How to File for Bankruptcy in Pennsylvania
There are many benefits of filing for bankruptcy if you are financially insolvent. By filing for consumer bankruptcy under Chapter 7 or Chapter 13, you access the potential to eliminate your debts, gain protection from creditors and collection attempts, and lay the foundation to start gradually rebuilding healthy credit.
However, there are many steps you must complete in order to successfully obtain a discharge and complete your case. This reference guide to how to file bankruptcy in Pennsylvania covers the filing process from start to finish, including where to go, which forms to submit, which fees to pay, how to take the Means Test, and the pre- and post-filing requirements.
If you or a loved one is considering filing for Chapter 13 or Chapter 7 in Pennsylvania, the experienced Philadelphia bankruptcy attorneys of Young, Marr & Associates can help. To get started discussing your goals in a completely free and private legal consultation, call our law offices at (609) 755-3115 in New Jersey or (215) 701-6519 in Pennsylvania today.
Before You File: Where to Get Credit Counseling
Before you will be permitted to file the voluntary petition for bankruptcy, you need to provide the courts with certification which proves you fulfilled the federal government’s pre-filing credit counseling requirement, a relatively new requirement passed by Congress in 2005. The basic objective of credit counseling is to assess the debtor’s financial situation and make sure that declaring bankruptcy is truly the best option.
It is very important to note that credit counseling may only be received through approved sources. However, you do not necessarily have to undergo credit counseling in person. You may also be able to receive counseling via telephone or even online if the cost or travel is prohibitive.
The following list contains several options for approved credit counseling agencies located in Eastern Pennsylvania, including Philadelphia, Bucks County, and Berks County:
1608 Walnut Street
Philadelphia, PA 19103
Credit Counseling Center
832 Second Street Pike
Richboro, PA 18954
Credit Counseling Center
60 N Main St
Doylestown, PA 18901
Credit Counseling Center
8150 Route 13
Levittown, PA 19057
Money Management International, Inc.
2101 Centre Ave.
Reading, PA 19605
Northwest Counseling Service, Inc.
5001 North Broad Street
Philadelphia, PA 19141
Chapter 7 or Chapter 13? Taking the Means Test
Credit counseling is not the only requirement which precedes filing. Additionally, you cannot file without indicating which “chapter” of bankruptcy you intend to utilize. You determine which chapter you will file under by taking the Means Test.
While many aspects of bankruptcy are very complex, the Means Test is relatively simple. The Means Test compares your monthly income against the median income for a Pennsylvania household of equivalent size. If your income is lower than the median, you qualify to file for Chapter 7, a short-term liquidation bankruptcy reserved for filers with the greatest degree of financial need. If your income is higher than the median, you must file for Chapter 13, a long-term reorganization bankruptcy in which filers use disposable income to gradually repay creditors over a three- to five-year repayment plan.
While the Means Test is an important component of the chapter determination process, its results are not necessarily set in stone. Some debtors opt to file for Chapter 13 despite qualifying for Chapter 7, and there are many strategic reasons to file under one chapter or the other where financially possible. You should always consult with an experienced Bala Cynwyd bankruptcy lawyer before you commit to either decision, as the chapter you select has an enormous impact on the overall course and requirements of your case.
Pennsylvania Bankruptcy Court Locations
Pennsylvania is subdivided into judicial “districts” dedicated to serving specific portions of the state. The eastern portion of Pennsylvania is served by the United States Bankruptcy Court for the Eastern District of Pennsylvania, which maintains two physical locations to serve a total of nine counties as follows:
- Philadelphia Division:
- Bucks County
- Chester County
- Delaware County
- Lancaster County
- Montgomery County
- Philadelphia County
- Reading Division:
- Berks County
- Lehigh County
- Northampton County
The Philadelphia Division is located at:
Robert N.C. Nix Sr. Federal Building
900 Market Street, Suite 400
Philadelphia, PA 19107
The Reading Division is located at:
The Madison Building, Suite 300
400 Washington Street
Reading, PA 19601
Which Forms Do You Need to Submit?
Persons filing for Chapter 7 or Chapter 13 in Pennsylvania must file all of the following documents:
- The voluntary petition, often called “the petition for bankruptcy.” The voluntary petition must be signed by yourself and your attorney in order to be valid.
- Schedules A, B, C, D, E, F, G, H, I, and J. The purpose of these alphabetized Schedules is to clearly list and itemize your assets. To provide a few examples, Schedule A requires debtors to list their real property (such as a home, land, rental properties, or business properties), while Schedule C requires debtors to indicate which properties they intend to claim as exempt.
- The Statistical Summary, which summarizes and adds up the liabilities reported in the alphabetic Schedules. The Summary also prompts debtors to provide average income, average expenses, and other financial data.
- The Certificate of Credit Counseling, which we discussed earlier.
- The Statement of Financial Affairs, an eleven-page form which prompts debtors to itemize financial data such as income from employment or businesses in operation, payments made to creditors, information about any repossessions or foreclosures, payments related to debt counseling or bankruptcy, and more.
- The Creditor Matrix, which compiles each creditor’s contact information. The Creditor Matrix is read by a scanner, not a human, so it is critical that the Matrix is formatted appropriately. Be sure to read through the Eastern District of Pennsylvania’s Credit Matrix requirements for guidance.
Chapter 7 debtors must also file the following documents:
- The Debtor’s Statement of Intention, which is used to “state the intention” of whether a debtor plans to redeem a property, reaffirm a debt, or proceed in some other way.
Chapter 13 debtors must also file the following documents:
- The reorganization plan, which outlines how the debtor will make gradual repayments over a three- to five-year period of time. This plan is absent from Chapter 7 filings, which resolve rapidly in a matter of just months instead of years.
All documents must be filed with the bankruptcy court which serves your county. To speak to the court clerk about any questions you may have, refer to the contact information listed above for the Reading and Philadelphia Divisions. You should also work with a Quakertown bankruptcy lawyer, who will help you make sure that your forms contain accurate information and are filed with the correct individuals in a timely manner.
Choosing Your Exemptions: State or Federal?
As you advance through the process of completing the above-noted paperwork, you will have to decide whether you wish to proceed with the Pennsylvania exemptions or the federal exemptions. In simple terms, exemptions are allowances for debtors to protect certain assets or pieces of property from being added to the bankruptcy estate (and therefore vulnerable to creditors). You can think of exemptions as items you get to keep, so it is very important to choose your exemption set wisely.
However, you cannot simply select favorable exemptions from both sets — you must choose one system and stick with it. Make sure you read through this overview of protected property in bankruptcy (and speak to a qualified attorney) before you commit to using either the state or federal system.
The Court Fee Schedule
Unfortunately, filing for bankruptcy is not free. Depending on the specifics of your case, the following fees (effective December 1, 2020) may apply to you:
- Petition — $338
- Administrative Fee — $78
- Petition — $313
- Administrative Fee — $78
Fees may also apply if you are converting or reopening a case:
- To Chapter 7 — $15
- Chapter 13 to Chapter 7 — $25
- Chapter 7 — $260
- Chapter 13 — $235
The Creditor Meeting (341 Hearing)
You are not quite “finished” once you file your petition.
In Chapter 7 cases, several weeks after filing you will be required to attend a creditor meeting, also referred to as a 341 Hearing or 341 Meeting, which is precisely what it sounds like: a meeting between you, your Doylestown bankruptcy lawyer, and your creditors to review all of your financial paperwork for inaccuracies or potential red flags. You must bring valid photo ID, such as a current passport or driver’s license, as well as your social security card.
You should also come prepared with any financial paperwork with relates to your income, taxes, assets, and debts, including but not limited to bank statements, income tax returns, W-2 statements, letters from the IRS (Internal Revenue Service), letters from the SSA (Social Security Administration), recent pay stubs, vehicle registration papers, and insurance documents. If you are unsure of exactly what to bring, speak with your Bucks County bankruptcy attorney and the trustee handling your case for clarification.
Chapter 13 is also subject to the 341 Hearing requirement. However, the creditor meeting in Chapter 13 focuses primarily on how the debtor’s proposed repayment plan will be satisfied over the next three to five years.
The Eastern District Court posts contact information for creditor 341 panel trustees and locations, as well as a 341 meeting schedule, both of which can be accessed under the “Creditor 341 Info” link on the court’s official website.
Post-Filing Pennsylvania Bankruptcy Motions and Hearings
Once you have completed your 341 Meeting, you might believe you are safely on your way to a discharge. In most Chapter 7 bankruptcies, that is the case. However, Chapter 13 is much more complicated. There is at least one more mandatory hearing and several possible other hearings a debtor will have to attend. Additionally, your case might require motions from our Philadelphia bankruptcy attorney or responses to motions that are filed by the trustee or your creditors.
The key difference between Chapter 7 and Chapter 13 is the reorganization plan. Our Pennsylvania bankruptcy attorney will draft and file an initial plan based on the information available before the filing date. This plan will dictate what creditors are paid and the amount they will receive. In many cases, a Chapter 13 debtor will be paying mortgage arrears, unpaid tax obligations, or other secured debt that must be paid through their plan.
Once your case is filed, your creditors will file a document known a “proof of claim.” A proof of claim sets forth what you owe that particular creditor along with evidence supporting their claim.
In nearly every case, our office will have to amend your original plan to address the filed claims. Unfortunately, the amounts we use are good faith estimates based on the documents available and not always accurate.
When your petition is filed, the court will set a date for your confirmation hearing. At this hearing, the trustee will attest to the court that your plan addresses all required creditors and adheres to the Bankruptcy Code. When a plan is confirmed, it becomes an order and requires the trustee to start making distributions based on the included terms. Confirmation means that the money you have been paying to the trustee will start going to your creditors.
Plan and Confirmation Objections
When you file a plan that does not address a creditor’s claim, they will typically file an objection to the plan. The trustee will also file an objection to your plan if it does not adhere to the required bankruptcy provisions. In most cases, objections will be filed.
Creditors have a deadline to file their claims. However, all creditors do not file at the same time, so there are likely to be several months of claims being filed. Usually, once a claim is filed, a creditor will file an objection if the amount is not the same as on the original plan. In most bankruptcy cases, these objections are resolved by simply amending the plan terms.
The trustee also might file an objection to confirmation. This objection is usually filed after the 341 Meeting, especially if there are amendments to your schedules required or additional documents requested. These objections serve as notice of what needs to be addressed before the confirmation hearing. As with most plan objections, these are resolved without any incident or need for further litigation.
Your creditors are not the only ones able to file objections. Our Pennsylvania bankruptcy attorney will carefully review every proof of claim filed to ensure it is accurate and legitimate. One of the most common objections filed is for unsecured creditor claims that are barred by the statute of limitations. In Pennsylvania, the statute of limitations sets a deadline of four years for collecting an outstanding contractual debt. For example, if you have not paid a credit card in five years and the company does not have a judgment, then if they file a proof of claim in your bankruptcy, it could be excluded. This is helpful when a Chapter 13 debtor is required to pay their unsecured creditors.
Motion for Relief From Stay
A motion no debtor likes to see but is filed in some cases is a “motion for relief from stay.” A secured creditor, such as your mortgage company or the financial institution that manages your car loan, will file this type of motion when you fall behind on your regular monthly payments.
When you file for bankruptcy, an injunction called an automatic stay goes into immediate effect. This stay stops all your creditors from collecting their debt, including phone calls, letters, and legal procedures. If you miss a couple of mortgage payments, your mortgage company will ask the court to remove your home from bankruptcy protection to pursue either a foreclosure or sheriff sale. If this motion is filed, our Pennsylvania bankruptcy attorney will have to file a response if you want to keep your home or other property.
Trustee’s Motion to Dismiss
One of the most common post-filing motions is a Chapter 13 bankruptcy is a motion to dismiss for failure to make payments filed by the trustee. Five years is a long time, and bankruptcy is not an easy path. While our office tries to budget future financial problems, such as home maintenance, into your plan, it is not always possible. In some cases, debtors are faced with an unexpected bill or crisis that diverts money that would have been paid to the trustee. Typically, if you miss two monthly payments, the trustee will file a motion to dismiss your case. Fortunately, in many instances in which this occurs, the debtor is able to keep their bankruptcy moving forward.
Motion to Avoid Liens
In Pennsylvania, when a creditor takes you to court and gets a judgment, they are given a judgment lien on your real property. A judgment lien means that your once unsecured credit card debt is now secured by your home. However, there is a way in both Chapter 7 and Chapter 13 to remove those types of liens. Our Pennsylvania bankruptcy attorney could file a “motion to avoid the lien.” Unfortunately, this is not possible in every case. Our office will review your liens and the facts in your case to determine if it is possible. In some situations, you could be required to have a formal home appraisal because your ability to avoid a lien is linked to your property’s value.
Discharge Requirements: Where to Go for Debtor Education
Between filing and actually receiving your discharge, you must complete a debtor education course under federal law. The basic objective of debtor education is to give filers the knowledge they need to avoid making similar financial missteps in the future, so that multiple filings do not become necessary.
Like the pre-filing credit counseling, the post-filing debtor education must also be administered by an approved provider only. Many of the certified providers in Eastern Pennsylvania happen to overlap with the credit counseling providers noted above, but feel free to browse through the Department of Justice’s complete list of approved debtor education agencies.
Contact Our Lawyers for a Free Consultation
While no law prevents debtors from filing without an attorney on a pro se basis, proceeding without professional support is highly inadvisable. Pro se filings may have been somewhat feasible in the past, but the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) has made the process considerably more complicated and fraught with legal and financial perils. As Bankruptcy Judge S. Martin Teel, Jr. cautions, “With the new Act and its many technical requirements, it’s really a minefield for pro se filers.”
Even a minor mistake could cost a debtor valuable exemptions, or even result in the dismissal of the case. If a debtor attempts to skew financial data, such as hiding assets from creditors, he or she could even be criminally investigated and prosecuted.
At Young, Marr & Associates, our Pennsylvania bankruptcy attorneys have more than 20 years of experience filing over 5,000 cases. We can help make your case as smooth, efficient, and cost-effective as possible. To arrange for a free and confidential case evaluation, call our law offices at (609) 755-3115 in New Jersey or (215) 701-6519 in Pennsylvania.