Updated: Mar 20
An important question in any bankruptcy is what happens to your property and possessions? In a chapter 7 case, it is possible that your property will be sold and used to pay off your debts. This is rarely the case because the law allows you to protect or “exempt” some of your property from being sold.
Some of your personal property is exempt from being sold, but there are limits on the value of exemptions. These exemptions, which change periodically, cover categories of property and are limited in dollar value. In Pennsylvania, you are given a choice between using either the state or federal exemptions. For the majority of filers, the federal exemptions will provide the most protection.
With the federal exemptions (in 2020) you can protect $25,150 of equity in your residence (equity is its current fair market value less the balance of all mortgages on the property); $4,000 of equity in your car; $13,400 of household goods, clothes, appliances and furniture; $2,375 for tools of your trade (perhaps you are a contractor or auto-worker); $1,700 worth of jewelry; and a variable “wildcard” exemption of $1,325 that can be applied to any type of asset. The amounts of the exemptions are doubled when a married couple files together.
These exemptions apply to the value of your assets at the time of your filing. With proper planning, most filers lose little to no assets in a bankruptcy. While your exemptions allow you to keep property even in a chapter 7 case, your exemptions do not make any difference to the right of a mortgage holder or car loan creditor to take the property to cover the debt if you are behind. In a chapter 13 case, you can keep all of your property if your plan meets the requirements of the bankruptcy law. In. most cases you will have to pay the mortgages or liens as you would if you didn’t file bankruptcy.
We understand the stress and sleepless nights that arise from difficult financial times. Our bankruptcy attorneys are ready to get you some relief and back on the path to good credit. Contact us today for a free initial consultation.