Can You Keep Your Property After Filing Bankruptcy in Pennsylvania?

The vast majority of individuals who file bankruptcy protect all of their property and do not “liquidate” their property. The mechanism to protect the property is known as the system of “exemptions”. In Pennsylvania, we use either the Federal list of exemptions, or, rarely, the Pennsylvania exemptions.

Essentially, no one would want individuals who file bankruptcy to lose all of their property and then have to apply for public assistance. This question will apply to individuals and couples who file bankruptcy. Corporations and other corporate entities such as LLCs that file Chapter 7 bankruptcy cannot protect any assets because that is a true “liquidation” form of bankruptcy.

Let’s talk about the Federal exemptions, because those are the ones that we use almost all the time. So, what can you keep? First, up to $20,000 in home equity for your house. Next, up to $3,225 in equity in your car. The majority of individuals have their vehicles still financed, in which case, they don’t have any equity in a car or truck, or their vehicles are older and don’t have much value anyway. So, it’s extremely rare that a vehicle cannot be fully exempted.

The federal exemptions then protect household possessions, up to $1,225 in jewelry value, along with life insurance, and a variety of other exemptions, most importantly, pensions and virtually all retirement plans. There’s also the bankruptcy attorney’s favorite, which is the “wild-card” exemption, which is any un-used homestead exemption value up to $11,200. This is used to protect bank accounts, second or third vehicles, etc.

The property that gets the most scrutiny from the Court would likely be an interest in a lawsuit. If someone files a bankruptcy case and is in the process of pursuing a lawsuit claim, such as a personal injury lawsuit, then they can be sure to get thorough questioning from the Court Trustee as to the potential value of that lawsuit. The individual can protect up to $20,000 in personal injury lawsuit proceeds, and then use the “wild-card” exemption to protect more value.

The bottom line: most, but not all, bankruptcy filings are considered “no-asset” cases, which means that the Court Trustee is not able to seize any property whatsoever.

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