Chapter 7 Bankruptcy in Pennsylvania: 3 Things You Need to Know

You may have experienced a financial hardship and are considering filing bankruptcy in Pennsylvania, specifically Chapter 7 bankruptcy.

There are 3 important things to consider when pursuing Chapter 7 bankruptcy in Pennsylvania:

1. Do you qualify for a Chapter 7 bankruptcy and how much does it cost to file bankruptcy in Pennsylvania?
2. What are the alternatives to Chapter 7 bankruptcy?
3. What is specific need-to-know Chapter 7 bankruptcy information for Pennsylvania?

Chapter 7 bankruptcy is the most common bankruptcy in the United States (Source).

Let’s get started to understand why Chapter 7 is a popular choice in Pennsylvania.

1) How Chapter 7 Bankruptcy Works in Pennsylvania

Many people we speak with care about two things:

1. How fast they can get relief from their debt burden.
2. How much is costs to get out of their debt burden?

When comparing debt-relief options, Chapter 7 bankruptcy often wins in both categories over alternatives such a Chapter 13 bankruptcy, debt negotiation, and debt management. Let’s explore those variables in greater detail.

How Fast Do You Get Relief in A Chapter 7 Bankruptcy in Pennsylvania

You can often get a Chapter 7 bankruptcy discharge in as little as 120 days in Pennsylvania. That is the typical time it takes to complete a no-asset Chapter 7 case in Pennsylvania. No-asset generally means that you do not own a home or other assets that may be above the Pennsylvania bankruptcy exemptions.

How Much Does It Cost To File Chapter 7 bankruptcy in Pennsylvania

The Chapter 7 bankruptcy cost nationwide tends to be between $500 and $3000. That said, Chapter 7 bankruptcy cost in Pennsylvania is different.

The Chapter 7 bankruptcy cost may even be different if you are filing in Allentown vs. Pittsburgh. For example, you may pay a Chapter 7 bankruptcy attorney fee of $995 in Allentown, but pay a bankruptcy attorney fee of $1,000 in Philadelphia.

Also, there are instances where the cost to file bankruptcy can be reduced based on a filing fee waiver. You should consider seeing the information related to Pennsylvania filing fee waiver.

So, How Do I Qualify For Chapter 7 Bankruptcy in Pennsylvania?

Chapter 7 bankruptcies are intended for people who cannot afford to pay any portion of their debts. However, you must first pass an income evaluation to qualify for a bankruptcy discharge (forgiveness of debt) in Chapter 7.

If you pass the Pennsylvania bankruptcy means test (which you can estimate below), you can erase most unsecured debts through Chapter 7. Unsecured debts discharged in Chapter 7 include medical bills, personal loans, some old income tax debt, old utility bills, credit card debts, and most personal judgments. Unsecured creditors hold debts that are not secured by collateral.

What about secured debts in Chapter 7?

If, however, you want to get rid of secured debts, like car loans and mortgages in Chapter 7, you need to surrender the asset to the creditor. The creditor must accept the asset as full payment of the amount owed.

Let’s go into how you qualify for Chapter 7 bankruptcy.

IMPORTANT: Chapter 7 Qualification via Pennsylvania Means Test

An important element in filing for bankruptcy relief is the means test. The means test is a bankruptcy form that calculates your average monthly and annual income. The test compares your income against the median income of other households in Pennsylvania.

If your average annual income or median income is below the Pennsylvania median income, you may qualify for a bankruptcy discharge under Chapter 7. You can estimate whether you qualify for a Chapter 7 bankruptcy using the free Pennsylvania Chapter 7 Bankruptcy Means Test Calculator below.

Help! My Income Exceeded The Chapter 7 Means Test Allowable in Pennsylvania

If your median income is above the state median income, you may need to look at part 2 of the means test or at an alternative.

The Means Test is a two-part test, so it is not a simple pass-fail test. If you “fail” the first section, you can “pass” the second section and still qualify under Chapter 7.

The Pennsylvania above-median bankruptcy means test calculator below uses both forms to help you determine allowable expenses to estimate Chapter 7 qualification.

Chapter 7 Bankruptcy Pennsylvania Income Limits

The Pennsylvania median income figures for the Means Test are adjusted periodically, based on IRS and Census Bureau data. Pennsylvania median income for bankruptcy cases filed on or after November 1, 2024 is:

For Pennsylvania households with more than 9 members, add $9,000 for each additional family member. You should always double-check the US Trustees website for the most current figures when calculating the Means Test.

Will I lose my belongings if I file Chapter 7 bankruptcy? Understand Pennsylvania bankruptcy exemptions

Bankruptcy exemptions protect the equity in your property in a bankruptcy case. Likewise, property not protected by bankruptcy exemptions may be sold in a Chapter 7 liquidation case. Note also that for Chapter 13 cases, non-exempt equity in the property can increase the bankruptcy plan payment.

The most important asset most people like to protect is their home. See the Pennsylvania bankruptcy homestead exemption below.

The homestead exemption is often broken down by age and whether you are married.

• Single and under 65: $0
• Single is 65 or older: $0
• Married and under 65: $0
• Married is 65 or older: $0

Pennsylvania specific homestead bankruptcy exemption text: “Property held as tenancy by the entirety may be exempt against debts owed by only one spouse.” (Source)

It is important to review additional Pennsylvania bankruptcy exemptions and choose those exemptions that best protect your assets.

The federal bankruptcy exemptions are detailed in 11 U.S. Code §522. The National Consumer Law Center maintains a list of federal bankruptcy exemptions on its website. Pennsylvania is a state that allows you to use federal bankruptcy exemptions

Always check that you use the most current information available when analyzing bankruptcy exemptions.

Chapter 7 Bankruptcy Pennsylvania Pros and Cons

Pros

1. Often the least expensive debt relief options
2. Receive discharge in about 120 days
3. Potentially keep your home and belongings
4. Stop debt collection lawsuits
5. No more deficiency
6. It can relieve an unaffordable unsecured debt

Cons

1. Income requirements for qualification
2. Potentially lose your home and other belongings when above the exemption
3. Negative credit report impact for 10 years
4. Negative credit score impact (in some situations)
5. Non-dischargeable debt
6. Difficult to prevent foreclosure

2) Alternatives to Chapter 7 Bankruptcy in Pennsylvania

Let’s cover the Chapter 7 bankruptcy alternatives in Pennsylvania in case you do not qualify for Chapter 7 bankruptcy, have too many assets, or do not wish to pursue Chapter 7 bankruptcy.

a) Chapter 13 Bankruptcy in Pennsylvania

For those who make above the income limit for Chapter 7, debt relief can still come through a filing a Chapter 13 bankruptcy. A Chapter 13 Bankruptcy in Pennsylvania case allows you to restructure your debts into an affordable monthly plan. By restructuring debts, many people can afford to keep their homes and vehicles under Chapter 13.

Chapter 13 stops foreclosures in Pennsylvania, repossessions, and potentially stops Pennsylvania wage garnishments. Chapter 13 bankruptcy also allows you to pay back mortgage payments, past-due car payments, and tax debt over three to five years through a bankruptcy plan. In addition, Pennsylvania may also allow you to reduce unpaid child support and alimony. However, you must resume your normal domestic support payments to remain in Chapter 13.

In a Chapter 13 plan, some debtors (the person filing the bankruptcy case) can lower their car loan payments and erase second mortgages, if they meet certain requirements.

Can you afford Chapter 13 bankruptcy?

Let’s say you do not qualify for a Pennsylvania Chapter 7 bankruptcy and are wondering whether you should pursue a Chapter 13 bankruptcy. Can you afford it? It may be odd to ask whether you can afford bankruptcy, but it’s an important question to ask.

To understand whether you can potentially afford a Chapter 13 bankruptcy, you may want to take the Chapter 13 calculator below to estimate whether you can afford the monthly payment.

b) Debt Relief

Pennsylvania debt relief can be less expensive than Debt Management because the debt management company is negotiating a lower amount on your total debt.

c) Pennsylvania Debt Management

Debt settlement companies negotiate lower amounts. Debt management companies negotiate lower interest rates. This is the key distinction. Often these programs last 3 or 5 years. This option is often more expensive than debt settlement and some creditors such as personal loan lenders may not work with the debt management company. There may be debt management credit score implications as well.

Who may debt management in Pennsylvania best for? Debt management may be best for those that have all high-interest credit card debt, and a reduction from 22-30% interest rate to a 10% interest rate would continue to make the debt affordable.

3) Specific Pennsylvania Chapter 7 Bankruptcy Information:

Let’s say you went through the 2 steps above and are now considering whether Chapter 7 bankruptcy is the right choice for you. Let’s go through some attributes about filing Chapter 7 bankruptcy in Pennsylvania that would be helpful to consider.

Pennsylvania Chapter 7 Bankruptcy Credit Counseling and Debtor Education Courses

When you file for bankruptcy relief under Chapter 7 bankruptcy, you must complete two bankruptcy courses to receive a bankruptcy discharge. This includes a credit counseling course prior to filing a bankruptcy case, and a debtor education course after filing. See below the approved courses for Pennsylvania

• Credit Counseling Approved Courses
• Debtor Education Approved Courses

The United States Trustee’s office has approved state-specific companies that offer bankruptcy courses. You can access a list of companies in Pennsylvania offering bankruptcy courses on the US Trustee’s website. Both courses are available online for a small fee.

Pennsylvania Chapter 7 bankruptcy Court Locations

Many 341 meetings of creditors have been over the phone or over Zoom due to the pandemic. That said, you may want to see where the courthouse is in Pennsylvania if there are any meetings that need to take place in person. Below are the court locations for filing bankruptcy based on the bankruptcy district.

Eastern District

• 601 Market Street
  Philadelphia, PA 19106
• 504 W. Hamilton Street
  Allentown, PA 18101
• 201 Penn Street
  Reading, PA 19601
• 101 Larry Holmes Drive
  Easton, PA 18042-7722

Middle

• 235 N. Washington Avenue
  Scranton, PA 18503
• 228 Walnut Street
  Harrisburg, PA 17101
• 240 West Third Street
  Suite 218
  Williamsport, PA 17701
• 197 South Main Street
  Wilkes-Barre, PA 18701

Western

• 17 South Park Row
  Erie, PA 16501
• 700 Grant Street
  Pittsburgh, PA 15219
• 208 Penn Traffic Building
  319 Washington Street
  Johnstown, PA 15901

Chapter 7 Bankruptcy Trustees Pennsylvania

Below are the Chapter 7 bankruptcy trustees in Pennsylvania broken out by bankruptcy district. You can also find the list here.

In addition to the above, review Pennsylvania local bankruptcy rules before filing a bankruptcy case. Some local rules may differ slightly from the Federal Bankruptcy Rules.

Conclusion

Hopefully, now you know much more about Chapter 7 bankruptcy in Pennsylvania. You can take the Chapter 7 bankruptcy means test calculator below if you’re interested to estimate qualification and costs.

For more information about Chapter 7 bankruptcy, check out our Chapter 7 bankruptcy process.

Most people work with a bankruptcy attorney in both Chapter 7 and Chapter 13, but there is the option to file without a bankruptcy attorney. Read filing bankruptcy without an attorney to learn how.