Bankruptcy exemptions in Philadelphia & South Jersey: what you keep when you file
TL;DR
Bankruptcy exemptions under 11 U.S.C. § 522 protect specific categories of property from the bankruptcy estate. Pennsylvania and New Jersey filers can choose between the federal exemption scheme under § 522(d) and their state’s scheme. For most consumer filers, the federal scheme is the better fit because it carries a meaningful homestead and a flexible wildcard.
Bankruptcy exemptions decide what property you keep when you file a Chapter 7 or Chapter 13 case. Federal law under 11 U.S.C. § 522 lists categories of property the bankruptcy estate cannot touch. Pennsylvania and New Jersey filers can pick between the federal exemptions and the state’s own scheme. Pennsylvania and New Jersey both have weak state schemes (no homestead in either), so most consumer filers in Philadelphia & South Jersey use the federal exemptions.
Here is how the exemption rules work, what each scheme protects, and how to figure out whether your home, car, and retirement accounts are safe before you file.
How bankruptcy exemptions work
When you file bankruptcy, everything you own becomes property of the bankruptcy estate under 11 U.S.C. § 541. Exemptions under § 522 carve specific property out of the estate and return it to you. In a Chapter 7 bankruptcy, exempt property is yours to keep; the trustee can sell only non-exempt property. In a Chapter 13, you keep all property, but the plan has to pay general unsecured creditors at least what they would have received in a Chapter 7 liquidation. That floor is set by the value of your non-exempt property.
Section 522(b)(2) gives each filer a choice between the federal exemptions in § 522(d) and the exemption scheme of the filer’s state of residence. Pennsylvania and New Jersey both permit the choice. Most consumer filers in either state pick the federal scheme because Pennsylvania and New Jersey have no state homestead exemption and very limited personal property exemptions.
Married joint debtor spouses can each claim a full set of exemptions, which roughly doubles every category for households filing together. The federal categories that benefit most from that doubling are the homestead, motor vehicle, household goods cap, and wildcard.
Federal vs. Pennsylvania vs. New Jersey exemptions at a glance
| Category | Federal § 522(d) | Pennsylvania state | New Jersey state |
|---|---|---|---|
| Homestead (home equity) | $31,575 per debtor | None | None |
| Motor vehicle | $5,025 | None state-specific | None state-specific |
| Household goods | $16,850 aggregate, $800 per item | $300 personal property (42 Pa.C.S. § 8123) plus bibles, schoolbooks, sewing machines | personal property (N.J.S.A. 2A:17-19) |
| Jewelry | $2,125 | Counts toward $300 personal property | Counts toward $1,000 personal property |
| Wildcard | $1,675 base, up to $17,462 with unused homestead spillover | None | None |
| Tools of trade | $3,175 | Limited (tools of trade by category, not dollar amount) | Limited |
| Retirement (ERISA-qualified) | Unlimited under § 522(d)(12) | Generally protected (42 Pa.C.S. § 8124(b)) | Generally protected |
| IRA / Roth IRA | $1,711,975 aggregate cap under § 522(n) | Generally protected | Generally protected |
| Life insurance unmatured cash value | Limited under § 522(d)(8) | Protected (42 Pa.C.S. § 8124(c)) | Protected (N.J.S.A. 17B:24-6) |
| Public benefits (Social Security, unemployment, disability) | Protected under § 522(d)(10) | Protected under federal law | Protected under federal law |
You pick one scheme or the other. You cannot mix federal and state exemptions in the same case. Married joint debtor spouses have to pick the same scheme.
Why most Pennsylvania and New Jersey filers pick the federal scheme
Pennsylvania and New Jersey are both “no homestead” states. Neither one has a state-law homestead exemption for residential real estate. A filer who picks the Pennsylvania or New Jersey scheme protects zero dollars of home equity through the state’s residential exemption. The federal scheme under § 522(d)(1) gives every individual debtor a meaningful homestead, doubled for joint filers, which is usually the most important number in a consumer case.
The federal scheme also offers a wildcard exemption under § 522(d)(5) that the filer can apply to any property. The wildcard combines a base amount with up to the unused portion of the homestead exemption. For a filer who does not own a home (or whose home has no equity), the wildcard can shelter a meaningful amount of cash, vehicle equity above the motor vehicle cap, or other property that does not fit a specific category.
Will I lose my house in bankruptcy?
For most filers in Philadelphia & South Jersey, the answer is no. The federal § 522(d)(1) homestead exemption protects $31,575 of home equity per debtor (and double that for a married joint filing). If the home’s equity sits below the homestead exemption, the trustee cannot sell the home in Chapter 7. If the equity is above the homestead, you can still keep the home in Chapter 13 by paying the non-exempt portion to unsecured creditors over the three- to five-year plan term.
Equity is the market value of the home minus the mortgage balance minus reasonable costs of sale. Our equity calculator gives a rough picture of where you sit before the consult.
If you are behind on the mortgage and facing foreclosure, Chapter 13 has a tool Chapter 7 does not: the plan can cure the arrears and reinstate the mortgage. Foreclosure defense walks through that path in detail.
Will I lose my car in bankruptcy?
Usually no. The federal § 522(d)(2) motor vehicle exemption protects $5,025 of vehicle equity per debtor (doubled for joint filers). The relevant number is equity (market value minus loan balance), not the value of the car itself. A filer with a $20,000 car and an $18,000 loan balance has $2,000 of equity, which fits easily within the federal exemption. A filer with a paid-off car worth more than the motor vehicle exemption can often cover the excess with the wildcard exemption under § 522(d)(5).
If you finance the car and want to keep it, both chapters give you the tools. In Chapter 7, you can sign a reaffirmation agreement that keeps you on the loan in exchange for keeping the car. In Chapter 13, the plan can cure missed car payments or, in some cases, reduce the secured portion of the loan to the value of the collateral under § 506(a) (with a carve-out for 910-day car loans on principal-residence-purpose vehicles).
What happens to my retirement account?
Section 522(d)(12) protects ERISA-qualified retirement plans (401(k), 403(b), pension plans) without an aggregate cap. The bankruptcy estate cannot reach them. That protection is one of the strongest in the Code, which is why we tell clients with retirement savings not to drain them to pay creditors before considering bankruptcy.
Section 522(n) caps Traditional and Roth IRA protection at an aggregate amount, currently $1,711,975. Most consumer filers fall well below that cap, but high-balance IRAs can fall partially outside it. Inherited IRAs sit under a different rule and may not qualify as exempt under § 522(d)(12); a high-balance inherited IRA deserves a focused conversation before filing.
What happens to non-exempt property
In Chapter 7, the trustee can sell non-exempt property and distribute the proceeds to creditors after paying the trustee’s commission and the costs of sale. In practice, the trustee usually does not pursue items that would cost more to sell than they would return. Most consumer Chapter 7 cases close as “no asset” cases, meaning the trustee finds nothing worth selling and unsecured creditors receive nothing.
In Chapter 13, you keep all property regardless of whether it is exempt. The trade-off is that your plan has to pay unsecured creditors the value of non-exempt property over the plan term. A homeowner with significant non-exempt equity often files Chapter 13 instead of Chapter 7 for exactly this reason.
A note on Philadelphia & South Jersey practice
The federal exemption scheme is identical across districts because it comes from federal law. What varies is how each district’s trustees scrutinize exemption claims. Some Chapter 7 trustees in the Eastern District of Pennsylvania and the District of New Jersey are aggressive about valuing personal property and challenging vehicle exemptions; others run a lighter audit. The exemption math should be tight regardless, because an objection to an exemption can change what you keep. Working with a lawyer who has handled cases through the same trustee panels matters more in close-call exemption cases than in any other part of the bankruptcy process.
Talk to a bankruptcy lawyer who serves Philadelphia & South Jersey
The Law Office of Mike Assad helps individuals across Philadelphia and South Jersey file Chapter 7 and Chapter 13 cases and protect the property the federal exemptions allow. Mike is admitted in both Pennsylvania and New Jersey and has handled consumer bankruptcy matters in the U.S. Bankruptcy Court for the Eastern District of Pennsylvania and the District of New Jersey.
What working with the firm looks like:
- A free, confidential consultation with no obligation, and a straight read on what the federal exemptions will let you keep.
- Flat-fee pricing where the case structure allows, with payment plans available. A $999 Chapter 7 program for qualifying filers.
- Fully virtual meetings by phone or Zoom, so you never have to come to an office.
- The same lawyer on your case from the first call through discharge, and a live person on the phone when you call.
Call (609) 808-3300 or book your free consultation online. The firm has offices in Cherry Hill, New Jersey and Philadelphia, Pennsylvania. If it would help, you can share your debt picture before the call so the consultation starts from the facts.
Frequently asked questions
Usually yes. Both Pennsylvania and New Jersey have no state homestead exemption, but federal exemptions under § 522(d)(1) protect a meaningful amount of home equity per debtor and double that for joint filers. If your equity exceeds the homestead, Chapter 13 lets you keep the home by paying the non-exempt value to unsecured creditors over the plan term.
No. Section 522(b)(2) requires you to pick one scheme or the other. Joint debtor spouses have to pick the same scheme.
No. Pennsylvania has no state-law homestead exemption for residential real estate. Filers in Pennsylvania who want a homestead protection use the federal exemption under § 522(d)(1), which Pennsylvania law permits.
No. New Jersey has no state-law homestead exemption either. New Jersey filers who want homestead protection use the federal exemption under § 522(d)(1).
Section 522(d)(12) protects 401(k) and other ERISA-qualified retirement plans without an aggregate dollar cap. Section 522(n) caps Traditional and Roth IRA protection, but most consumer filers fall well below it. High-balance IRAs and inherited IRAs deserve a focused conversation before filing.
Section 104(b) of the Bankruptcy Code requires the federal exemption dollar amounts to adjust every three years to reflect changes in the Consumer Price Index. The Federal Register publishes each adjustment.
Mike Assad
Founding attorney, admitted in Pennsylvania and New Jersey. Mike has guided individuals and businesses through bankruptcy across Pennsylvania and New Jersey.