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How a Philadelphia Bankruptcy Lawyer Can Help You Keep Your Assets



By:Mike Cibik


Bankruptcy and Keeping Your Assets


When it comes to bankruptcy, people tend to think the worst. You’ll lose your home and car. You’ll have to give up your retirement savings. This is why there are Philadelphia bankruptcy lawyers. To understand which assets you may lose depends on the type of bankruptcy, and if the asset is classified as exempt or non-exempt. Let’s break this down.


With a Chapter 7 bankruptcy, you can lose assets (i.e., your home or car) based on their worth. Any assets with equity that is lower than the exemption amount cannot be sold. After you file, you are assigned a trustee. This person will seize any assets that are higher than the exemption amount and sell them to pay off your creditors. However, you can keep your car if you sign a reaffirmation agreement. This document states that you will continue to make the payments on the vehicle. Also, a secured creditor can ask a bankruptcy court to foreclose or sell your home if you default on your mortgage loan – missed payments, late payments or lack of equity.


With a Chapter 13 bankruptcy, you can keep your assets because you are making payments through a payment plan set up by the IRS.


It’s also essential to understand bankruptcy terms. We talk about exempt and nonexempt when it comes to your assets. No one likes to hear what they have worked hard for reduced to a term. If something is exempt, that means that a creditor cannot claim it as payment for a debt, whereas non-exempt means a creditor can claim it. Sometimes, you may have to prove an asset is exempt if a creditor thinks it was misclassified.


State or Federal Exemptions


In Pennsylvania, we are fortunate that we can choose between state and federal exemptions (not both). So, how do you choose between the two? You will need to do a few things:


  1. Take an inventory of all of your assets, from your home to clothing, and the replacement value for each piece. You will have an estimate for items you do not have documentation/receipts for.
  2. Compare the values of items to Pennsylvania’s state exemptions for the type of asset.
  3. Choose the system (state or federal) that allows you to keep the asset.


If you choose state exemptions, then you can also select from a list of exemptions declared by the federal law (federal nonbankruptcy exemptions). These include:


  • Retirement Benefits
  • Survivor’s Benefits
  • Death & Disability Benefits
  • Miscellaneous (e.g., 75% of earned but unpaid wages and military group life insurance).


State exemptions include:


  • Personal Property (e.g., clothing, bibles, uniforms, etc.)
  • Wages
  • Pensions
  • Public Benefits (e.g., crime victims’ compensation and veterans’ benefits)
  • Insurance (e.g., group insurance policies and annuities)
  • Business Partnership Property
  • $300 of Property (e.g., electronics)


State non-exempt include:


  • Cash, Bank Account, Stocks or Bonds
  • Coin or Stamp Collection and Antiques
  • Second Homes/ Vacation Homes
  • Second Cars/Trucks/Motorcycles


Federal exemptions include:


  • Homes, Mobile Homes, Co-Ops or Burial Plots up to $23,675
  • Personal Property – Motor Vehicle up to $3,775
  • Animals, Crops, Clothing …etc. up to $12, 625 (total)
  • Jewelry – up to $1,600
  • Health Aids
  • Wrongful Death Award
  • Personal Injury Award – up to $23,675
  • Lost Earning Payments
  • Pensions
  • Public Benefits
  • Tools (Livelihood) – up to $2,375
  • Alimony and Child Support
  • Insurance
  • “Wildcard” – up to $1,250 of property and unused portion of homestead up to $11,850


If you think that your assets will be sold with a Chapter 7, you can switch to a Chapter 13 bankruptcy.


Which State Exemptions to Use?


If you have recently moved to Pennsylvania, you will need to use the state exemptions from the state you moved from if you had lived there for at least two years. If you haven’t lived there for two years, then you will use the state where you have lived in the longest.


Acquired Property or Funds After Filing


A number of our clients ask if they can keep property or money (assets) they received before they filed, such as an inheritance or damages awarded from a lawsuit, but won’t get them until after the bankruptcy case begins. Unfortunately, they can be considered part of the bankruptcy. The bankruptcy court will discover the date you will receive the assets. If you have received them within 180 days (6 months) after filing, it can be subject to Chapter 7 liquidation.


Don’t Risk Losing Your Assets


At Cibik & Cataldo, we have the expertise to know which system that will benefit you the most. We will fight to make sure you keep your assets before and after filing for bankruptcy. Contact us today at (215) 735-1060 for a free consultation.


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