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Bankruptcy: Pennsylvania

Filing bankruptcy in Pennsylvania gives debtors an opportunity to overcome overwhelming debt and allows creditors to be repaid to the extent that the debtor’s property value or earnings permit. 38,581 bankruptcies were filed in Pennsylvania in 2010, ranking Pennsylvania 39th in the country for the number of bankruptcy filings per capita. 71% of Pennsylvania’s bankruptcy petitions in 2010 sought protection under Chapter 7 bankruptcy.

Filing Bankruptcy in Pennsylvania

Federal law governs bankruptcy proceedings in Pennsylvania, therefore all bankruptcy cases are filed in the US Bankruptcy Courts located in:

  • Pennsylvania Eastern District Courts: Allentown, Doylestown, Lancaster, Philadelphia, Reading
  • Pennsylvania Middle District Courts: Harrisburg, Scranton, Wilke-Barre, Williamsport
  • Pennsylvania Western District Courts: Erie, Johnstown, Pittsburgh

Despite the fact that federal courts have jurisdiction over bankruptcy proceedings, Pennsylvania law allows petitioners to choose the exemptions listed in the U.S. bankruptcy code or the exemptions provided under Pennsylvania law. The federal and state exemption systems cannot be mixed and matched. With the counsel of an experienced bankruptcy attorney Pennsylvania debtors can gain a full understanding of what personal property the systems permit the petitioner to keep in bankruptcy, and what must be sold.

Chapter 7 Bankruptcy, Pennsylvania

Chapter 7 bankruptcies in Pennsylvania are the most common bankruptcy filing.  Chapter 7 is best suited to petitioners who lack significant assets such as investments or substantial equity in a home, since a Bankruptcy Trustee may liquidate personal property that isn’t protected by Pennsylvania’s bankruptcy exemptions. Liquidation takes place when the Trustee converts personal assets to cash to distribute to creditors. Pennsylvania’s Chapter 7 bankruptcy law allows debtors to keep some essential property and the exempt assets are off-limits to creditors seeking repayment.

The vast majority of Chapter 7 cases are “no-asset” cases where no property is taken.

Pennsylvania Bankruptcy Exemptions

Pennsylvania bankruptcy law identifies specific property exemptions that allow debtors to keep certain personal property and assets so they may move forward from bankruptcy without undue material or financial stress.  To be frank, this means creditors cannot pressure debtors to sell the shirt off their backs to resolve a debt.  Bankruptcy in Pennsylvania permits petitioners to choose exemptions from the federal or state lists.

Property exemption values may have changed since this writing, so it is wise for anyone considering filing bankruptcy to seek the advice of a Pennsylvania bankruptcy attorney to understand the choices open to them.  Pennsylvania bankruptcy exemptions include:

Pennsylvania Homestead Exemption

  • None; Property held as tenancy by the entirety may be exempt against debts owed by only one spouse

Pennsylvania Personal Property Exemption

  • Military uniforms and accoutrements
  • Clothing
  • Bibles and schoolbooks
  • Sewing machines

Pennsylvania Tools of Trade Exemption

  • Seamstress’s sewing machine

Pennsylvania Wage Garnishment Exemption

  • Earned but unpaid wages
  • Prison inmates wages
  • Wages of victims of abuse

Pennsylvania Public Benefits Exemption

  • Workers’ and Unemployment compensation
  • Veterans’ benefits
  • Korean conflict veterans’ benefits
  • Crime victims’ compensation

Pennsylvania Insurance Exemption

  • Accident or disability benefits
  • Fraternal benefit society benefits
  • No-fault automobile insurance proceeds
  • Group life policy or proceeds
  • $100 per month: Insurance policy or annuity contract payments, where insured is the beneficiary, cash value or proceeds
  • Life insurance and annuity proceeds if clause prohibits proceeds from being used to pay beneficiary’s creditors
  • Life insurance annuity policy cash value or proceeds if beneficiary is insured’s dependent, child or spouse

Pennsylvania Pensions and Retirement Savings Exemption

  • State, County, City and Municipal employees
  • Police officers
  • Public school employees
  • $15,000 per year: Private retirement benefits (IRAs, et cetera.) to extent tax-deferred, if clause prohibits proceeds from being used to pay beneficiary’s creditors; exemption limited to deposits made at least 1 year prior to filing (limit does not apply to rollovers from other exempt funds or accounts)

Pennsylvania Miscellaneous Exemption

  • Property of business partnership

Pennsylvania Wild Card Exemption

  • $300 total: Any property, including cash, real property, securities or proceeds from sale of exempt property

Chapter 13 Bankruptcy, Pennsylvania

In 2010, 29% of debtors filed for protection under Chapter 13 bankruptcy in Pennsylvania.  Filing Chapter 13 bankruptcy in Pennsylvania initiates a financial reorganization process in which a court-appointed Trustee negotiates with creditors and implements a 3-5 year repayment plan using the debtor’s future earnings to repay creditors.  Chapter 13 petitioners in Pennsylvania keep most – or all – of their property.

How to File Bankruptcy in Pennsylvania

Your decision to file for bankruptcy protection from creditors should reflect your eligibility for property exemptions. The desired outcome should be the protection of major assets and discharge of debts. Because each bankruptcy case is different, a Pennsylvania bankruptcy attorney can inform debtors of the exemption rules and their financial options concerning Chapter 7 and Chapter 13 bankruptcies.

Bankruptcy Attorney: Pennsylvania

It is the bankruptcy petitioner’s duty to know their rights and obligations as a debtor.  The bankruptcy process can be complex and emotional for many.  A Pennsylvania bankruptcy attorney can counsel petitioners regarding Pennsylvania bankruptcy exemption regulations and provide expert advice on bankruptcy options for each financial circumstance.