The Basics of Filing Bankruptcy in Pennsylvania
In Pennsylvania there are two available types of bankruptcy. The first is Chapter 7 bankruptcy, also referred to as “liquidation”. The liquidation form of bankruptcy sells non-protected assets in order to satisfy debts. Once all of the assets are sold off then the remaining debts are wiped clean on discharge. Because debts are wiped away entirely, Chapter 7 is often preferred by individuals – despite the requirements of a ‘means test’.
If the means test cannot be met, Pennsylvanians are also eligible for Chapter 13 bankruptcy. Chapter 13 is considered a reorganization rather than a liquidation. Chapter 13 will organize debts into a payment to be paid back over a set duration of time. Despite having to pay back debts, Chapter 13 offers much greater protection for property. Therefore, many individuals with assets will chose to use Chapter 13 rather than liquidation. Under Chapter 13 those whose average monthly income falls below Pennsylvania’s median generally have 36 month, or less, payment plans. If you are able to prove good cause you may be able to extend the period to 60 months which is generally the maximum. If you earn more than or equal to the median, then a 60 month repayment plan is quite likely.
Another concern for Pennsylvanians is where they should go to file there bankruptcy. The answer to that question is dependent upon where you live. You should consult an experienced bankruptcy attorney on where you need to file, but we can give a few general guidelines. For individuals filing bankruptcy, Pennsylvania is separated into three districts. The first is the Eastern district including the Philadelphia and Reading areas. The second is the Middle District including the Williamsport, Harrisburg, and Wilkes-Barre areas. Finally, the Western district covers the Pittsburgh, Johnstown, and Erie areas.
Pennsylvania, Federal bankruptcy exemptions
The last concern is to look at the specific bankruptcy exemptions Pennsylvania offers. It is imperative to understand that you may choose only Pennsylvania’s OR the Federal exemptions. You cannot mix and match your selections. Unlike the Federal exemptions, Pennsylvania does not offer a homestead exemption in bankruptcy, but a marital home cannot be seized due to one spouse’s debt. Also unlike the Federal exemptions, Pennsylvania offers no motor vehicle exemption. However, Pennsylvania does offer an exemption for earned but unpaid wages where the Federal Government does not. Therefore, it is important that you consult a lawyer so that you select the set of exemptions that is most favorable for your particular financial circumstances.
If you would like to speak to a bankruptcy attorney
If you are thinking about filing bankruptcy in Pennsylvania or New Jersey, I invite you to contact the experienced consumer bankruptcy team at Maselli Warren. Our attorneys have helped thousands of individuals navigate the process of selecting whether, where, and how to file. Contact us today for a free, initial consultation.