Section 522 of the Federal Bankruptcy Code allows a bankruptcy debtor to retain certain types of property in which he or she has an interested.  These allowances are referred to as “exemptions.”  The purpose of these exemptions is to ensure that the  debtor has the “bare necessities” required to maintain a livelihood.

In many states, the debtor may chose between using the federal bankruptcy exemptions of the exemptions provided under his or her state law.  In Pennsylvania, debtors will often chose the federal exemptions because they are more favorable than those provided under state law.

Effective February 19, 2010¹, the key federal bankruptcy exemptions in one’s personal and real property are²:

(1) The debtor’s aggregate interest, not to exceed $21,625 in value, in real property or personal property that the debtor or a dependent of the debtor uses as a residence, in a cooperative that owns property that the debtor or a dependent of the debtor uses as a residence, or in a burial plot for the debtor or a dependent of the debtor.

(2) The debtor’s interest, not to exceed $3,450 in value, in one motor vehicle.

(3) The debtor’s interest, not to exceed $550 in value in any particular item or $11,525 in aggregate value, in household furnishings, household goods, wearing apparel, appliances, books, animals, crops, or musical instruments, that are held primarily for the personal, family, or household use of the debtor or a dependent of the debtor.

(4) The debtor’s aggregate interest, not to exceed $1,450 in value, in jewelry held primarily for the personal, family, or household use of the debtor or a dependent of the debtor.

(5) The debtor’s aggregate interest in any property, not to exceed in value $1,150 plus up to $10,825 of any unused amount of the exemption provided under paragraph (1) of this subsection.

(6) The debtor’s aggregate interest, not to exceed $2,175 in value, in any implements, professional books, or tools, of the trade of the debtor or the trade of a dependent of the debtor.

These exemptions are important for both Chapter 7 and Chapter 13 debtors to keep in mind.   A debtor with assets in excess of the exemptions may be forced to sell the additional assets in order to satisfy unsecured claims.  Alternatively, in a Chapter 13 case, the debtor may be required to make payments over and above his or her disposable income in order to guarantee unsecured creditors as much as they would receive in a Chapter 7 liquidation of non-exempt assets.

To find our more about managing your debt, and for a free consultation to see if Bankruptcy might be an option for you, call Attorney Joshua Daly at 484-293-1885.

1   See http://www.federalregister.gov/articles/2010/02/25/2010-3807/revision-of-certain-dollar-amounts-in-the-bankruptcy-code-prescribed-under-section-104a-of-the-code

2   See 11 U.S.C. 522(d) for a complete list of bankruptcy exemptions.

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