Filing Bankruptcy in Pennsylvania
If you live in Pennsylvania and you are unable to pay your bills or if you are facing home foreclosure, you may be eligible to file either Chapter 7 Bankruptcy and discharge most of your qualifying unsecured debt or Chapter 13 Bankruptcy and create a reorganization plan to repay your debts over a three to five year period.
Filing Bankruptcy in Pennsylvania can stop wage garnishments, home foreclosure, property repossessions and harassing creditor calls.
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Filing Chapter 7 Bankruptcy in Pennsylvania
Bankruptcy law changes have made it more difficult to file Chapter 7 Bankruptcy in Pennsylvania. Federal bankruptcy laws were tightened in 2005 to force more individuals to repay their debt by filing Chapter 13 Bankruptcy.
How do you know if you are eligible to file a Chapter 7 Bankruptcy in Pennsylvania? To file a Pennsylvania Chapter 7 Bankruptcy your median income must be below the average income compared to other families of similar size in the state of Pennsylvania. If your median income is below other families, you may be able to file Chapter 7 Bankruptcy. If you income is above other families in the state of Pennsylvania, additional "means testing" will have to be done.
Median income for the state of Pennsylvania is provided by the United States Trustees. In the state of Pennsylvania, beginning March 15, 2011, the median income level for a single wage earner was $44,555. For a two person family it was $53,763 and for a family of three it was $67,757. For a family of four it was $77,867.
If your income is not below the median income for your state, additional means testing must be done. Means testing can be complicated and confusing. There are several calculators available online to perform the means test or you can contact a Pennsylvania bankruptcy lawyer for help. In general, when your income is over the median income for Pennsylvania (for a household of similar size), the next step is to perform the "Means Test" to find out if you can file Chapter 7 Bankruptcy in Pennsylvania.
The first step in the means test is to determine your disposable income or the income you have left over after paying your "allowable" month expenses. In general, the "means testing" will analyze your monthly income over the last six months and subtract priority debt (taxes owed, mortgage payments, school tuition- up to a threshold limit). If, after the expenses are subtracted, you would be able to pay $100 per month to your unsecured creditors or $6,000 within the next 5 years, you may have to file a Pennsylvania Chapter 13 Bankruptcy.
If you cannot pay $6,000 but have enough disposable income to contribute 25% to your unsecured debt over the next 5 years, you may also have to file Chapter 13 Bankruptcy in Pennsylvania. If you are unable to do this, you may be allowed to file Chapter 7 Bankruptcy.
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Filing Chapter 13 Bankruptcy in Pennsylvania
Given the updated federal bankruptcy laws, many debtors now must file Chapter 13 Bankruptcy. Although filing Chapter 13 Bankruptcy in Pennsylvania does not immediately discharge debt, there are some distinct advantages, for instance, you may be able to retain your property.
Individuals, including the self-employed or those operating an unincorporated business, may file Chapter 13 Bankruptcy in Pennsylvania. To file a Pennsylvania Chapter 13 Bankruptcy the individual must have unsecured debt which is less than $360,475 and secured debt which is less than $1,081,400 (11 U.S.C. § 109(e)). Filing Chapter 13 Bankruptcy in Pennsylvania will allow you to create a 3 to 5 year debt repayment schedule. If you complete the requirements of the Chapter 13 Bankruptcy repayment plan, your debts will be discharged.
State and Federal bankruptcy laws will determine what assets are considered part of the bankruptcy estate and which are "exempt". Exempt property is determined at the Federal level under Federal Bankruptcy law, but many states have developed their own State Exemption Lists.
Depending on your state, you may have the option to use either the state exemption list or the federal exemption list. If you are filing a Pennsylvania bankruptcy you may choose the Pennsylvania bankruptcy exemptions or the federal exemptions.
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Discharging debt by filing a Pennsylvania Bankruptcy
Filing bankruptcy in Pennsylvania will not discharge all debts. Debts not discharged must be paid. Debts not discharged in a Chapter 13 Pennsylvania bankruptcy may be included in your debt repayment plan. Secured debts, including your house and your car, must be paid if you want to keep the property. Debts not discharged by filing bankruptcy in Pennsylvania include:
- Child support and alimony or spousal support payments
- Debts for personal injuries caused by driving while intoxicated by drugs or alcohol
- Student loans (exceptions may be made if you can prove that there would be an undue hardship if it was repaid)
- Fines or penalties for any criminal offenses, including traffic fines
- Income tax debts (from the past 3 years) and all other tax obligations
- Debts omitted from the bankruptcy documents
Debts not discharged by filing a Pennsylvania Chapter 7 Bankruptcy case (if the creditor challenges the discharge)
- Debts incurred from larceny, breach of trust or embezzlement
- Debts from the malicious or willful injury of another person or their property
- Credit purchases of $1,150 or more for luxury goods or services within 60 days of filing Chapter 7 Bankruptcy in Pennsylvania
- Debts incurred from fraud
- Debts owed from a divorce decree or settlement (may be discharged if the court determines the benefit you would receive by the discharge outweighs the detriment to your ex-spouse)
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Hiring a Pennsylvania Bankruptcy Lawyer
Will you need a Pennsylvania bankruptcy lawyer to help with your bankruptcy? Most debtors need help determining if they are eligible to file Chapter 7 or Chapter 13 Bankruptcy in Pennsylvania.
For simple Chapter 7 Bankruptcies where the debtor has no assets, it may be possible to complete the process on your own, but bankruptcy laws can be complicated and having a Pennsylvania bankruptcy attorney working for you can improve the process.
Filing a Pennsylvania bankruptcy is a serious financial decision with long-term consequences. Bankruptcy attorneys in Pennsylvania can review your financial information and make sure it is the right solution.
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Means Test - as defined in our Bankruptcy Glossary
Pennsylvania capital considers bankruptcy as California city seeks to emerge - continued from Part 1: Cash-starved cities increasingly look to dangerous, rarely used Chapter 9
The great 'Chapter 8' debate: Should states be allowed to declare bankruptcy? - continued from Part 2: Pennsylvania capital considers bankruptcy as California city seeks to emerge
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