Pennsylvania Bankruptcy Without Losing Your Home or Vehicle
- If you choose to file Chapter 7 bankruptcy in Pennsylvania, which is one of the two most common types, then the Pennsylvania bankruptcy exemptions will affect the outcome of your case. Bankruptcy exemptions are the court's way of telling you what are essential items of property that will help you rebuild your life after your bankruptcy. Exemptions are unique to individual states, although many states use similar categories. In Pennsylvania, you can keep items like public benefits, pensions and earned but unpaid wages, but the only specific personal property you can keep is clothing, school books, bibles, sewing machines, uniforms and accoutrements. Beyond that, Pennsylvania only offers a $300 personal property exemption that you can apply to items like a vehicle. For a home, there is no exemption at all, unless you own property titled as tenants by the entirety. In this case, your home is exempt to the limit of the debts of one spouse. Any property you own over these amounts may have to be surrendered.
- Pennsylvania's bankruptcy exemptions can only shield your assets from the court, which is intent on liquidating your property to benefit your creditors. If you are still financing your property and do not own your home or car free and clear, then your creditors still have an interest in your property even if you successfully file bankruptcy. In other words, even after a bankruptcy discharge, you may not be able to protect your car and home from seizure, repossession or foreclosure by your lenders. In this case, you may have to work out a deal with those creditors to keep your property.
- The two main deals you can cut with your secured lenders to keep your property after your Pennsylvania bankruptcy are redemption and reaffirmation. Redemption is essentially a buyout, where you pay your creditors the fair value of your asset, such as your car, and the court discharges your liability to pay any remaining debt balance above this amount. Reaffirmation is basically an agreement to keep the status quo, with you making timely payments on your loan and keeping your property in exchange. If you default in the future, after signing a reaffirmation agreement, your lenders still have the right to repossession or foreclosure.
- While Chapter 13 bankruptcy requires you to pay back the debt you owe for as long as five years, in some ways it is simpler than Chapter 7 bankruptcy. If you owe any secured debt when you file Chapter 13 in Pennsylvania, the court will typically include your secured payments in your monthly Chapter 13 debt payment, and your creditors cannot take action against you during that time. If you do not pay off your full secured debt balance in your Chapter 13, you will have to reaffirm your debt, as you could in a Chapter 7, in order to keep your assets. If you own your assets, such as your home and car, free and clear when you file Chapter 13, it doesn't matter how much they are worth, the court allows you to keep them. Bankruptcy exemptions only apply to Chapter 7 cases in Pennsylvania.
