The five most important asset exemptions for business owners pursued by MCA funders are:
- property held in tenancy by the entireties with your spouse;
- retirement funds;
- wages in the possession of your employer;
- certain benefit fund deposits in your bank account; and
- a $300 general exemption for whatever assets you want.
You need to claim these exemptions.
This article covers asset exemptions after an MCA judgment is entered against you personally. On fighting the guarantee itself, read Personal Guarantee on MCA Enforceable?
Which state's asset exemptions apply to an MCA judgment?
If you have property in Pennsylvania, Pennsylvania's asset exemptions will apply to that property even if the judgment was entered in another state (e.g. New York). A judgment from another state filed in Pennsylvania has the same effect as a Pennsylvania common pleas judgment and is subject to the same procedures and defenses under 42 Pa.C.S. § 4306.
What are the asset exemptions I can use in Pennsylvania?
| Type of Exemption | Brief Description of Exemption | Limitation of Exemption |
|---|
| Tenancy by the entireties | Real estate or bank/investment accounts held jointly with spouse | Lost if spouse also owes the debt |
| Retirement accounts | 401(k), 403(b), IRA, Roth IRA, or Coverdell account | Contributions in excess of $15,000 in a 1 year period |
| Wages | Wages in the possession of your employer | Lost once wages are deposited into bank account |
| Benefit deposits into bank accounts | If exempt benefits are directly deposited into account | Limited to $10,000 if other funds are in the account |
| General $300 exemption | Can be applied to any property you want, or take as cash | Only $300, not available to entities, only individuals |
1. Tenancy by the entireties (Pennsylvania's version of a "homestead" exemption)
Pennsylvania has no "homestead" exemption outside of bankruptcy, but married individuals have tenancy by the entireties. When property is conveyed to a husband and wife together, each spouse owns the entire property, so a creditor of only one spouse cannot reach it (In re Brannon). A joint bank account qualifies if the spouses treat it as entireties property. However, if your spouse is also a guarantor on the MCA, the funder is a joint creditor and the property is not exempt. If you divorce, the property becomes a tenancy in common, each spouse owning one-half (23 Pa.C.S. § 3507(a)). If your spouse dies first, you become sole owner and your creditors can reach it. Transfers into tenancy by the entireties can be undone as a "voidable transfer" under 12 Pa.C.S. § 5109. See Can a Personal Guarantee on an MCA Be Used against My House? on real estate liens.
2. Retirement accounts
Pennsylvania exempts from execution funds held in a 401(k) plan, a 403(b) plan, an individual retirement account, a Roth individual retirement account, or a Coverdell education savings account, together with any growth on or income from these accounts (42 Pa.C.S. § 8124(b)(1)(ix)). It does not cover contributions of over $15,000 within a one-year period (this limit applies even if you are not in bankruptcy). Nor does it cover contributions within one year of a bankruptcy filing or a "fraudulent conveyance."
A "solo" 401(k) covering only you and your spouse is generally not an "ERISA" plan, so you lose ERISA's benefits (as discussed in Patterson v. Shumate) and rely on the state statute. Try not to "cash out" retirement funds into your checking account.
3. Wages held by your employer
In Pennsylvania, funders may not garnish your wages to collect a judgment on your MCA guaranty. Under 42 Pa.C.S. § 8127, wages, salary, or commissions in the hands of the employer are exempt, but wages in your personal bank account are no longer in the employer's hands. The § 8127 exceptions (child support, divorce, board, residential leases, PHEAA student loans, criminal restitution) include none for commercial debts. If you are paying yourself via draws or distributions, it is unclear whether those payments are considered wages under § 8127.
4. Direct deposits in your bank account
Funders often levy your bank account. If federal benefit payments are directly deposited, 31 C.F.R. § 212.6 requires your bank to protect the lesser of (a) benefits deposited during the two months before the garnishment, or (b) the account balance. In addition, under Pa.R.C.P. 3111.1, if exempt money is deposited electronically on a recurring basis, the first $10,000 in your account is exempt. If every deposit is exempt, the entire account is exempt. Under 42 Pa.C.S. § 8124(c), disability insurance, workers' compensation, and unemployment benefits are exempt.
5. General exemption / no tools of trade exemption
Outside bankruptcy, the only protection for your work truck, laptop, or other tools of your trade is your $300 general exemption under 42 Pa.C.S. § 8123. You can pick property worth $300 or take $300 in cash from the sale. Pennsylvania has no tools of trade or motor vehicle exemptions. Tools titled to your LLC belong to the LLC and cannot be reached without a judgment against the LLC. In bankruptcy, you can use the federal exemptions, whose current amounts took effect on April 1, 2025 and include a $3,175 tools of the trade exemption, a $5,025 motor vehicle exemption, a $31,575 homestead exemption, a $1,675 wildcard exemption, and the ability to use up to $15,800 of any unused homestead exemption.
Do you have to claim these exemptions, or are they automatic?
You must claim these exemptions. You file a claim for exemption with the Sheriff pursuant to Pa.R.C.P. 3123.1 the Sheriff notifies the funder and the garnishee (e.g., your bank), and the Court hears your claim within 5 business days. The Court can enter judgment against the garnishee 20 days after the writ of execution is served on them, unless a claim for exemption is pending. If your guarantee included a waiver of exemptions, ask counsel whether it is valid. The Federal Trade Commission has a rule prohibiting the practice, but only for consumer credit, not an MCA guarantee.
Frequently Asked Questions
If my spouse and I both signed a guarantee for an MCA, can the funder go after our jointly-held property?
Generally, yes. Tenancy by the entireties will not protect you from a joint creditor, either in a collection action or in bankruptcy.
Can I move my money into my IRA or into my spouse's name to avoid the funder going after it?
If the MCA has already gone bad, that is risky. Pennsylvania's retirement exemption excludes contributions over $15,000 in any one-year period and fraudulent conveyances, and its voidable transfer law generally lets transfers be undone for four years.
Can my LLC claim the $300 exemption?
No. The $300 general exemption in 42 Pa.C.S. § 8123 does not apply to a debtor who is not an individual. Only you can claim it.