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Will I lose everything if I file bankruptcy?

It has long been said that the principal purpose of bankruptcy is to give a “fresh start” to the “honest but unfortunate” debtor. Wetmore v. Markoe, 196 U.S. 68 (1904). To that end, the Bankruptcy Code protects debtors from becoming destitute and dependent upon the public dole. While the Bankruptcy Code allows debtors to keep sufficient income to pay reasonably necessary expenses to support themselves and any dependents, it also allows them to keep enough property to attain the “fresh start.” In fact, the primary reason most people file bankruptcy is to protect their property from creditors.

In order to make the “fresh start” possible, the Bankruptcy Code provides for a property that is exempt from the bankruptcy. These exemptions allow debtors to keep a reasonable amount of their property. While some states preclude debtors from taking the federal exemptions provided within the Bankruptcy Code, Pennsylvania citizens have a choice between the federal exemptions and the state exemptions. While state exemptions are limited compared to the federal exemptions, the state exemptions preserve most property held by a married couple. Federal exemptions, on the other hand, relate more to the property that is held based upon its net value. So, if you own property with a lien against it, you subtract the amount still owed from the fair market value of the property and exempt whatever is left. A married couple who files together can take a set of exemptions for each of them, thus in most cases doubling the amount they get to keep. Although there are some exceptions, these exemptions apply in most consumer cases. The chart below gives you an idea of the amount of property you can keep in most bankruptcies. While some of the categories may be considered as income, you will not lose property within the category.

With the proper guidance from a legal professional, most debtors are required to give up none of their property in a bankruptcy. Even if the Bankruptcy Code does not protect all of your assets, perfectly legal strategies are available to avoid giving up anything. If you are an “honest but unfortunate” person who seeks a “fresh start” but are afraid that you might be wiped-out, contact us. We give second chances on Second Street.

Exempted Amount

Residential Property

One Vehicle

Household Property


Any Remaining Property
Up to $13,950 of unused Residential Property + $1,475

Tools of the Trade

Term Life Insurance Policy

Whole Life Insurance Policy

Health Aids

Social Security, veteran benefits, disability benefits, support, and pensions

Crime Victim Reparations

Life Insurance Benefits
Amount reasonably necessary for support

Personal Injury Claim

Loss of Future Earnings
Amount reasonably necessary for support

Retirement Funds