is questionable. Most states do not allow you to retain a large amount of equity. VA. looks at tenancy by entirety ownership and whether your wife is a joint creditor with you. If she is then the house can be sold and equity paid on the joint account.60,000 is maximum exemption for house equity in Va. Maybe 10K more if your ages are both above 65. So seek competent lawyer in your jurisdiction,

Timothy Denison agrees with this answer

James L. Arrasmith
James L. Arrasmith pro label Lawyers, want to be a Justia Connect Pro too? Learn more ›
  • Bankruptcy Lawyer
  • Sacramento, CA

A: If you stop paying unsecured debts, creditors may take legal action against you, such as filing lawsuits to recover the owed amount. However, in Virginia, Social Security benefits and pensions are generally protected from garnishment by unsecured creditors, which means your income sources might be secure.

Regarding your home, the equity you have is substantial. In Virginia, the homestead exemption protects a portion of equity in your primary residence from creditors. However, the exemption limit in Virginia is considerably less than your $300,000 equity, meaning part of your home's equity might be vulnerable to claims by unsecured creditors. This doesn’t automatically make you judgment-proof, as creditors could potentially target the non-exempt portion of your home equity.

It's crucial to remember that stopping payments on debts can have significant consequences, including damage to your credit score and potential legal action from creditors.

Given the complexity of your financial situation and the high equity in your home, it would be wise to seek guidance from a professional who can help you understand your legal rights and options. They can provide tailored advice on how to best protect your assets while addressing your unsecured debts.

Timothy Denison agrees with this answer

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