How Do Wildcard Exemptions Work in Pennsylvania Bankruptcy?

When you file for bankruptcy, there are many areas of money you have that might be taken and put toward your outstanding debts to clear away as much as possible.  This can leave you with less than you might hope in remaining assets, but the wildcard exemption is often a big help for Pennsylvania bankruptcy petitioners to keep some money aside.

“Exemptions” are areas of money and property that are blocked from being liquidated to cover your debts.  Exemptions exist for different areas of property you need to keep, like your house, your car, and the tools you use for work.  The wildcard exemption is a catch-all that allows you to put it towards any other property, cash, or accounts you want to protect from liquidation.  Pennsylvania’s exemption is only $300, but if you use the list of federal exemptions instead, you can protect up to $17,475 in some cases, or at least $1,675.

For help with a bankruptcy case, call Young, Marr, Mallis & Associates’ Pennsylvania bankruptcy lawyers at (215) 701-6519 today.

How Do Exemptions Work in a Pennsylvania Bankruptcy Case?

In a Chapter 7 bankruptcy case, the bankruptcy court will go over what assets, property, money, and accounts you have, then take as much of it as the law allows to put it toward your debts.  Once everything available is taken and put toward the payment, the rest of the debt is wiped away.

The understanding here is that you have so much debt that you could never pay it off with your current income, and so much of it has to just be cleared away.

Exemptions lay down the rules about what property is protected from liquidation.  This tries to leave you with the things you need to continue getting by, as well as many things that it would be rude to strip away from someone going through hard financial times.

What Type of Bankruptcy Do Exemptions Apply To?

These exemptions we are discussing here apply to Chapter 7 bankruptcy.

Petitioners typically get two options for bankruptcy:

• Chapter 7 is “liquidation bankruptcy,” which seizes available assets and sells them to put the proceeds toward the outstanding debts. Anything left over after liquidating as much as can be liquidated gets cleared away.
• Chapter 13 is “reorganization bankruptcy,” which allows debtors to reorganize their debts into one payment and pay it off over time.

To file under Chapter 7, you usually need to have a low income level through a means test.  If your income and assets are low enough to qualify, the debts can be wiped away after putting a lot of your property toward them, but there is no expectation you will lose everything you have.  The exemptions are there to ensure you still have property and some money to fall back on after the bankruptcy is completed.

Under Chapter 13, your assets are not liquidated.  Instead, you rely on having enough income to pay down your debts, and you follow your repayment plan to wipe away your debts.  Nothing needs to be sold off or seized, so there is no need for exemptions.

List of Exemptions Available

Under the federal list of exemptions found in 11 U.S.C. § 522(d), you can protect certain amounts for the following things:

1. Your home
2. One car
3. The furniture in your home, along with everyday household items like clothes, books, appliances, pets, etc.
4. Personal or family jewelry
5. Other property (this is the wildcard exemption)
6. Professional “tools of the trade”
7. Life insurance you hold
8. Life insurance held for you
9. Health aids
10. Social security and other public benefits
11. Awards from certain cases (e.g., crime victim awards, wrongful death awards, life insurance payments)
12. Certain retirement funds.

That fifth exemption for “other property” is what we call the “wildcard exemption.”

Under Pennsylvania law, the exemptions are a bit different.  For example, we have no homestead exemption for your primary residence.  However, petitioners are allowed to choose which set of exemptions to use.  That means our Pennsylvania bankruptcy lawyers can advise you on your choice and let you know if there is any reason you should choose the Pennsylvania list instead of the federal list.

How Much is the Wildcard Exemption in Pennsylvania?

As mentioned, we have both a Pennsylvania exemption and a federal exemption.  The Pennsylvania wildcard exemption is only $300, and there are other exemptions missing (e.g., a homestead exemption for your house).  Because of this, most petitioners will probably use the federal exemption instead.

How Much is the Federal Wildcard Exemption for Bankruptcy?

The exemptions are updated periodically and published in the Federal Register.  As of the writing of this article, the current wildcard exemption is set at $1,675.

Note that the way the wildcard exemption is worded in § 522(d)(5), there is additional money that can be set aside through this exemption as well.  If you do not take the home exemption under § 522(d)(1) – which is $31,575 – then you can put up to $15,800 of that toward your wildcard exemption, too.

That’s great if you don’t own a house in the first place: you can put the full $15,800 plus $1,675 toward your wildcard exemption for a total wildcard exemption of $17,475.

What Does the Wildcard Exemption Cover for a Pennsylvania Bankruptcy Case?

The wildcard exemption is essentially a catch-all exemption, allowing you to protect anything that isn’t protected under the other categories.  This can include any property or possessions that aren’t even listed in other categories.

This makes the wildcard exemption primarily used for the following:

• Cash
• Checking and savings accounts
• Stock portfolios and investment accounts
• Other accounts that aren’t covered
• Collectible items
• Other personal items not protected by other exemptions.

You can also use it to save property that goes over the limit in other categories.  For example, the automobile exception under (d)(2) protects up to $5,025 in value for your car.  If your car is worth $10,000, you couldn’t save the whole car under the automobile exception.  Instead, you can put the full automobile exception plus $4,975 of your wildcard exemption toward your car to keep it from liquidation.

Call Our Pennsylvania Bankruptcy Lawyers for Help Today

Call Young, Marr, Mallis & Associates’ Pennsylvania bankruptcy lawyers at (215) 701-6519 for a free case review.