How much “stuff” may I keep?
|Many people believe that personal bankruptcy, whether Chapter 7 or Chapter 13, will cause them to lose significant assets. While in some cases people may want to surrender assets, it is a rare case where people are forced to give up assets that they otherwise wish to retain. |
Retaining Your Residence and Non-Residential Assets
Under Federal exemptions, each debtor can retain a residence with up to $25,150.00 in equity. For a married couple, all of these exemptions are doubled, such that a married couple can keep up to $50,300.00 worth of equity in their residence. “Equity” is the difference between the fair market value of the residence and the amount owed on any mortgages, other liens, or real estate taxes.
If no residence is owned, or if the residence has less equity than above, then each debtor gets up to $12,575.00 in any other non-residential assets Additionally, each debtor may retain up to $4,000.00 equity in a car, $13,400.00 equity in furniture, furnishings, and appliances; up to $1,700.00 worth of jewelry; $1,325.00 cash in a bank or checking account; $2,525.00 worth of tools of the trade; and $13,400.00 worth of cash surrender value in life insurance.
For most people in the Central Pennsylvania area, these amounts cover the overwhelming majority of people who file for bankruptcy protection.
Retaining a Residence Subject to a Mortgage
If a person filing bankruptcy wishes to keep their residence, but it is subject to a mortgage, while they are allowed to have up to the equity limits discussed above, they have to keep making the mortgage payments, the real estate taxes, and the insurance. Similarly, keeping a car, even though it may have up to $4,000.00 in equity, requires that you continue to make the car payment. But, if it is determined that the house or the car is not affordable, the owner of the asset may surrender the asset to the secured creditor, usually owing nothing further, and then use their exemptions on other assets.
Exempting Marital Assets
In less than 5% of cases, the exemptions under the Federal law are not appropriate. This is where the exemptions under Pennsylvania law come into play. Most important of the Pennsylvania exemptions is the ability to exempt marital assets owned as husband and wife (tenants by the entireties) if the debts are only owed by one of the spouses but not both. As long as the debts are not owed together, the creditor of only one spouse cannot seize assets that are owned as husband and wife, tenants by the entireties. Additionally, Pennsylvania law protects certain life insurance benefits without limits while under Federal law there is a limit based on “need.”
Finally, under both Federal and Pennsylvania law, 401(k) and IRA accounts – typical retirement accounts – are exempt under most circumstances.
CGA Law Firm Can Help
Of course, each case must be examined on the specific facts, but for those who fear they may have to give up assets that they wish to retain, a consultation with a qualified bankruptcy attorney at CGA might show that you can keep those assets that are most important to you.
|Attorney Larry Young|
Larry chairs the firm’s Bankruptcy and Debt Restructuring group. He is certified as a Consumer Bankruptcy Specialist by the American Board of Certification, and is one of only 25 attorneys who have this designation throughout the Commonwealth. Larry may be reached at (717) 848-4900, ext. 110 or by email: firstname.lastname@example.org.
Larry Young’s Bio
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