Recently on our bankruptcy forum a user asked, “I live in the State of Pennsylvania and I am considering filing for bankruptcy. I want to know if I can protect my house?”
Filing bankruptcy does not automatically mean that everything you own will be liquidated and sold to creditors. In fact, all states have exemptions which protect certain assets from repossession and liquidation.
What do I need to know about Pennsylvania’s homestead exemptions?
While many states have very generous homestead exemptions which allow property owners to protect the equity in their homes, unfortunately, the exemptions offered by states differ significantly.
For example, in Texas, homeowners may exempt an unlimited amount of their home and other property covered under the homestead exemption (with acreage limitations). Pennsylvania, other the hand, does not provide a homestead exemption, although it does provide a $300 exemption which is applicable to any property not just real estate.
So what do you do if you want to protect your home in Pennsylvania? First, you will need to discuss your case with a bankruptcy lawyer familiar with your state’s bankruptcy laws. Next, you will want to review whether or not you can protect your home using the federal bankruptcy exemption scheme. Finally, you can review whether you and your spouse own your home as a tenancy by entirety, which also may offer some protections if you are filing bankruptcy on your own without your spouse.
What are the federal bankruptcy exemptions?
The good news is that bankruptcy filers in Pennsylvania may choose to use either the state or the federal bankruptcy exemptions. In some cases, if you want to protect your home and you are filing with your spouse, using the federal bankruptcy exemptions will be the best option for you.
Although you cannot mix and match exemption schemes, which means if you choose the federal homestead exemption you will have to use all of the federal exemptions, if you decide to use the federal exemptions you can double the exemption amount if you file with your spouse, protecting up to $43,250 of the equity in your home.
Other federal bankruptcy exemptions that you can use to protect your assets in Pennsylvania include a federal insurance exemption of $12,250 in the loan value of a life insurance policy, $3,675 to protect a car, and a $1,225 wildcard exemption (plus $11,500 from an unused homestead exemption (maximum $12,725).
More information for using the federal exemptions can be found by reviewing the federal bankruptcy homestead exemption at 11 U.S.C. §522(d)(1) and (5).
Real Property Held as Tenancy in the Entirety in Pennsylvania
Another option to protect your home if you are filing bankruptcy separately from your spouse is to discuss with your bankruptcy lawyer if you can protect your house through a tenancy in the entirety. What this means is that your property is owned jointly by you and your spouse as a single marital entity and cannot be liquidated to pay the debts of only one owner.
Understanding bankruptcy laws is important to protecting yourself in bankruptcy. Although Pennsylvania does not offer the best protections for your home this does not mean there are not some protections available to save your house.
Latest posts by Beth (see all)
- Chapter 7 bankruptcy how to avoid filing a second time? - April 24, 2017
- Chapter 7 bankruptcy how do they determine if I can file? - April 19, 2017
- Receiving Supplemental Security Income can I file for bankruptcy? - April 12, 2017