Bankruptcy in Pennsylvania
Although friends and family often offer referrals for divorce, real estate, and estate planning attorneys, many keep the fact that they’ve filed bankruptcy private so it is sometimes hard to find a bankruptcy attorney that’s a good fit. In this article, we’ll show you how Pennsylvania bankruptcy law differs from the laws other states; discuss whether you should file Chapter 7 or Chapter 13 bankruptcy; how to find and select a bankruptcy lawyer; and how to prepare to work with a bankruptcy attorney.
How Pennsylvania Bankruptcy Law Differs from the Laws of Other States
Federal law dictates the bankruptcy proceedings procedure so it’s the same in every state. However, property rights in the form of bankruptcy exemptions are created by both federal and state law. This means that there is variance among the states.
In Pennsylvania, bankruptcy filers can choose between the federal and state exemptions, with the federal exemptions being much more generous. Because of generous federal exemptions, most people filing bankruptcy don’t lose any of there assets (unless they want to be relieved of the associated payments.)
- Pennsylvania bankruptcy exemptions offer no homestead protection; however, a married person, who owns his or her residence as tenants by the entireties with a spouse and who is filing bankruptcy as an individual, may be able to protect the house under tenancy by the entireties laws.
- Some personal property, books, clothes, insurances, wages, and the like are protected.
- Other property, such as stocks and bonds, up to $300 is protected.
The Pennsylvania exemptions are enough to scare anyone. On the other hand, federal exemptions (LINK TO PAGE WITH FEDERAL EXEMPTIONS) are much more generous and likely a better fit. It is a rare case the bankruptcy filers lose their assets.
Your Choices in Filing Bankruptcy in Pennsylvania: Chapter 7 or Chapter 13
When an individual or married couple files for bankruptcy protection, there is a choice between filing for Chapter 7 or Chapter 13 bankruptcy. The numbers, “7” and “13” refer to chapters (i.e. sections) of the U.S. Bankruptcy Code.
Both offer a discharge, an end to creditor harassment, and a fresh start. However, the path to the bankruptcy discharge is very different.
- Chapter 7 is known as a “liquidation” bankruptcy because, in theory, the filer’s assets are sold (i.e. liquidated) to pay off creditors and almost all “non-secured” debts are discharged. It takes about 6 months for a Chapter 7 bankruptcy to be discharged.
- Chapter 13 is known as a “reorganization” bankruptcy because debts are renegotiated and reorganized (with some being discharged). Debts are repaid over a three to five year period; it is only at the end of this period that the bankruptcy is discharged.
Generally, you must qualify to file for a Chapter 7 bankruptcy by way of a “means test.” This means that your income must be below the Pennsylvania state median income. But don’t get discouraged if you don’t immediately qualify. There is more than one path to filing Chapter 7. Get good legal advice before you disqualify yourself.
How to Find and Select a Bankruptcy Attorney
The best way to find an attorney is to get a personal referral, but as we mentioned above, that can prove difficult (or uncomfortable for you). As an alternative, look for an attorney who focuses his or her legal practice on bankruptcy. Most bankruptcy attorneys will offer a free, no obligation consultation or phone interview so you can determine whether that attorney is a good fit for you.
How to Prepare to Work with a Bankruptcy Attorney
Your bankruptcy lawyer will only be able to successfully guide you through your bankruptcy proceeding if he or she has all of your financial information including assets, income, debts, and any repayments you’ve already made. You will be asked to fill out lengthy forms; these are all necessary. Don’t hold anything back. If in doubt, disclose the information.
Where to Get Help Filing Bankruptcy
Bankruptcy is not a path to walk alone. Any mistake could cause your bankruptcy filings to be refused and cost you thousands or tens of thousands of dollars. Consult with a qualified Pennsylvania bankruptcy attorney to determine how to protect your assets; whether bankruptcy is right for you; and, if so, which chapter of bankruptcy you qualify for.