Some individuals facing financial stress may qualify to file for Chapter 7 bankruptcy as a way to obtain a fresh start. Many people refer to this form of bankruptcy as liquidation bankruptcy because consumers sell their assets and use the proceeds as partial repayment of outstanding debt to creditors. Creditors then forgive the balance of the debt in a bankruptcy discharge. However, bankruptcy law protects consumers in Pennsylvania and elsewhere from losing all property through recognized exemptions. In some cases, individuals can walk away with virtually all of their property.
How the law distinguishes between exempt and non-exempt property
The basic purpose of Chapter 7 bankruptcy involves striking a balance between helping creditors reduce losses while leaving filers with enough assets to start new lives after the bankruptcy discharge. The Cornell University Law School Legal Information Institute provides information on the complex federal bankruptcy law used to identify assets deemed exempt from liquidation versus less necessary items deemed non-exempt.
In many situations, the law considers debt backed by assets (secured debt) as non-exempt, allowing creditors to repossess or otherwise acquire the assets. This can include homes, vehicles or even credit card debt if the individual voluntarily agreed to back the debt with assets. However, federal exemptions can save many items from liquidation, including a set dollar amount of assets as well as pensions and retirement savings.
Making the choice between Pennsylvania and federal exemptions
In addition to federal exemptions, Pennsylvania provides filers with a different list of state exemptions. However, with a few exceptions, you need to use either federal exemptions or state exemptions ― you cannot use both to create a customized list. The choice you make depends on many variables. For example, the Pennsylvania Tenancy by Entirety exemption can make a dramatic difference to the assets you keep. Under this provision, if a creditor holds a claim against you for property in joint ownership with your spouse, the law may exempt that property in bankruptcy.
You need the help of experienced Media bankruptcy attorneys to conduct a careful analysis of your unique situation so you can choose which exemption list makes the most sense for you.
Contact an experienced bankruptcy attorney in Media, PA to learn all available choices under the law
The choices you make when filing for bankruptcy can make a vital difference to your financial future. To obtain the information and advice you need, call David R. Black’s Bankruptcy Legal Group today at (866)-491-6275 for a consultation with one of our experienced bankruptcy lawyers. We serve Media and the surrounding communities and strive to do our absolute best to get you the relief you need, when you need it.