The present work contributes to the current state of art in fracture modeling of carbon fiber through development of virtual internal bond (VIB) model based on Tersoff-Brenner potential for carbon fiber. The underlying VIB method is multiscale in nature and the stress–strain relation which while retaining the microscopic attributes handles crack initiation and propagation without addition criterion. A variant of VIB method viz. multi-dimensional virtual internal bond (MVIB) method is employed to model epoxy resin, wherein the stiffness involved in the interaction potential is penalized based on the strain levels to capture damage. Following calibration based on elastic properties and tensile strength, the potential of the current work is demonstrated through simulation of damage in two-dimensional assemblage of carbon and epoxy under the action of bi-axial loading characterized via bi-axiality ratio.