How Much Can I Keep?

One of the most commonly asked questions by people thinking about Chapter 7 is “How much of my ‘stuff’ do I get to keep if I file for bankruptcy?” Considering that Chapter 7 is called a “Liquidation of Assets,” you might be surprised to learn the answer. To figure out how much you get to keep depends, firstly, on Residency and, secondly, on just how much “stuff” you start with (your Assets). The quick answer is YOU PROBABLY GET TO KEEP EVERYTHING…although each of the two determining factors is discussed in detail below and must be applied to your situation individually.

Residency Analysis

Residency, as used here, does not mean the place you live. The term is a legal construct used to determine which exemption laws apply to the debtor (pursuant to the so-called “730-Day Rule”). It is also wholly different from Venue, which is the jurisdiction where your case should be filed (pursuant to the so-called “180-Day Rule”). This might sound a bit confusing, but a look at the two rules should make it easier to understand:

• VENUE (180-day rule): Your case should be filed at the United States Bankruptcy Court located in the district where you have lived the last 180 days or, if you have not lived in the same place for the last 180 days, file in the place where you lived the greatest amount of time over the last 180 days.


• RESIDENCY (730-day rule): To figure out which jurisdiction’s laws are to be used, use the laws of the state where you resided consecutively for the last 730 days, or, if you have not lived in the same place for the last 730 days, use the laws of the state where you resided for the greater percentage of time in the 180 days immediately prior to the last 730 days (i.e., where did you live the most from 731 days ago through 910 days ago?)

Venue is not very narrowly applied, meaning that unless someone objects, your case will be allowed to proceed in the place where you filed it. This suggests that you should loosely apply the 180-day rule and simply file where you live; and if an objection is successful, just be ready to proceed with your case in the venue where the case is transferred to.

Residency, however, is looked at closely. The reason is that the bankruptcy laws were constructed to dissuade people from taking advantage of one state’s liberal asset protection statutes over another state which provides for less property protection. For instance, California is known to have broad asset protections and Oregon is not. The law, therefore, seeks to prevent Oregonians from “moving” to California for a few months so as to use California’s laws and then “’moving” back to Oregon.

Once the 730-day rule is employed and the state whose laws are to be used is determined, an examination of the Exemption Statutes is required. In Pennsylvania, debtors may use the state exemptions or use the federal exemptions (a default list constructed for foreign filers, debtors for whom the 730-day rule is inapplicable, etc.). As it turns out, the federal exemption list is broader than Pennsylvania state exemptions, so most Pennsylvania Chapter 7 filers employ the federal exemptions to protect their property (listed on the petition in Schedule C).

Asset Analysis

While the federal exemptions are broader than the Pennsylvania exemptions, they do not generally exceed national averages for other states’ exemptions. Not surprisingly, debtors generally do not have storehouses of cash, stocks, bonds, or other property with significant equity. As a result, most Pennsylvania Chapter 7 filers are able to exempt everything they own. Again, through application of the federal exemptions for Pennsylvania filers, MOST FILERS KEEP EVERYTHING THEY OWN.

A case where nothing is taken from you is called a “no asset” case. This is because none of your assets will be liquidated by the trustee in the Chapter 7 bankruptcy. If you do have assets in excess of the exemption limits, that property may be taken by the trustee, sold at auction, and the proceeds given to the creditors. Sometimes, however, the trustee may not want the property (if, for instance, the property is too cumbersome to take possession of or may be too difficult to sell).

The Pennsylvania exemptions statutes and the federal exemptions states are adjusted periodically to account for costs of living, inflation, and changing times. While the current values may be found through an online search of state and federal statutes, speaking with a bankruptcy attorney who deals with these issues on a daily basis might be a speedier and more thorough way to see how filing a bankruptcy might do away with your debts while protecting your assets.

As a rule of thumb, assume a Pennsylvania filer will be able to keep all their furniture, all their clothing, 100% of their pension, and ANY other property/equity up to about $20,000 in value, including cash.