Bankruptcy is a legal process that allows individuals or businesses to eliminate or restructure their debts. While it may seem like a daunting option, it can provide relief for those struggling with overwhelming debt. It is important to understand the full bankruptcy filing process in Pennsylvania to make informed decisions. In this post, we will provide a step-by-step guide on how to file for bankruptcy in Pennsylvania.
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Types of Bankruptcy
The two most common types of bankruptcy are Chapter 7 and Chapter 13. Chapter 7 bankruptcy is a liquidation bankruptcy that allows individuals to eliminate most unsecured debts, such pay debts such as credit card debt and medical bills. Chapter 13 bankruptcy is a reorganization bankruptcy that allows individuals to restructure their debts into a manageable payment plan. The repayment plan usually lasts for three to five years, and any remaining debts are discharged after the plan is completed.
The main difference between the two types of bankruptcy is the eligibility requirements and the outcome. Chapter 7 bankruptcy has income limits, and individuals must pass a means test to qualify. Chapter 13 bankruptcy does not have income limits, but individuals must have a regular income to make payments under the payment plan. While Chapter 7 bankruptcy provides a quicker resolution, Chapter 13 bankruptcy allows individuals to keep their assets and repay their debts over time.
Eligibility for Bankruptcy
To file for bankruptcy in Pennsylvania, individuals must meet certain requirements. They must complete a debtor education course before filing and pass a means test to determine if they qualify for Chapter 7 bankruptcy. The means test compares the individual’s income to the state’s median income to determine if they have enough disposable income to repay their debts.
There are exceptions to the means test, such as if the individual’s debts are primarily non-consumer debts, such as secured debt such as business debts or taxes or personal property only. If the individual does not qualify for Chapter 7 bankruptcy, they may still be eligible for Chapter 13 bankruptcy.
Steps in Filing for Bankruptcy
The first step in filing for bankruptcy is gathering necessary documents, such as tax returns, bank statements, and pay stubs. Once the documents are gathered, individuals who file bankruptcy and must fill out bankruptcy forms, including the petition, schedules, and statement of financial affairs. It is recommended to hire a bankruptcy attorney to help with the process and ensure all forms are completed accurately.
After the forms are completed, individuals must file a bankruptcy petition with the bankruptcy court. Filing the petition united states bankruptcy court initiates the automatic stay, which stops all collection actions from creditors. Within a few weeks of filing the bankruptcy code, individuals must attend a meeting of creditors, where they will be questioned by the bankruptcy trustee and any creditors who choose to attend.
Bankruptcy Court Proceedings
The bankruptcy court system in Pennsylvania consists of a bankruptcy court, bankruptcy judges, and a bankruptcy trustee. The bankruptcy trustee is responsible for overseeing financial management of the bankruptcy case, liquidating assets in Chapter 7 cases, and administering payment plans in Chapter 13 cases.
Creditors have the right to file a proof of claim to request payment for their debts. If the debts are discharged, the creditors will not be able to collect on them. However, some debts, such as student loans, mortgage payments and taxes, may not be a dischargeable debts.
Once the payment plan is completed in Chapter 13 bankruptcy, any unsecured debt remaining debts are discharged. In Chapter 7 bankruptcy, most unsecured debts are discharged, but some debts, such car payments such as child support and alimony, may not be dischargeable. Individuals may also have the option to reaffirm certain debts, meaning they agree to continue making payments on them.
Life After Bankruptcy
After the bankruptcy process is complete, individuals must work on rebuilding their credit. It may be difficult to obtain credit right away, but there are options, such personal loans such as secured credit cards and credit builder loans. It is important to avoid future financial problems by creating a budget and sticking to it, avoiding high-interest loans, and saving for unexpected expenses.
Financial planning is crucial to avoid falling back into debt. Creating a savings plan and setting financial goals can help individuals stay on track and avoid future financial problems.
Conclusion
Filing for bankruptcy can be a difficult decision, but it can provide relief for those struggling with overwhelming debt. It is important to seek professional help and understand the bankruptcy process in Pennsylvania to make informed decisions. By following the steps outlined in this post, filing bankruptcy, and working on rebuilding credit and financial planning, individuals can start on the path to financial stability.
Frequently Asked Questions
What are the different types of bankruptcy in Pennsylvania?
The two most common types of bankruptcy in Pennsylvania are Chapter 7 and Chapter 13. Chapter 7 is a liquidation bankruptcy, while Chapter 13 is a reorganization bankruptcy.
Can I file for bankruptcy on my own?
Yes, you can file for bankruptcy on your own, or bankruptcy fraud but it is recommended to a bankruptcy lawyer hire an experienced bankruptcy attorney.
What is the bankruptcy means test?
The bankruptcy means test is a calculation used to determine if you are eligible to file for Chapter 7 bankruptcy based on your income, expenses, and family size.
Will bankruptcy stop collection calls and creditor harassment?
Yes, once you file for bankruptcy, an automatic stay goes into effect, a federal law which for consumer bankruptcy and stops all collection calls and creditor harassment.
How long does the bankruptcy process take in Pennsylvania?
The bankruptcy process in Pennsylvania typically takes 3-6 months for Chapter 7 and 3-5 years for Chapter 13.
Can I keep my house and car if I file for bankruptcy?
It depends on the type of bankruptcy you file and the equity you have in your house and car. In Chapter 7, you may need to surrender your mortgage modification car loan and assets, while in Chapter 13, you can keep your assets if you can afford to make payments on them.
Will bankruptcy ruin my credit score?
Yes, bankruptcy will negatively on credit reports and impact your credit score, but it is possible to rebuild your own credit report, over time.
Can I file for bankruptcy if I have student loans?
Student loans are generally not dischargeable in bankruptcy, but filing for bankruptcy may help you manage your other debts and free up income to pay your student loans.
How much does it cost to file for bankruptcy in Pennsylvania?
The filing fee for Chapter 7 bankruptcy is $335, and the filing fee for Chapter 13 bankruptcy is $310. Attorney fees vary.
Will I lose my retirement savings if I file for bankruptcy?
Generally, retirement accounts and savings are protected in bankruptcy, but it is important to consult with an attorney to understand your specific situation.
Glossary
- Bankruptcy: A legal process in which a person or business declares that they cannot pay their debts and seeks relief from some or all of their creditors.
- Chapter 7 Bankruptcy: A type of bankruptcy that allows individuals and businesses to discharge most of their debts and start fresh.
- Chapter 13 Bankruptcy: A type of bankruptcy that allows individuals to reorganize their debts and repay them over a period of three to five years.
- Automatic Stay: A court order that stops creditors from taking any action to collect debts from a debtor once the bankruptcy case has been filed.
- Debtor: A person or entity that owes money to another.
- Creditor: A person or entity that is owed money by another.
- Bankruptcy Trustee: A court-appointed official who oversees the bankruptcy case and administers the debtor’s assets.
- Dischargeable Debt: A debt that can be eliminated or discharged through the bankruptcy process.
- Non-Dischargeable Debt: A debt that cannot be eliminated or discharged through the bankruptcy process.
- Exemptions: Protections that allow a debtor to keep certain assets, such as a home or car, during the bankruptcy process.
- Means Test: A calculation used to determine whether a debtor qualifies for Chapter 7 bankruptcy based on their income and expenses.
- Credit Counseling: A requirement for individuals filing for bankruptcy that involves attending a counseling session with an approved credit counseling agency.
- Reaffirmation Agreement: An agreement between a debtor and a creditor to continue paying a debt that would otherwise be discharged in bankruptcy.
- Bankruptcy Discharge: A court order that eliminates a debtor’s legal obligation to pay certain debts.
- Proof of Claim: A document filed by a creditor in a bankruptcy case that details the amount of money owed to them by the debtor.
- Adversary Proceeding: A lawsuit filed within a bankruptcy case, typically to resolve a dispute between the debtor and a creditor.
- Bankruptcy Petition: The official document that initiates a bankruptcy case.
- Debtor’s Estate: The property and assets owned by a debtor at the time of filing for bankruptcy.
- Meeting of Creditors: A mandatory meeting between the debtor, bankruptcy trustee, and any creditors who wish to attend, typically held within a few weeks of filing for bankruptcy.
- Dismissal: A court order that terminates a bankruptcy case before the debtor receives a discharge of their debts.
