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Personal bankruptcies protect some assets

| Oct 31, 2020 | Chapter 7 Bankruptcy

A Chapter 7 bankruptcy filing in Pennsylvania does not mean you lose all money and assets. You do surrender most of them to the federal bankruptcy trustee assigned to your case for eventual distribution to settle your declared debts. The reason you do not lose everything is to ensure that you can rebound from the bankruptcy.

Standard exemptions apply

A Chapter 7 consumer bankruptcy provides federal and state exemptions that protect some of your assets. Federal exemptions are standardized across the nation and let filers keep $1,150 in assets. State exemptions might be larger or smaller and can vary greatly. Texas leads the nation with the most generous asset protections of up to $60,000 for Chapter 7 filers.

Very small state wild card exemption

Pennsylvania does not provide much by way of asset protection for Chapter 7 filers. The state only has maximum $300 wild card exemptions for bankruptcy asset forfeitures. There also is not homestead exemption, which means homeowners likely will lose their homes and other significant assets when filing for bankruptcy in the Keystone State. The state’s wild card exemption is among the lowest in the United States.

Home equity wild card

Federal bankruptcy court also lets you protect up to $21,625 in home equity value. If you do not have any home equity, you can use up to $10,825 of that amount to protect other real property, like a car on which you have an outstanding debt. The home equity exemption would let you keep the car and wipe out the debt via the maximum federal exemption value.

Important to ensure stability

With only $300 in asset state wild card exemptions available in addition to the federal wild card amount, it is very important to plan for life after bankruptcy and ensure that you can provide for yourself. An experienced consumer bankruptcy attorney may help you understand your options and go forward with the best possible Chapter 7 filing plan.