The Basics of Filing for Bankruptcy in Pennsylvania

The Basics of Filing for Bankruptcy in Pennsylvania

Filing for bankruptcy in Pennsylvania can be a complex process, but understanding the basics can help you navigate it more effectively. This guide outlines essential steps and considerations to help individuals and businesses make informed decisions regarding bankruptcy.

Types of Bankruptcy in Pennsylvania

In Pennsylvania, the two most common types of bankruptcy filings for individuals are Chapter 7 and Chapter 13.

Chapter 7 Bankruptcy: This type of bankruptcy is often referred to as "liquidation bankruptcy." It allows individuals to eliminate most of their unsecured debts, such as credit card debts and medical bills, without having to repay. However, certain assets may be sold to pay off creditors. Pennsylvania has specific exemptions that allow you to keep some personal property, including a portion of your home equity.

Chapter 13 Bankruptcy: Chapter 13 is known as "reorganization bankruptcy." It is designed for individuals who have a regular income and wish to repay their debts over a three to five-year period. This plan allows debtors to keep their property while making manageable payments to creditors.

The Bankruptcy Process

Filing for bankruptcy in Pennsylvania involves several steps:

  1. Credit Counseling: You must complete a credit counseling course from an approved provider within 180 days before filing. This step assesses your financial situation and explores alternatives to bankruptcy.
  2. Gather Financial Documents: Collect all necessary documents, including income statements, tax returns, bank statements, and documentation of debts and assets. Accurate documentation is crucial for a smooth filing process.
  3. Filing the Petition: Complete and file the bankruptcy petition and related forms with the local bankruptcy court. In Pennsylvania, this would typically be done in either the Eastern or Western District of the state.
  4. Automatic Stay: Upon filing, an automatic stay is enacted, which halts most collection activities, including foreclosure proceedings and wage garnishments.
  5. 341 Meeting: Attend the Meeting of Creditors, also known as the 341 meeting, where you will answer questions about your financial situation from the bankruptcy trustee and creditors.
  6. Discharge: If filing under Chapter 7, your debts will typically be discharged within a few months after the 341 meeting. Under Chapter 13, debts will be discharged after successful completion of the repayment plan.

Eligibility Requirements

The eligibility requirements for filing bankruptcy in Pennsylvania depend largely on the chapter you choose. For Chapter 7, debtors must pass the means test, which compares your average monthly income to the median income for Pennsylvania. If your income is above the median, you may need to opt for Chapter 13 bankruptcy instead.

Consulting a Bankruptcy Attorney

Given the complexities involved in the bankruptcy process, it is advisable to consult with a qualified bankruptcy attorney in Pennsylvania. An attorney can help assess your situation, guide you through the filing process, and ensure you understand your rights and obligations.

Impact on Credit and Future Financial Decisions

Filing for bankruptcy in Pennsylvania will have a significant impact on your credit score and will remain on your credit report for several years. However, it can provide a fresh start and relieve overwhelming debt. It’s important to take steps post-bankruptcy to rebuild your credit, such as budgeting, making timely payments, and maintaining low debt levels.

Conclusion

Understanding the basics of filing for bankruptcy in Pennsylvania is crucial for making informed financial decisions. Whether you choose Chapter 7 or Chapter 13, being aware of the process, eligibility requirements, and potential impacts can empower you to take control of your financial future.