When going through a bankruptcy, be it a Chapter 7 or a Chapter 13 bankruptcy, the government allows you to keep certain assets so that, post-bankruptcy, you may move forward with your life without the need to replace basic necessities. The rules that allow you to do this are called exemptions and vary from state to state. In Pennsylvania, you can choose between the federal bankruptcy exemptions or the Pennsylvania bankruptcy exemptions. Chapter 7 and Chapter 13 both allow you to claim the federal non-bankruptcy exemptions that protect certain retirement and disability benefits, if you are a federal employee or work for the military.
In Pennsylvania, married couples filing a joint bankruptcy can have double the exemptions. However, you may only exempt property that you yourself own. You may not exempt any of your spouse’s property, such as a vehicles, wages or benefits.
Some of the most common Pennsylvania exemptions that can be claimed are:
- Tenants by the Entireties — Pennsylvania law exempts property that is owned jointly by a husband and wife from claims that are owed individually by the husband or wife. This exemption can often be used to protect a home that the husband and wife own with more equity than what might be allowed with the federal bankruptcy exemptions.
- Personal property — Pennsylvania allows you to exempt 100% of the value of your clothing, bibles, school textbooks, sewing machines and uniforms.
- Wages — Unpaid wages are generally exempt from claims of your unsecured creditors.
- Pensions — State- or municipal-sponsored pension benefits are exempt. Private pensions may be also exempt, but the plan must state that proceeds may not be used to pay off creditors.
- Insurance payments — Annuity or life insurance proceeds are also generally exempt if the policy prohibits proceeds from being paid to creditors.
- Public benefits — Benefits such as veteran benefits, workers’ compensation and unemployment benefits are exempt.
- Wildcard — $300 of any property can be exempted.
The above is a list of only the most common exemptions. Both the federal and Pennsylvania exemptions contain many more. To protect your assets as much as possible and to help you determine which set of exemptions would benefit you the most, contact an experienced Pennsylvania bankruptcy attorney. Your attorney will help you get the fresh start you deserve.