Filing for Bankruptcy in Pennsylvania

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, filing for bankruptcy can provide relief. Here, you will find an explanation of Chapters 7 and 13, checklists to help you understand the process and stay organized, and information on Pennsylvania's property exemption laws and filing.

How Does Bankruptcy Work in Pennsylvania?

In most respects, filing for bankruptcy in Pennsylvania isn't different from filing in another state. The bankruptcy process falls under federal law, not Pennsylvania state law, and 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 significantly because they determine the property you can keep in your bankruptcy case. You'll also need to know other filing information, which we explain after reviewing some basics.

How Do I Choose the Right Chapter?

Most people file for either Chapter 7 or Chapter 13, and you're not alone if you don't know how the two differ. The brief explanation below will help clarify things.

Filing for Chapter 7

Chapter 7 is often a bankruptcy filer's first choice because it's quick, taking only a few months to complete, and it's cheap—you don't pay anything to creditors. Chapter 7 bankruptcy is well-suited for individuals who own primarily the essential items needed for living and working, and not much else.

People with more assets could lose them in Chapter 7 because the Chapter 7 trustee, the official responsible for the case, sells unnecessary luxury items and distributes the proceeds to creditors. For instance, you might have to give up your RV, baseball card collection, or timeshare in the Bahamas, as well as your house or vehicle, if you have more equity than you can keep.

Additionally, unlike Chapter 13, Chapter 7 doesn't offer 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 on the loan when you file.

Filing for Chapter 13

Chapter 13 involves repaying creditors some or all of what's owed using a three- to five-year repayment plan. Chapter 13 filers retain all their assets, and the payment plan offers strategies to address challenging financial situations.

For instance, you can catch up on late payments and save your home from foreclosure or your car from repossession. Also, if you need time to repay a debt you can't eliminate or "discharge" in bankruptcy, you can use Chapter 13 to force a creditor into a payment plan and repay your balance over time. Learn more about when filing for Chapter 13 is better than Chapter 7.

While Chapter 13 helps many save their homes, one of the biggest downsides of this chapter is that it can be expensive. Many people can't afford the monthly payment. Also, businesses can't file a Chapter 13 case. If you're a business owner, it's a good idea to learn about the ins and outs of small business bankruptcies before choosing the right bankruptcy for you.

Will Filing for Bankruptcy Erase My Debts?

Bankruptcy wipes out many types of bills, including credit card balances, overdue utility payments, medical bills, personal loans, and more. You can even eliminate a mortgage or car payment if you're willing to surrender 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 will recover the property.)

But you can't discharge all debts. You'll want to be sure that bankruptcy will discharge (get rid of) enough bills to make it worthwhile. For instance, nondischargeable debts, such as domestic support arrearages and recent tax debts, aren't eliminated in bankruptcy.

Additionally, student loans are challenging to discharge because one must file and win a separate lawsuit in court. However, in 2023, steps were taken to ease the student loan discharge process, and a new student loan bankruptcy form was introduced. Learn more about student loans in bankruptcy.

How Do I Qualify for Chapter 7 or Chapter 13 Bankruptcy?

You won't be surprised to learn that qualifying for bankruptcy involves meeting several requirements. Because you're only entitled to a discharge every few years, if you've filed before, you'll want to check whether enough time has passed to allow you to file again. The bankruptcy waiting period varies depending on the chapter previously filed and the chapter you plan to file.

You'll also need to meet specific chapter requirements. Here are the qualification basics for Chapters 7 and 13.

Chapter 7 Bankruptcy 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. Here's how to determine whether you meet this test: 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").

If you'd prefer an easier way to calculate this, take the Quick Median Income Test. But don't count out Chapter 7 if you don't pass this first step. If you make too much, you still might qualify after taking the second part of the "means test," which allows you to deduct some monthly expenses from your income. If, after subtracting expenses, you don't have enough remaining to pay into a Chapter 13 plan, you'll qualify for Chapter 7.

Chapter 13 Bankruptcy Qualifications

Qualifying for Chapter 13 can be costly because the additional benefits come with a hefty price, and many can't afford the monthly payment. To qualify, you'll pay the larger of your priority nondischargeable debt, the value of nonexempt property, or your disposable income. Find out more about calculating a Chapter 13 bankruptcy payment.

How Do I Keep Property in Pennsylvania Using Bankruptcy Exemptions?

You won't lose everything in bankruptcy. You'll use bankruptcy exemption laws to protect your property. We list the significant exemptions below, but first, understanding the following will help you maximize what you can 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 federal nonbankruptcy exemptions.
• Doubling exemptions. In many instances, spouses filing together can double the exemption amount if both own the property.
• Retirement accounts that all filers can protect. Federal law allows all filers to 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 $1,711,975 per person (for cases filed between April 1, 2025, and March 31, 2028). (11 U.S.C. 522(b)(3)(C); (n); current amounts can be found in the Federal Register.) Learn more about retirement accounts in bankruptcy.

What Are the Bankruptcy Exemptions?

Caution: State exemptions are not updated in real-time and should not be relied upon without verification through independent research or by consulting a local bankruptcy attorney. Some state exemption amounts could be higher, and your state may have added new exemptions or deleted old ones.

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 because only one spouse can file, and home equity isn't protected in all cases, so be sure to speak with a lawyer first. Otherwise, you can protect a modest amount of home equity using the federal bankruptcy exemption scheme.

Learn more about ways to protect home equity in Pennsylvania.

Pennsylvania's Motor Vehicle Exemption

A motor vehicle exemption helps you keep a vehicle in bankruptcy. Pennsylvania doesn't have a dedicated exemption to protect your car's equity, but you can use Pennsylvania's $300 wildcard exemption or the federal exemptions (they include a motor vehicle exemption).

Pennsylvania's Wildcard Exemption

You can safeguard $300 of personal property or cash. (42 Pa.C.S. § 8123)

When Can I Use Bankruptcy Exemptions?

You can file for bankruptcy in Pennsylvania after living there for over 180 days. However, you must live in Pennsylvania for at least 730 days before filing. Otherwise, you'd use the previous state's exemptions.

If you lived in multiple states during the two years before filing for bankruptcy, you'd use the exemptions of the state you lived in for most of the 180 days before the two years immediately preceding your filing. (11 U.S.C. § 522(b)(3)(A).)

Also, to claim the total value of the homestead exemption, you must have purchased and owned the property for at least 1,215 days before the bankruptcy filing. If you can't meet this requirement, your homestead exemption is limited by federal law to $214,000 for cases filed between April 1, 2025, and March 31, 2028.

Learn more about filing for bankruptcy after moving to a new state.

How Do I Prevent Bankruptcy Exemption Problems?

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

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

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 administrator disagrees with Mason's characterization and files an objection with the court. The judge is likely to decide that the vehicle doesn't qualify as art.

What Steps Are Involved in Bankruptcy?

We all know that seeing the forest helps us recognize the trees. Similarly, understanding the significant steps you'll take during your bankruptcy journey will help you better comprehend the bankruptcy process. Think of this checklist as a roadmap, but you can also use it to track your progress.

Bankruptcy Steps Checklist

Should I Hire a Bankruptcy Lawyer?

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 creditors who call because telling creditors about your bankruptcy can encourage them to take more drastic collection steps before they lose the right to collect altogether. However, if you hire counsel and refer creditors to your lawyer, they'll have to stop calling you.

What Do I Need to File for Bankruptcy?

Once you decide to file, the fun begins! Well, not really. You'll start by gathering your financial information, and it can be a bit of a chore. But our bankruptcy document checklist should help you organize what you or your attorney will need.

Taking the time to make copies of needed financial documents before meeting with a lawyer can help you avoid unexpected strategy changes down the road. Bankruptcy attorneys greatly appreciate clients who bring these items to the initial consultation, because it gives them a clear picture of your case. Otherwise, their initial evaluation will be based solely on the information you remember or believe is relevant, and the lawyer's assessment will likely change after reviewing the documents, often dramatically.

Bankruptcy Document Checklist

How Do I File for Bankruptcy Without a Lawyer?

You'll complete the steps listed above in "What Steps Are Involved in Bankruptcy?" However, not everyone should file their own bankruptcy case. The ideal candidate is a Chapter 7 debtor who meets the qualification requirements, can eliminate all debts, and can safeguard all property through bankruptcy exemptions. Individuals filing complex cases for Chapter 13 or Chapter 7 should seek representation.

Where Do I Find the Pennsylvania Bankruptcy Court Website and Locations?

Your case starts when you file your paperwork with the local bankruptcy court. Pennsylvania has three bankruptcy districts, the Eastern, Middle, and Western Districts, each with several locations serving the surrounding areas.

The court's address, phone number, and hours of operation are on the court's webpage, as well as local forms and instructions for people filing without an attorney. Click on the links below to go to the homepage.

What Happens After Filing for Bankruptcy?

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 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 made the law accessible for over fifty years? It's true, and we wholeheartedly encourage research and learning. You can find many more helpful bankruptcy articles on Nolo's bankruptcy homepage. Information needed to complete the official downloadable bankruptcy forms can be found on the Department of Justice U.S. Trustee Program website.

However, online articles and resources can't address all bankruptcy issues and aren't written with the facts of your particular case in mind. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.