Protecting Assets in Pennsylvania Before Bankruptcy

Filing for bankruptcy doesn’t mean giving up all your belongings. Pennsylvania law and the federal bankruptcy code include protections that let you safeguard certain assets from creditors. Our Pennsylvania banking attorneys at Mette Law can help you retain the property that matters most while still obtaining the debt relief you need.

Convert Non-Exempt Assets

In some situations, you can legally convert non-exempt assets into exempt ones before filing. For example, using non-exempt cash savings to pay down your mortgage or contribute to a protected retirement account can shift the value into a category the bankruptcy trustee cannot touch, though timing and intent matter significantly.

Asset Protection Trusts

Placing certain assets into an irrevocable trust before financial trouble arises can remove them from your personal estate and put them beyond the reach of creditors. However, these trusts must be established well in advance of any bankruptcy filing to hold up under scrutiny:

• The trust must be irrevocable once created
• You must give up direct control over the transferred assets
• Transfers made too close to filing may be challenged as fraudulent
• A qualified attorney should draft the trust to meet all legal requirements

Tenancy by the Entirety

If you are married and own property jointly with your spouse as tenants by the entirety, that property may receive additional protection when only one spouse files for bankruptcy. Pennsylvania recognizes this form of ownership, and creditors holding debts owed by just one spouse generally cannot reach assets held under this designation.

Utilize Federal Exemptions

Because Pennsylvania does not offer its own bankruptcy exemptions, filers must rely on the federal exemptions. These exemptions determine which assets you can protect from liquidation during your case:

• Homestead: You can exempt a set amount of equity in your primary residence, which is adjusted periodically for inflation and currently protects tens of thousands of dollars in home value.
• Motor Vehicle: A specific dollar amount of equity in one vehicle is protected, allowing you to keep reliable transportation while going through the bankruptcy process.
• Retirement Funds: Most tax-exempt retirement accounts, including 401(k) plans, IRAs, and pensions, are fully protected from creditors under federal law.
• Public Benefits: Social Security payments, unemployment compensation, veterans’ benefits, and public assistance funds are exempt and cannot be seized.
• Household Goods and Personal Property: Furniture, clothing, appliances, and other everyday items are protected up to a specified per-item and aggregate value.

Avoid Fraudulent Transfers

While it is perfectly legal to plan, transferring assets to friends or family members with the intent to hide them from creditors is not. The bankruptcy trustee has the authority to reverse any transfer made within a certain lookback period if it appears designed to defraud creditors, and doing so can jeopardize your entire case or result in a denial of your discharge.

Consult a Pennsylvania Bankruptcy Lawyer

Protecting your assets before filing requires careful planning and a clear understanding of what the law allows. A Pennsylvania bankruptcy lawyer will assess your financial situation, identify every available exemption, and build a strategy that safeguards your property while putting you on the path to a fresh start. Call Mette Law today at 717-232-5000 or contact us online to schedule a consultation.