Bankruptcy Laws in PA
The bankruptcy laws in PA are a little more stringent than in other states, particularly regarding exemptions. In Chapter 7 bankruptcy, non-exempt property is sold to pay off debt. The exemptions in Pennsylvania are $300.00 for property of any kind (there is no homestead exemption in PA), clothing, books, sewing machines, wages and veterans’ benefits. However, Pennsylvania does give you the option of following the federal exemption guidelines.
The good news is Pennsylvania is not a community property state. As such the bankruptcy laws in PA free a spouse from involvement in the bankruptcy of a spouse who is filing, unless they have co-signed a loan or have joint accounts.
Before filing Chapter 7, the debtor must pass a means test for eligibility. The first step in a means test is to compare your income with the median income in your state for a family of your size. The bankruptcy laws in PA list the median income rates as follows: $46,515.00 for single income, $54,767.00 for two members, $68,586.00 for a family of three and $79,102.00 for a family of four. This is the most current information posted as of May 2012. There is more involved in the means test but this should help you determine right off the bat whether or not you qualify for Chapter 7 bankruptcy.
If you do not qualify for Chapter 7 according to the bankruptcy laws in PA, Chapter 13 may be an option. This allows you to keep all of your property. The courts will determine what you can afford to pay to your creditors, after figuring your monthly living expenses. You will then have three or five years to pay the debts interest free. You will make one monthly payment to the court appointed trustee who will in turn distribute the agreed amount to each of your creditors. Filing Chapter 13 bankruptcy may actually reduce the amount you owe. If at the end of the repayment period, there is still a balance due, it is forgiven and the debtor is no longer liable. The creditors, as part of the bankruptcy order cannot come after you for the balance. The reasoning is some payment is better than no payment.
As in any legal matter, it is advisable you consult with an attorney before making a decision.