Bankruptcy Exemptions

In Pennsylvania, debtors have a choice to either accept exemptions outlined within the Bankruptcy Code created by Congress, or wave those exemptions and abide by Pennsylvania bankruptcy exemptions. In relation to bankruptcy, exemptions refer to the inventory of items safeguarded from collections. In short, exemptions explain what you may maintain possession of once you file for bankruptcy. Bankruptcy exemptions differ from state to state and may be determined by either federal or state statues depending on whether the state prohibits federal statues or not.

As you may have assumed, it is vital to have an understanding of Pennsylvania bankruptcy exemptions when embarking upon the bankruptcy process. It is important to know about the specific types and property values deemed untouchable to bankruptcy trustees and creditors because these items are legally exempt from being liquidated. As a result, debtors are able to maintain possession of the property in question.

Federal and Pennsylvania state law both permit claimants to keep possessions considered necessary for rebuilding their financial futures following the bankruptcy process. These items are considered “exempt property” and must be included as exempt within the debtor’s schedules, which are required to initiate the bankruptcy process. If PA bankruptcy exemptions are not challenged, the items listed are officially labeled exempt and will no longer be considered part of the bankruptcy estate.

When dealing with Chapter 7 Bankruptcy it is important to keep in mind that even though 401(k) plans and pension rights are one of the largest assets for a majority of families, debtors generally disclose but do not have to exempt them. These assets lie outside the estate and for that reason, are not included within the property of the estate so they remain protected. Although some retirement plans can be property of the estate, the majority of savings related to retirement are deemed exempt. For example, according to federal statues under the Bankruptcy Code, there is a one million dollar exemption for IRA’s. In addition, according to Pennsylvania statues pension plans exempt from seizure include: contributions to ERISA qualified retirement plans, tax deferred annuities, deferred compensation plans as well as health insurance plans.

In reference to Chapter 13 bankruptcy, the debtor usually keeps possession of their property but may be required to choose exemptions. These bankruptcy exemptions are utilized to figure out if the bankruptcy plan coincides with the requirement that creditors will receive a minimum of what they would receive had the claimant filed for Chapter 7.

As you can see, there are many different components to federal and Pennsylvania bankruptcy exemptions that are dependent on the factors of each claimant’s case, such as the state they reside in, whether they select exemptions according to the bankruptcy code or state, and the type of bankruptcy being sought. This can be overwhelming, but with the help of a Reinherz & Reinherz Pennsylvania bankruptcy attorney, claimants have nothing to fret about. Our professionals assist debtors with determining how much to exempt, which exemptions apply to their case and how to maximize exemptions and evaluate the value of exempt property.