You don't have to lose all your property when you file bankruptcy in Philadelphia. When you file a personal bankruptcy, there are exemptions in place that can help protect a portion of your personal property, which could include your vehicle.
Bankruptcy Exemptions in Pennsylvania
In the U.S., there are typically two sets of bankruptcy exemptions in each state. Most states require residents to use state bankruptcy exemptions. A handful of states allow you to choose between using state or federal guidelines when you're exempting property.
Pennsylvania is one of the states that allows the choice, but you must use one set or the other for all exemptions – you can't pick and choose for specific items. However, if you choose to use the Pennsylvania state exemptions, you can use them along with the federal nonbankruptcy exemptions.
Because you're allowed the choice, you have to look carefully at both the state and federal exemptions. Once you choose how to file, you won't be allowed to change this.
In PA, you're allowed to exempt personal property including clothing, school books, sewing machines, uniforms, and bibles, as well as wages, pensions, certain public benefits, some insurance, and any federal nonbankruptcy exemption which applies to you. Pennsylvania doesn't have a homestead or motor vehicle exemption, though, so if you plan to keep your car, you need to file using the federal bankruptcy exemptions.
Keeping Your Car with Federal Exemptions
As a resident of Philadelphia, you must use federal exemption rules to keep a vehicle during your Chapter 7 or Chapter 13 bankruptcy. Federal bankruptcy exemption amounts are updated every three years.
There are a number of items you can keep under these rules, including a homestead, personal property, pensions, some public benefits, tools of your trade, alimony, child support, insurance, and a wildcard exemption which can be used for anything of your choice. Under these guidelines, a car is considered personal property, and you're allowed to exempt up to $4,000 of its value.
This means that if you own your vehicle outright, and it's value is $4,000 or less, you can keep it. If your car is valued at more than $4,000 you could still keep it by using both the motor vehicle exemption and the wildcard exemption, which is an additional $1,325.
Additionally, if you have enough unused value remaining from your homestead exemption, you can designate all or part of it to be added to your vehicle exemption.
Keeping an Auto Loan during Bankruptcy
If you have an auto loan, you can typically still keep your car, but you need to make arrangements to continue paying on your loan throughout your bankruptcy. In a Chapter 7 bankruptcy, this means reaffirming your loan.
Reaffirmation allows you to make an agreement with your lender to keep your property. In some cases, reaffirmation agreements may have different terms which are more affordable, such as a lower interest rate, but this varies by lender. Unfortunately, if you reaffirm your loan, it's no longer included in your bankruptcy, so any remaining balance won't be wiped out when your bankruptcy is discharged.
In a Chapter 13 bankruptcy, you don't lose your property, but any loan amount not covered by your exemptions must be repaid through your chapter 13 repayment plan.
Not Able to Exempt Your Vehicle?
If you aren't able to save your vehicle with an exemption in Philly, don't panic. There are lenders available that work with people in unique credit situations, including bankruptcy.
At Auto Credit Express, we're teamed up with a large network of special finance dealerships that have these lenders available. Let us help guide you toward a dealer near you for the auto loan you need.
Fill out our free, zero-obligation auto loan request form, and we'll work to match you with a local dealership. Don't wait any longer, get started right now!