Pennsylvania bankruptcy laws are designed to protect debtors while they try to deal with overwhelming debt. Whether you got into debt because of poor financial decisions or through no fault of your own, you may find bankruptcy gives you the chance to start over fresh. Before filing, take the time to understand the state’s laws.

Bankruptcy Exemptions

In Pennsylvania, you can choose to follow either the state or federal exemption schemes. Under the federal plan, you can keep:

• Up to $20,200 for your home
• Wrongful death, crime victims’ compensation, or public benefits or compensation
• Up to $10,775 in a loan value life insurance policy
• Life insurance payments you receive from someone you depended on, like a parent
• Up to $20,200 for personal injury compensation
• Alimony or child support
• ERISA qualified benefits and retirement benefits
• Up to $10,775 for household goods, $550 per item
• Up to $1,350 for jewelry
• Life insurance contract that has not matured
• Up to $3,225 for a vehicle
• Health aids
• Up to $20,200 for tools of the trade
• Lost earnings payments
• Up to $10,125 of the value of unused homestead exemption, applied toward other property
• Up to $1,075 for any property as a wild card

Under the state plan, debtors may keep:

• Clothing
• Bibles and school books
• Sewing machines
• Uniforms and accouterments from the military
• Qualified retirement funds and accounts
• Pension or annuity
• Social security benefits
• Worker’s compensation benefits
• Insurance proceeds

Because of the more generous federal terms, most choose the federal exemption scheme.

Chapter 7 Bankruptcy Information

For those who qualify, Chapter 7 bankruptcy allows them to discharge their debts, with a few exceptions, after the courts sell nonexempt assets in an attempt to pay them. In order to qualify, you must pass a means test, which requires your income to be at or below the median level in Pennsylvania.

Chapter 13 Bankruptcy Information

Chapter 13 bankruptcy allows debtors to hang on to assets while they attempt to repay their debts over a period of three to five years. The bankruptcy courts supervise the repayment. Some debts are discharged at the end of the repayment term.