One of the first questions individuals ask when filing bankruptcy in PA is whether they will lose everything they own. In Pennsylvania, the answer is no. Federal and state law both provide exemptions—legal protections that allow you to keep certain types of property even after filing for bankruptcy.
These bankruptcy asset protection rules in PA are designed to shield essential items: your home, car, household furniture, work tools, and most retirement accounts. What is protected depends not only on the value of what you own but also on the chapter under which you file and which exemption system you use.
Under Chapter 7, a trustee may sell non-exempt property to pay creditors, but exempt items are off-limits. Under Chapter 13, you keep all your property and repay debts through a structured plan over three to five years. Understanding the rules and making informed decisions from the beginning can help preserve your most important assets.
Understanding Bankruptcy Exemptions in Pennsylvania
Each option has its advantages. For instance, the federal list includes stronger protections for home equity and retirement funds. Pennsylvania’s list may favor certain personal property, but it does not include a homestead exemption.
Making the wrong selection can result in losing assets that would otherwise be protected. Choosing the right exemption system based on your asset profile is one of the most important steps in preparing a bankruptcy case in Pennsylvania.
What Assets Are Protected in a Pennsylvania Bankruptcy?
If you’re filing bankruptcy in PA, you may be able to keep a wide range of necessary property. The type and extent of protection depends on whether you file under Chapter 7 or Chapter 13, and which exemption system you use.
A. Your Home (Homestead Exemption)
Pennsylvania does not offer a state-level homestead exemption for primary residences. However, if you choose the federal exemption system, you may protect up to $31,575 in home equity (or $63,150 for joint filers, as of 2024).
If you are behind on your mortgage, Chapter 13 bankruptcy and protected property rules allow you to cure defaults over time, helping you avoid foreclosure and keep your home.
B. Your Vehicle
The Pennsylvania exemption protects up to $3,000 in vehicle equity. Under the federal rules, the exemption amount increases to $4,450, subject to inflation.
If your vehicle’s equity exceeds the allowable exemption, it could be sold under Chapter 7. In Chapter 13, however, you can retain the vehicle by including any arrears in your repayment plan.
C. Household and Personal Property
Both exemption systems offer protection for common household items. This includes clothing, furniture, kitchen appliances, and other basic necessities. The total value exempted can vary—federal rules currently allow up to $16,850 in household goods.
Some categories, such as jewelry or electronics, have specific caps. Luxury items or collectibles are not likely to be fully protected and must be listed honestly in your filing.
Federal bankruptcy law provides full exemption for most tax-deferred retirement accounts. This includes:
401(k)s
Traditional and Roth IRAs (protected up to about $1.5 million combined)
Government pensions
These assets are generally safe in both Chapter 7 and Chapter 13, assuming they’re properly titled and held in qualifying accounts.
E. Tools of the Trade and Wages
If you work for yourself or in a trade, you don’t have to give up the tools you need to earn a living. Pennsylvania lets you keep up to $300 in equipment, while the federal exemption goes up to about $2,800. It’s meant to cover the basics—what you actually use to keep working.
With wages, the rules change depending on the chapter. In Chapter 7, any money you earn after filing is yours. In Chapter 13, your income funds the plan, but you still manage it under the court’s terms.
What You Can Lose in Chapter 7 Bankruptcy
Chapter 7 erases most debt but can require giving up property that isn’t protected. The trustee only sells assets that have real value after accounting for exemptions.
Things sometimes at risk include:
- A second car you don’t use for work
Costly jewelry or collectibles
Investment property or vacant land
Cash or investments outside retirement accounts
A quick review with a bankruptcy lawyer before filing can help you protect what you need and avoid surprises later.
Asset Protection in Chapter 13 Bankruptcy
Under Chapter 13, nothing gets sold. The value of your non-exempt assets affects what you pay unsecured creditors—but you don’t lose the property itself.
This chapter often fits people who have equity in their home or own items they can’t risk losing under Chapter 7. It also gives time to catch up on missed mortgage or tax payments.
Choosing the Right Exemption System in Pennsylvania
Your choice between federal and state exemptions can shape the entire outcome of your case. Pennsylvania’s state exemptions are more limited and do not include a homestead exemption. The federal exemptions are more generous in areas such as home equity, personal property, and retirement accounts.
No two cases are the same. Someone with a large 401(k) may benefit from federal rules, while another filer may have little to protect beyond household furniture. Once you file and choose a system, the decision cannot be reversed.
Before filing, work with a qualified bankruptcy attorney to evaluate which exemption path offers the strongest protection based on your asset profile.
Final Thoughts
Filing for bankruptcy in Pennsylvania doesn’t erase everything you own. Most people keep their home, car, and everyday property with the right plan.
The key is filing under the right chapter and applying exemptions correctly. A Pennsylvania bankruptcy lawyer can guide you through each step so your assets stay protected and your case stays on track.