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  1. #1

    Default Keeping a Homestead Home in Bankruptcy

    My question involves bankruptcy in the state of: PA

    My sister has lived in PA the last 12 years. She and her husband own a home they live in which is probably valued at $80K She only owes $4K on the home. She owes about $35K in debt. She and her husband are both on Social Security and only get about $1200/mo. If they file for BK, can they keep their house? It's confusing because I read they can keep $42,500 as an exemption. (Federal) Does that mean they will be forced to sell their home and pay back the debt of $41,000? I know it's different for Chapter 13 and 7 but I'm not sure I'm understanding it clearly.

    What happens if only she files for BK under the super exemption. Does that mean creditors can't go against the home because it's in both of their names?

    This is what I read:
    If property is held as a tenancy in the entirety, it is owned as a whole by both married persons and creditors cannot take it to pay the debts of only one owner. For this reason, tenancy by the entirety is often referred to as a “super exemption,” although it is not actually an exemption.

  2. #2
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    Default Re: Keeping a Homestead Home in Bankruptcy

    This is solely the wife's debt and bankruptcy? Is the marital home owned as a tenancy by the entirety?

  3. #3

    Default Re: Keeping a Homestead Home in Bankruptcy

    Yes and yes.

  4. #4
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    Default Re: Keeping a Homestead Home in Bankruptcy

    If in fact the home is owned as a tenancy by the entirety, that should render the entire homestead unreachable by creditors when only one spouse is a debtor.

  5. #5
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    Default Re: Keeping a Homestead Home in Bankruptcy

    Hi Gblvdgirl,

    My first impression is that it does not seem as though they will be required to sell the home. From my understanding, allows for $42,500 in equity to be exempt or shielded from creditors.

    Whether or not they will be required to pay the $35K and remaining mortgage debt is likely going to depend upon which chapter of bankruptcy they choose to file under. If they have money left over after paying their basic living expenses every month, then they may be required to file chapter 13 bankruptcy. If this occurs, the bankruptcy courts will arrange a repayment plan at a reduced rate to pay off the debt.

    If they have no money left over after paying their basic living expenses every month and they qualify under Pennsylvania's means test, they may be able to file chapter 7 bankruptcy and potentially have some of the $35k debt eliminated. The discharge of debt however will likely also depend on what type of debt the $35k is - unsecured vs secured.

    I hope this helps!

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