An Exemption is your right under the Bankruptcy Code to keep your property or equity in your property, up to certain values in specific categories of property. You can use either the Federal exemptions in the Bankruptcy Code or State exemptions created under state law when we file your bankruptcy petition. Exempt property has dollar limits in the Bankruptcy Code or under state law. You will usually use the federal exemptions, especially if you need to protect mostly personal property. However, depending upon what property you need to protect from creditors, there are situations where it is better for you to use the Pennsylvania state exemptions. We will analyze your property and guide you choosing the correct exemptions for your situation.
Equity in your home or other real property is the value of your ownership interest after subtracting the value of any lien created by a written mortgage recorded against your home or other real property in Recorder of Deeds office in the county where the real estate is located. The mortgage is said to “secure” (insure) the repayment of a written promise to pay a debt known as a Note. A Mortgage secures a loan used to buy the real estate known as Purchase Money Mortgages as well as Home Equity Loans and Home Equity Lines of Credit. Loans can also be secured by real estate that is not your home. A mortgage can also be given to an individual secure the repayment of a personal or business debt. The real property described in the mortgage is called Secured Property. The owner of the mortgage (“mortgagee”) is known as the “secured party” outside bankruptcy and the “secured creditor” in bankruptcy.
Equity in items of personal property is the value of your interest after subtracting the value of any lien created by a written Financing Agreement or Financing Statement recorded against your personal property with PennDOT or the Pennsylvania of State to secure the repayment of a written promise to pay a debt known as a Note or Loan Agreement. Common examples of such loans include but are not limited to car, truck, boat, trailer, camper, RV, airplane, equipment, tools, or machinery loans. The personal property named in the Financing Agreement or Financing Statement is also called “secured property”. The owner of the Financing Agreement of Financing Statement is known as the “secured party” outside bankruptcy and the “secured creditor” in bankruptcy.
A lien is the legal right of a secured creditor to sell or take and sell secured property to satisfy the outstanding debt if the loan is “in default” (usually overdue) according to the terms of the note or loan agreement plus costs described in the note or loan agreement incurred in selling the property. A lien survives bankruptcy, so you have to pay it to keep the property. This is most commonly done with a Chapter 13 filing, which allows you to pay off arrearages owed to secured creditors over a time period not to exceed five years.
Outside of bankruptcy, any money left over after the secured party sells your property is supposed to go to you. However, the note or loan agreement always gives the lender the right to sue you for the difference between the proceeds from selling your property and the outstanding balance on the overdue loan. As a practical matter, the lender always adds on enough fees and/or the sale price of the property is so much less than what you paid for it that you almost always owe the lender more money after the sale. Filing a Chapter 13 and successfully completing it prevents this from happening as explained in our Chapter 13 page.
Completely exempt property is an item of property which has a fair market value of less than or the same as the dollar value as the exemption that applies to it and there is no lien at all attached to the property. Partially exempt property is an item of property that is worth more than the dollar limit of the exemption that applies to it, or has a lien attached to it. Non-exempt property is an item of property for which you claim no exemption on your bankruptcy petition, or it’s fair market is more than the value of the lien attached to it.
Most liens survive bankruptcy. If you want to keep the property, you have to pay the creditor the mount of the lien in a Chapter 7 or pay off the value of the lien over time in a Chapter 13. Start on your path to freedom from debt stress today. Call bankruptcy lawyer Robert G. Williamson or for a consultation. We will respond as soon as possible and discuss with you or email to you instructions for what to bring with you to your first meeting with us.