Chester Bankruptcy - State vs. Federal Exemptions

A Chester County debtor is allowed to take either state or federal bankruptcy exemptions pursuant to 522(b)(1).  Pennsylvania is a minority state in that it has not opted-out of the federal bankruptcy exemptions.  Most of the time, Pennsylvania exemption laws are terrible (meaning, you can't exempt much) and it is normally advised by a Chester County bankruptcy lawyer to elect for the federal bankruptcy exemptions. For your notes, the PA exemption law is 42 Pa.C.S.A. Sections 8123-8127 (I'm sure you won't be looking those up).  

If a Chester County individual or family wishes to proceed under the state exemptions of Pennsylvania, an "interest that the debtor holds in property with a spouse as entireties property is exempt to the extent that such entireties property is exempt from process under PA law.  So, "entireties property" is "immune" from process when only one spouse is liable for the debt.  

Breakdown of the Law

What this means is:  If you own a home with your wife, and all the debt is in your name, the home is completely exempt.  This is normally the course where a home has too much equity beyond the bankruptcy exemptions.  This can also be the case for real or personal property.  The value can be through the roof and it does not matter.  

But, the rules are important:  1)  All the property must be in the entireties and 2)  All the debt must be individual.

So, if you meet this case, you must make sure that the non-filing spouse has no debt (or very little).  

There is a couple issues with this plan and we will cover it in Part 3.