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Many Philadelphians would like to file bankruptcy, but hesitate because they believe they will lose all of their assets and property. If this describes you, there is good news: bankruptcy exemptions allow you to protect many of your valuable belongings and possessions, while still enjoying the financial benefits of debt relief. Read on to hear Pennsylvania bankruptcy lawyers explain how the strategic use of exemptions may allow you to declare bankruptcy and keep your home, vehicle, and other property.

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Can I Keep My House and Vehicle if I File Bankruptcy?

As Philadelphia Chapter 7 lawyers, we are frequently contacted by Pennsylvanians who have questions such as, “Can I file for bankruptcy and keep my house?” or “Can I keep my car if I file bankruptcy?” Though it depends on the debtor’s financial circumstances, in many cases, the answer to both questions is yes.

The process of Chapter 7, which is also called “straight” or “ordinary” bankruptcy, involves liquidation of the debtor’s non-exempt assets by a court-appointed bankruptcy trustee. The idea is that proceeds from the sale will help pay the debtor’s creditors, since Chapter 7 creditors do not receive monthly payments as they would in a Chapter 13 bankruptcy.

However, the key here is the term “non-exempt.” If an asset is covered by bankruptcy exemptions, it is exempt and cannot be sold by the trustee.

If an asset is lost, generally it is surrendered because it does not make financial sense to keep it. For example, if a petitioner owns an automobile and has a loan for $15,000, but the car is only worth $5,000, the petitioner may voluntarily surrender the automobile and not be held responsible for the $10,000 deficiency.

But what if a debtor does not want to surrender property? In this type of situation, bankruptcy exemptions may provide financial protection.

Bankruptcy exemptions can be used to exempt property up to a certain dollar limit, which varies from exemption to exemption. Some examples of assets that may be exempted in Chapter 7 bankruptcy include:

  • Household Goods
  • Jewelry
  • Tools of a Trade

Pennsylvania debtors may choose between two sets of exemptions: the federal bankruptcy exemptions, or the Pennsylvania bankruptcy exemptions. Debtors must choose one or the other – not combine both systems. However, both sets of exemptions can have advantages as well as disadvantages, so it’s important to review your assets carefully with a Montgomery County Chapter 7 lawyer. Doing so will enable you to make an informed, practical decision about which exemptions will protect more of your property.

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Federal Bankruptcy Exemptions Chart 2016

The federal bankruptcy exemptions are listed below, along with:

  • The pertinent section of Title 11 of the United States Code.
  • A description of the type of exemption.
  • A brief explanation of rules associated with the exemption.

The following federal bankruptcy exemptions are current as of 2016, the most recent date of adjustment, but may be subject to change in the future.

U.S. Code SectionDescriptionUses
11 U.S. Code § 522(d)(1)Federal Homestead ExemptionReal property, including co-ops and mobile homes, or burial plots, up to $23,675. Unused portion of homestead, up to $11,850, can be used for other property.
11 U.S. Code § 522(d)(2)Personal Property (Motor Vehicle)Up to $3,775.
11 U.S. Code § 522(d)(3)Personal Property (Animals, etc.)Animals, crops, clothing, appliances and furnishings, books, household goods, and musical instruments up to $600 per item, and up to $12,625 total.
11 U.S. Code § 522(d)(4)Personal Property (Jewelry)Jewelry up to $1,600.
11 U.S. Code § 522(d)(9)Personal PropertyCovers health aids.
11 U.S. Code § 522(d)(11)(B)Wrongful Death CompensationCovers wrongful death recovery for the person you depended upon.
11 U.S. Code § 522(d)(11)(D)Personal Injury CompensationPersonal injury recovery up to $23,675 (except for pain and suffering or for pecuniary damages).
11 U.S. Code § 522(E)Compensation for Lost EarningsCovers payments to compensate for lost earnings.
11 U.S. Code § 522(b)(3)(C); 11 U.S. Code § 522(b)(3)(C)(n)PensionsTax exempt retirement accounts such as 401(k)s and 403(b)s; IRAs and Roth IRAs up to
$1,283,025.

So, how do the bankruptcy exemptions actually work? If a bankruptcy petitioner has equity in his or her vehicle, for example, the petitioner may combine the bankruptcy motor vehicle exemption and, if need be, the bankruptcy personal property exemption in order to protect the equity and retain the vehicle. Further, if a petitioner in bankruptcy has equity in their home, the petitioner may take advantage of the homestead exemption to ensure they will continue to enjoy the subject real estate.

On a final but crucial note, the federal exemptions can be doubled (called “doubling”) if a married couple files bankruptcy together (called filing “jointly”). In other words, you may be able to protect more of your property by filing bankruptcy with your husband or wife, as opposed to filing individually. For instance, the 2016 federal homestead exemption of $23,675 can be doubled to $47,350.

Contact Our Philadelphia Chapter 7 Lawyers About Home Foreclosure

Due to the federal exemptions, it is extremely rare that a petitioner in bankruptcy loses property when filing Chapter 7 with assistance from the Philadelphia foreclosure lawyers of Sadek & Cooper. If there are any questions or topics you would like to discuss relating to foreclosure or bankruptcy law in the Philadelphia, Pennsylvania region, contact the Delaware County Chapter 7 bankruptcy attorneys of Sadek & Cooper Law Offices at (215) 995-2543 today for a free legal consultation.