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Bankruptcy doesn't mean you have to lose your home

One of the most persistent concerns expressed by those considering filing either Chapter 7 or Chapter 13 bankruptcy is the potential to lose most, if not all, of their assets. Often, the thing that those who are contemplating filing are most concerned about is their home. After all, a home is not only where you and your family live, it also represents your biggest investment.

The equity in your home is likely where the majority of your income has gone for many years, even decades. For those with mounting bills and debt, the possibility of losing their home may be the biggest hurdle between them and their decision to file.

Is your home value is exempt from bankruptcy proceedings?

Unfortunately, in Chapter 7 proceedings in Pennsylvania, your home equity is not protected. Bankruptcy laws vary from state to state. Because the state of Pennsylvania does not have its own, state-based exemption for homestead properties (meaning a personally owned primary residence) in bankruptcy, those who live in Pennsylvania may struggle to protect their most important asset.

You may qualify for the federal homestead exemption, which can protect a substantial amount of your equity. Speaking with an attorney can help clarify if this will work in your situation.

There may be some relief if only one spouse files

Pennsylvania is one of a handful of states that allows for married couples to own a home as "tenant by the entirety," which protects the homestead property from being sold to repay debts attached to only one spouse. If you and your spouse jointly own your home and the vesting language on your deed includes the language "as tenants by the entirety," there is less reason for concern regarding established equity in the property.

An experienced bankruptcy attorney can review your deed documents and determine if this particular rule applies in your case. As this is a less common form of ownership, chances are good that a different approach will be needed.

An experienced bankruptcy attorney is the best option

Because there is no state-based homestead exemption in Pennsylvania, and because the wild-card exemption, which can be applied to any assets, is only $300, those seeking debt relief via Chapter 7 bankruptcy stand to lose their home equity in the process. This doesn't need to be the case.

You should consult with an attorney, who may be able to guide you through Chapter 13 proceedings as opposed to Chapter 7. While Chapter 13 bankruptcy requires scheduled repayment of your debts, it typically also protects your assets from seizure and sale, including your home. If you are considering bankruptcy in the state of Pennsylvania, consulting an attorney should be your first step.

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