Filing for Bankruptcy in Pennsylvania

In most respects, filing for bankruptcy in Pennsylvania isn’t any different than filing in another state. The bankruptcy process falls under federal law in Pennsylvania.

By , Attorney

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Facing financial challenges is a part of life. But if you're one of the millions struggling financially due to a job loss, illness, or another event in Pennsylvania, bankruptcy can help. Here, you'll find an explanation of Chapters 7 and 13, checklists to help you understand the process and stay organized, and Pennsylvania's property exemption laws and filing information.

However, we couldn't squeeze everything into this article, so be sure to check out its companion, What You Need to Know to File for Bankruptcy—you'll find lots more details there.

How Bankruptcy Works in Pennsylvania

In most respects, filing for bankruptcy in Pennsylvania isn't any different than filing in another state. The bankruptcy process falls under federal law, not Pennsylvania state law, and it works by unwinding the contracts between you and your creditors—that's what gives you a fresh start.

But Pennsylvania's laws come into play in a significant way. They determine the property you can keep in your bankruptcy case. You'll also need to know other filing information, which we explain after going over some basics.

Choosing the Right Bankruptcy Chapter For You in Pennsylvania

Most people file either Chapter 7 or Chapter 13. If you don't know the differences between the two, you're not alone. The short explanation below and our handy Chapter 7 versus 13 chart will help clarify things.

Chapter 7 bankruptcy. Chapter 7 is often a bankruptcy filer's first choice for several reasons. It's quick—it only takes a few months to complete. And it's cheap—you don't pay anything to creditors. It works well for those of us whose property consists of the essential items needed to live and work.

However, people with more assets could lose them, especially if they own unnecessary luxury items. For instance, you might have to give up your RV, baseball card collection, or timeshare in the Bahamas—even your house or vehicle if you have too much equity in it or you're behind on the payments. Unlike Chapter 13, Chapter 7 doesn't have a payment plan option for catching up on late mortgage or car payments. So you could lose your home or car if you're behind when you file.

Chapter 13 bankruptcy. By contrast, Chapter 13 filers must pay creditors some or all of what they owe using a three- to five-year repayment plan. But the payment plan allows Chapter 13 to offer benefits not available in Chapter 7. For instance, not only do you keep all of your property, but you can save your home from foreclosure or your car from repossession. If you need time to repay a debt you can't discharge in bankruptcy, you can use this chapter to force a creditor into a payment plan. The biggest downside to this chapter? It can be expensive. Many people can't afford the monthly payment. Learn more about when filing Chapter 13 is better than Chapter 7.

Caution for businesspeople. Be sure to learn about the ins and outs of small business bankruptcies. The principles discussed apply to consumers only.

Will Filing Bankruptcy in Pennsylvania Erase My Debts?

Bankruptcy wipes out many bills, like credit card balances, overdue utility payments, medical bills, personal loans, and more. You can even get rid of a mortgage or car payment if you're willing to give up the house or car that secures the debt. (Putting property up as collateral creates a "secured debt"—if you don't pay what you owe, the lender gets to take the property back.)

But you can't discharge all debts. Nondischargeable debts, like domestic support arrearages and recent tax debt, won't go away in bankruptcy, and student loans aren't easy to wipe out (you'd have to win a separate lawsuit). You'll want to be sure that bankruptcy will discharge (get rid of) enough bills to make it worth your while.

Steps in a Pennsylvania Bankruptcy

We all know that seeing the forest helps us recognize the trees, so it's probably a good time to consider the significant steps you'll take during your bankruptcy journey. Think of this checklist as a roadmap of sorts, but you can also use it to track your progress. The good news? You've already made headway on the first two items!

Bankruptcy Steps Checklist

Keeping Property When Filing Bankruptcy in Pennsylvania

You won't lose everything in bankruptcy. You'll use your state bankruptcy exemption laws to protect your property. We list the significant exemptions below, but first, understanding the following will help you maximize what you'll keep in your case.

  • Exempt and nonexempt property. You can keep property protected by an exemption or "exempt" property. When a bankruptcy exemption doesn't cover the property, you'll either lose it in Chapter 7 or have to pay for it in the Chapter 13 repayment plan.
  • Choosing state or federal exemptions. You can choose whether you use the state exemption list or the list of federal bankruptcy exemptions, but you can't mix and match exemptions from both sets. Filers who use state exemptions can also use the federal nonbankruptcy exemptions.
  • Doubling exemptions. In many instances, spouses filing together can double the exemption amount if both own the property.
  • COVID-19 recovery rebate exemption. You might be able to protect stimulus payments, tax credits, and child credits in bankruptcy with the federal recovery rebate exemption.
  • Retirement accounts all filers can protect. You can keep tax-exempt retirement accounts, including 401(K)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and defined benefit plans and traditional and Roth IRAs to $1,512,350 per person (for cases filed between April 1, 2022, and March 31, 2025). (11 U.S.C. 522(b)(3)(C); (n).) Learn more about retirement accounts in bankruptcy.

Pennsylvania's Bankruptcy Exemption List

Here are some commonly used Pennsylvania bankruptcy exemptions.

Pennsylvania's Homestead Exemption

Pennsylvania doesn't have a homestead exemption, but you might be able to protect your home equity if you and your spouse own it as a tenancy by the entirety. This can be tricky (it might be that only one spouse can file), so be sure to speak with a lawyer first. Otherwise, you can protect a modest amount of home equity if you choose to use the federal bankruptcy exemption scheme. Learn more about protecting your home with a homestead exemption in Pennsylvania.

Pennsylvania's Motor Vehicle Exemption

Pennsylvania doesn't have a dedicated exemption that will protect the equity in your car. You can use the $300 wildcard exemption for that purpose (below). The federal exemptions include a motor vehicle exemption. Find out how the motor vehicle exemption works in a Chapter 7 case.

Pennsylvania's Wildcard Exemption

You can safeguard $300 of personal property or cash. (42 Pa.C.S. § 8123) This isn't much. The federal exemptions offer a more significant wildcard exemption.

Personal and Business Property and Wages

  • Clothing, religious texts, school books, a sewing machine, and uniforms. (§ 42-8124)
  • Wages held by an employer. (§ 42-8127)

Pensions and Retirement Funds

  • City employees. (§§ 42-8124, 53-761, 53-881.115, 53-13431-13446 & 53-23561-23575.2; 53-881.115)
  • State employees. (§§ 42-8124 & 71-5953)
  • County employees. (§ 16-4716)
  • Public school employees. (§§ 24-8533 & 42-8124)
  • Private annuity, pension, or retirement benefits. (§ 42-8124)
  • Police officers. (§§ 42-8124(b)(1)(iii); 53-761; 53-762; 53-763; 53-764; 53-776)
  • Municipal employees. (§§ 42-8124 & 53-881.115)

Other retirement exemptions are available. Learn more about retirement accounts in bankruptcy.

Insurance

$100 per month in insurance or annuity payments and life insurance or annuity proceeds (multiple conditions apply); group insurance policy or proceeds; accident or disability insurance proceeds; no-fault automobile insurance proceeds. (42 Pa.C.S. § 42-8124)

Public Benefits

  • Veterans' benefits. (51 Pa.C.S. §§ 20012, 20048, 20098 & 20127)
  • Workers' compensation and unemployment compensation. (42 Pa.C.S. § 8124)

Additional exemptions exist. Also, some exemptions are subject to conditions and amounts adjust periodically. Also, other exemptions are available. To ensure exempting all property possible, independently verify exemptions on the Pennsylvania General Assembly website or consult with a bankruptcy lawyer.

Preventing Bankruptcy Exemption Problems

Exempt your property carefully. The bankruptcy trustee—the court-appointed official assigned to manage your case—will review the exemptions. A trustee who disagrees with your exemptions will likely try to resolve the issue informally. If unsuccessful, the trustee will file an objection with the bankruptcy court, and the judge will decide whether you can keep the property.

Example. Mason owns a rare, classic car worth $15,000, but the state vehicle exemption doesn't cover it entirely. Believing that the car qualifies as art—at least in his mind—Mason exempts it using his state's unlimited artwork exemption. The trustee disagrees with Mason's characterization and files an objection with the court. The judge will likely decide the vehicle doesn't qualify as art.

Purposefully making inaccurate statements could be considered fraudulent. Bankruptcy fraud is punishable by up to $250,000, 20 years in prison, or both.

Qualifying for Bankruptcy in Pennsylvania

If you've never filed for bankruptcy before, you'll meet the initial requirement. Otherwise, check whether enough time has passed to allow you to file again. The waiting period varies depending on the chapter previously filed and the chapter you plan to file. Learn more about multiple bankruptcy filings.

You'll also need to meet specific chapter qualifications.

You'll qualify for Chapter 7 bankruptcy if your family's gross income is lower than the median income for the same size family in your state. Add all gross income earned during the last six months and multiply it by two. Compare the figure to the income charts on the U.S. Trustee's website (select "Means Testing Information").

Want an easy way to do this online? Use the Quick Median Income Test. If you find that you make too much, you still might qualify after taking the second part of the "means test." If, after subtracting expenses, you don't have enough remaining to pay into a Chapter 13 plan, you'll qualify for Chapter 7.

Qualifying for Chapter 13 can be an expensive proposition because the extra benefits come at a hefty price, and many people can't afford the monthly payment. To qualify, you'll pay the larger of:

Find out more about calculating a Chapter 13 bankruptcy payment.

Hiring a Bankruptcy Lawyer in Pennsylvania

Most people find it worthwhile to get counsel. A bankruptcy attorney will help you:

  • qualify for the chapter of your choice
  • determine when it's time to file
  • help you keep the property you want
  • make sure you don't run afoul of fraud or other issues, and
  • explain when you can stop paying the bills you'll erase in your case.

You can expect creditors to call until you file. It's usually best to ignore them because telling creditors about your bankruptcy can encourage them to take more drastic collection steps before losing the right to collect altogether. However, if you hire counsel and refer creditors to your lawyer, they'll have to stop calling you.

Are you curious whether your case is simple enough to file yourself? Our quiz will help you identify potential complications while educating you about the bankruptcy process. You'll find it here: Do I Need a Lawyer to File for Bankruptcy?

Filing Your Bankruptcy in Pennsylvania

Now that you've decided to file, the fun begins! Well, not really. The first step—gathering your financial information—can be a bit of a chore. But using our bankruptcy document checklist should help you organize the things you (or your attorney) will need.

Bankruptcy Document Checklist

Bankruptcy Forms, Means Test Multipliers, and Course Providers

After assembling the documents, your next step will be to prepare the paperwork. Here's what you'll need and where to find it.

  • Bankruptcy forms. You'll find free downloadable bankruptcy forms on the U.S. Courts website.
  • Means test multipliers. Go to the U.S. Trustee website to get the figures needed to complete the means test.
  • Education providers. The U.S. Trustee website also lists providers under "Credit Counseling & Debtor Education." Scroll down until you get to your district. And don't give up—it's a long list. (Individuals must complete credit counseling during the 180 days before filing for bankruptcy and a debt management course after filing the bankruptcy case.)

Pennsylvania Bankruptcy Court Website and Locations

Your case starts when you file your paperwork with the local bankruptcy court and either pay the filing fee or request a fee waiver. Pennsylvania has three bankruptcy districts—the Eastern, Middle, and Western Districts—each with several locations serving the surrounding areas.

You'll find the court's address, phone number, and hours of operation on its webpage, as well as local forms and instructions for people filing without an attorney. (Click on the court's name to go to the homepage.)

Eastern District of Pennsylvania

Middle District of Pennsylvania

Western District of Pennsylvania

Division locations: Philadelphia and Reading

Division locations: Wilkes-Barre, Harrisburg, and Williamsport

Division locations: Pittsburgh, Johnstown, and Erie

After Filing for Bankruptcy in Pennsylvania

Your creditors will stop bothering you soon after you file. It takes a few days because the court mails your creditors notice of the "automatic stay" order that prevents most creditors from continuing to ask you to pay them. Here's what will happen next:

  • You'll turn over financial documents proving the statements in your bankruptcy paperwork.
  • You'll attend the 341 meeting of creditors—the one appearance all filers must attend.
  • You'll complete a debtor education course and file the completion certificate.

These things all must happen before you get a Chapter 7 bankruptcy discharge. Chapter 13 filers will also attend a repayment plan confirmation hearing and complete the three- to five-year payment plan.

Need More Bankruptcy Help?

Did you know Nolo has been making the law easy for over fifty years? It's true—and we want to make sure you find what you need. Below you'll find more articles explaining how bankruptcy works. And don't forget that our bankruptcy homepage is the best place to start if you have other questions!

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Helpful Bankruptcy Sites

Department of Justice U.S. Trustee Program

United States Courts Bankruptcy Forms

We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.

Updated April 18, 2022

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