How to Qualify for Bankruptcy in Pennsylvania
Filing for bankruptcy in Pennsylvania can provide individuals and businesses a fresh financial start. However, qualifying for bankruptcy involves understanding the specific requirements of the state’s laws. Here’s a comprehensive guide on how to qualify for bankruptcy in Pennsylvania.
Types of Bankruptcy Available in Pennsylvania
In Pennsylvania, the two most common types of bankruptcy for individuals are Chapter 7 and Chapter 13. Understanding the differences between these two options is primarily important for determining eligibility.
1. Chapter 7 Bankruptcy
Chapter 7 bankruptcy, often referred to as "liquidation bankruptcy," allows individuals to discharge most unsecured debts such as credit card debts and medical bills. To qualify for Chapter 7, you must pass the means test, which compares your income to the median income for a household of your size in Pennsylvania.
Means Test Calculation
The means test involves two main calculations:
- Your average monthly income over the last six months before filing.
- The set median income for Pennsylvania based on your household size, which is updated periodically.
If your income is below the median, you qualify for Chapter 7 bankruptcy. If it's above, further calculations regarding your allowable expenses will determine your eligibility.
2. Chapter 13 Bankruptcy
Chapter 13 bankruptcy is designed for individuals with a regular income who can repay a portion of their debts through a repayment plan. To qualify, you must meet certain criteria:
- Your secured debts must be less than $1,257,850.
- Your unsecured debts must be less than $419,275.
The amount of your debts is assessed as of your filing date. Additionally, you must demonstrate a stable income stream to propose a feasible repayment plan to the court.
Additional Qualifications
Beyond financial qualifications, you need to ensure that:
- You have not received a bankruptcy discharge in the past eight years for Chapter 7 or within the last two years for Chapter 13.
- You have completed a credit counseling course from an approved provider within 180 days before filing.
Filing for Bankruptcy in Pennsylvania
The procedure of filing for bankruptcy includes filling out a series of detailed forms and providing comprehensive information about your assets, liabilities, income, and expenses. It's advisable to consult with a bankruptcy attorney to avoid mistakes that could delay the process.
Conclusion
Qualifying for bankruptcy in Pennsylvania requires an understanding of both your financial situation and the specific eligibility criteria established by law. Whether you choose Chapter 7 or Chapter 13, being informed can help you navigate this challenging process successfully and achieve financial relief.