Bankruptcy in Pennsylvania, Part 3
Continued from Bankruptcy in Pennsylvania, Part 2.
Federal versus state exemptions
Pennsylvania is one of the fifteen states (plus Washington D.C.) that allow Chapter 7 debtors to choose between the exemptions in the bankruptcy code or the the exemptions provided by Pennsylvania statute. However, you can't "mix and match"--you must choose one or the other.
Individual states vary widely in state-granted exemptions. For example, Florida and Texas protect, respectively, even mansions and estates up to 200 acres. Unfortunately, Pennsylvania provides no homestead exemption, unless a married couple (even if only one spouse is filing as the debtor) claims the exemption of Tenance by Entirety, which is to say the property is held under joint tenancy of the marriage, not by either as individuals.
Most recent rise in federal exemptions was in 2010
Federal exemptions are raised periodically to keep up with inflation, cost of living, etc. The most recent changes can be found in the Feb. 5, 2005 Federal Register, where you can see the old figures versus the new limits and also get an idea of the variety of assets that can be protected. For example, the federal "qualified homestead exemption" was raised from $136,875 to $146,450. What that means to the filing debtor is that if the primary residence must be sold, the debtor keeps the proceeds up to that amount, with any overage disbursed among creditors. However, if the residence is worth less than that, there is no reason for the trustee to recommend liquidation.
Federal and state exemptions allow protection of wide variety of assets
Other exemptions include such items and instruments as tools of the trade, personal property, household goods, insurance policies, retirement benefits and disability benefits. Under state exemptions, different statutes address different types of employees, including: city, county, municipal, police, public school and state employees. Many exemptions can be doubled for married couples, but, again, no mixing of federal and state: each has to claim the same as the other spouse.
Bankruptcy attorneys have expert knowledge of exemptions
Intimate knowledge of exemptions is a granular, discrete reason to retain a qualified bankruptcy attorney. If you file pro se (i.e., represent yourself without benefit of an attorney), you have to complete the exemptions forms as part of your petition. Working with an attorney, you simple answer questions in consultation or by completing a questionnaire (with, at least, office support if not direct contact with the attorney). When that's finished, the attorney knows how to complete the paperwork correctly, and you're basically done until the so-called Meeting with Creditors (the "341 meeting").
Attorney fees can be included in bankruptcy payments
Attorney fees are set by the code and therefore pretty much standardized for your region. When I filed for Chapter 13 protection, the charge was $3,000, but due to my circumstances, my attorney was able to roll that fee into the bankruptcy. When that happens, the attorney gets paid back first; when the fee is paid, the rest of the creditors start getting paid.
Continued in Bankruptcy in Pennsylvania, Part 4.
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