Filing for bankruptcy is a scary experience. Most people considering the process have only a vague sense of what they’ll be able to keep, and fear that they’ll have to sacrifice cherished belongings to the bankruptcy trustee. That unknown creates significant stress, but doing a little research can help. Every state has different rules regarding what assets can be exempted or protected, and Pennsylvania’s rules are among the most restrictive, though married couples filing for joint bankruptcy are able to double the amount of the exemption because they can each claim the full exemption amounts as long as they both have ownership interest in the property. Still, Pennsylvania bankruptcy filers are able to choose whether to use the state’s exemptions or those provided under the federal bankruptcy rules, and many opt for the latter, which tend to be less limiting.

The first thing you need to understand is how bankruptcy exemptions work. Different types of properties are assigned different exemption amounts. If you own property and your equity value is less than or equal to the published exemption amount, you can keep it. So in other words, if your state’s exemption amount for a car is $5,000 and you fully own a car whose book value is $4,000, you can keep it, but if your car is worth $20,000, it will be sold and you will be able to keep $5,000, with the other $15,000 distributed to your creditors.

With that in mind, your first step is to make a list of all of your assets and their value, and then compare that number to the exemption that it qualifies for under both state and federal rules. Then you can decide which set of exemptions works best for you. Keeping that in mind, here are some of the most important aspects of Pennsylvania’s exemptions:

• Pennsylvania offers no homestead exemption
• Wildcard exemption up to $300 on any personal property other than real estate
• Clothing, bibles, school books, sewing machine, uniforms
• Earned but unpaid wages; abuse victims’ wages
• Pensions such as tax exempt retirement accounts (including 401(k)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and defined benefit plans)
• IRAS and Roth IRAs to maximum (amount changes)
• Workers’ compensation and unemployment compensation
• Veterans’ benefits and Korean conflict veterans’ benefits
• Insurance
• Business partnership property

By contrast, under federal bankruptcy rules, exemptions include:

• $25,150 of equity in your principal place of residence
• $4,000 for your motor vehicle
• $1,700 for jewelry
• $625 per individual item with a $13,400 aggregate value on household goods, furnishings, appliances, clothes, books, animals, crops, musical instruments
• $2,525 for tools of the trade, including implements and books
• Health aids
• $13,400 in loan value, accrued dividends, or interest in a life insurance policy
• Spousal support, child support, life insurance payments, and all Social Security benefits, unemployment benefits, veteran’s benefits, public assistance, and disability or illness benefits

As you can see, the federal bankruptcy exemptions offer far greater latitude for bankruptcy filers. For more information about how to protect your assets, contact our experienced bankruptcy attorneys today to set up a time to meet.