Filing for bankruptcy in Pennsylvania falls under federal law. But you'll need to understand Pennsylvania state exemption laws, too. This article provides instructions for filing for bankruptcy in Pennsylvania.
Table of Contents
- How Does Bankruptcy Work in Pennsylvania?
- How Do I Choose the Right Bankruptcy Chapter in Pennsylvania?
- Will Filing Bankruptcy in Pennsylvania Erase My Debts?
- How Do I Qualify for Chapter 7 or 13 Bankruptcy in Pennsylvania?
- How Do I Keep Property in Pennsylvania Using Bankruptcy Exemptions?
- What Are the Bankruptcy Exemptions in Pennsylvania?
- When Can I Use Bankruptcy Exemptions in Pennsylvania?
- How Do I Prevent Bankruptcy Exemption Problems in Pennsylvania?
- Should I Hire a Bankruptcy Lawyer in Pennsylvania?
- How Do I File for Bankruptcy in Pennsylvania Without a Lawyer?
- How Much Does It Cost to File for Bankruptcy in Pennsylvania?
- What Steps Are Involved in a Pennsylvania Bankruptcy?
- What Do I Need to File for Bankruptcy in Pennsylvania?
- Where Do I Find the Pennsylvania Bankruptcy Court Website and Locations?
- What Happens After Filing for Bankruptcy in Pennsylvania?
- Need More Bankruptcy Info?
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.
Because we couldn't include everything in one article, you'll want to check out its companion, What You Need to Know to File for Bankruptcy. You'll find lots more details there.
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 Bankruptcy Chapter in Pennsylvania?
Most people file either Chapter 7 or Chapter 13, and you're not alone if you don't know how the two differ. The short explanation below and our handy Chapter 7 versus 13 chart will help clarify things.
Filing for Chapter 7 in Pennsylvania
Chapter 7 is often a bankruptcy filer's first choice for several reasons. It's quick, taking only a few months to complete. And it's cheap. You don't pay anything to creditors.
Chapter 7 bankruptcy works well for people who own mainly the essential items needed to live and work 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, even your house or vehicle if you have more equity than you can keep.
Also, unlike Chapter 13, Chapter 7 has no 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 in Pennsylvania
Chapter 13 involves repaying creditors some or all of what's owed using a three- to five-year repayment plan. Chapter 13 filers keep everything they own, and the payment plan provides ways to improve sticky 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.
The biggest downside to this chapter? 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 bankruptcy right for you.
Will Filing for 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 recovers 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, like domestic support arrearages and recent tax debt, won't go away in bankruptcy. Also, student loans aren't easy to wipe out because you'd have to win a separate lawsuit (however, in 2023, steps have been taken to ease the student loan discharge process with a new student loan bankruptcy form).
Learn more about student loans in bankruptcy.
How Do I Qualify for Chapter 7 or Chapter 13 Bankruptcy in Pennsylvania?
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 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 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. 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 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.
Chapter 13 Bankruptcy Qualifications
Qualifying for Chapter 13 can be expensive 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:
- 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'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 federal nonbankruptcy exemptions.
- Doubling exemptions. In many instances, spouses filing together can double the exemption amount if both own the property.
- Retirement accounts 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, 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.
What Are the Bankruptcy Exemptions in Pennsylvania?
Pennsylvania's state exemptions don't provide the level of protection commonly offered in most other states. The federal bankruptcy exemptions could help you keep more equity in your home, car, and other property.
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)
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 might exist. Also, some exemptions are subject to conditions and amounts adjust periodically. To ensure you exempt all property possible, independently verify exemptions on the Pennsylvania General Assembly website or consult a bankruptcy lawyer. Legalconsumer.com also updates exemption amounts regularly.
When Can I Use Pennsylvania 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).)
Learn more about filing for bankruptcy after moving to a new state.
How Do I Prevent 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.
Should I Hire 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.
How Do I File for Bankruptcy in Pennsylvania Without a Lawyer?
You'll complete the steps listed below in "What Steps Are Involved in a Pennsylvania Bankruptcy?" But not everyone should file their own bankruptcy case.
The best candidate is a Chapter 7 debtor who meets qualification requirements, can eliminate all debts, and can protect all property with bankruptcy exemptions. People filing for Chapter 13 or Chapter 7 filers with complicated cases should seek representation.
Are you curious whether your case is simple enough to file yourself? Our quiz will help you identify potential complications while educating you about bankruptcy. You'll find it here: Do I Need a Lawyer to File for Bankruptcy?
How Much Does It Cost to File for Bankruptcy in Pennsylvania?
All filers pay a $338 filing fee in Chapter 7 unless the court grants a fee waiver and a $313 filing fee in Chapter 13 (amounts current as of August 2023). You'll also pay approximately $50 to $75 for credit counseling and debt management courses.
If you hire a bankruptcy lawyer to represent you, you can expect to pay from $1,500 to $2,500 upfront for most Chapter 7 cases, although the price will depend on the going rates in your area and case complexity. Chapter 13 legal fees run about $1,000 to $1,500 more, but you can pay them in installments through the Chapter 13 payment plan.
Learn about your options if you can't afford to hire a bankruptcy attorney.
What Steps Are Involved in a Pennsylvania 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 understand the bankruptcy process. Think of this checklist as a roadmap, but you can also use it to track your progress.
Bankruptcy Steps Checklist
What Do I Need to File for Bankruptcy in Pennsylvania?
Once you decide to file, the fun begins! Well, not really. You'll start by gathering your financial information, which can take time. But our bankruptcy document checklist should help you organize what you or your attorney will need.
Bankruptcy Document Checklist
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.
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Division locations: Philadelphia and Reading |
Division locations: Wilkes-Barre, Harrisburg, and Williamsport |
Division locations: Pittsburgh, Johnstown, and Erie |
What Happens 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 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 easy for over fifty years? It's true—and we want to ensure 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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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 August 23, 2023
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