Understanding Bankruptcy Discharge in Pennsylvania
Bankruptcy discharge is a critical concept for individuals considering declaring bankruptcy in Pennsylvania. When a debtor files for bankruptcy, one of the ultimate goals is to have certain debts discharged, meaning they are no longer legally required to pay them. Understanding how bankruptcy discharge works in Pennsylvania can significantly impact financial recovery.
In Pennsylvania, bankruptcy is primarily governed by federal law, specifically the U.S. Bankruptcy Code. There are two common types of bankruptcy for individuals: Chapter 7 and Chapter 13. Each type has different implications for debt discharge.
Chapter 7 Bankruptcy Discharge
Chapter 7 bankruptcy is often referred to as "liquidation" bankruptcy. It allows for the discharge of most unsecured debts, such as credit card debt, medical bills, and personal loans. However, specific debts are typically non-dischargeable, including certain taxes, student loans, and child support obligations.
In Pennsylvania, the process involves the debtor filing a petition with the bankruptcy court. Once a bankruptcy case is filed, an automatic stay goes into effect, halting most collection actions against the debtor. After a thorough review of the debtor's financial situation, the court will issue a discharge order, releasing the debtor from liability for the eligible debts. This process generally takes about four to six months.
Chapter 13 Bankruptcy Discharge
Chapter 13 bankruptcy is designed for individuals with a regular income who wish to reorganize and pay off their debts over a three- to five-year repayment plan. In this case, the discharge does not occur until the debtor has completed the payment plan. Once the plan is fulfilled, the court can discharge any remaining eligible debts, similar to Chapter 7 bankruptcy.
One of the significant advantages of Chapter 13 is the ability to catch up on missed mortgage payments, potentially allowing the debtor to keep their home. However, like Chapter 7, not all debts can be discharged under Chapter 13, so understanding which debts are eligible is vital.
Eligibility for Bankruptcy Discharge
To qualify for bankruptcy discharge under either chapter, the debtor must meet specific eligibility criteria. For Chapter 7, this includes passing a means test that evaluates income and expenses to determine whether the debtor's income is below the state's median income level. Chapter 13 requires the debtor to have a regular income sufficient to support a feasible payment plan.
Consequences of Bankruptcy Discharge
Receiving a bankruptcy discharge can provide significant relief, but it comes with long-term consequences. A bankruptcy will remain on the debtor’s credit report for up to ten years, affecting creditworthiness. Nevertheless, many individuals find that they can rebuild their credit over time with responsible financial behavior after discharge.
Consulting a Bankruptcy Attorney
Because bankruptcy law can be complex, seeking advice from a qualified bankruptcy attorney in Pennsylvania is highly recommended. An attorney can help navigate the process, ensure accurate filings, and provide guidance on achieving a successful discharge.
In summary, understanding bankruptcy discharge in Pennsylvania is essential for those seeking relief from overwhelming debt. By familiarizing oneself with the types of bankruptcy available, their eligibility requirements, and the consequences, individuals can make informed decisions on their path to financial recovery.