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Pennsylvania Bankruptcy Laws

Pennsylvania Bankruptcy Laws should be known by every resident of the state of Pennsylvania. A few decades ago, applying for bankruptcy protection has been a constant source of shame for most citizens. However, with the impact of the economic crisis, many are left with no choice but to resort to bankruptcy. Bankruptcy protection is every Pennsylvanians’ right and should not be considered as shameful. Pennsylvania bankruptcy laws are stringent when it comes to screening the eligibility of a debtor for bankruptcy; the fact remains that bankruptcy should be a last resort rather than the only option a debtor thinks of when he is in financial trouble.

With regard to this, the federal and state laws specify a credit counseling program as one of the initial requirements to apply for bankruptcy. Every debtor must complete this program 6 months before the expected application. The organization that facilitated the counseling should be approved by the bankruptcy court of the state. A certification or any documentation to prove you have attended the said counseling will be presented together with the required papers and the filing fee.

One of the most essential things a debtor should determine is the bankruptcy type he wants to avail of. Majority of the debtors settle for Chapter 7 because this gives them the opportunity to have a fresh financial start. Nonetheless, the eligibility process of Chapter 7 is very meticulous and only a few of those who apply are accepted. One of the reasons why a debtor’s application is usually denied is because his monthly income is more than the median income level of the state based on the latest data from the US Census Bureau. This evaluation is done by the trustee assigned to the case. Although there is another way to qualify for Chapter 7, it is also equally hard. The trustee will compute all your monthly expenses and deduct this to your monthly income using a formulaic equation and if it is determined that you can actually spare $100 a month to pay your creditors, your application for Chapter 7 is rejected. Instead, you can opt to dismiss the case or the court recommends the next option in line.

This option is Chapter 13 or the debt reorganization program. Compared with the first option, the debtor is also given a fresh financial start of sorts. Not because his dischargeable debts will be liquidated, but because the court gives an allowance of 3 to 5 years to pay the creditors. This bankruptcy program will prove most advantageous for regular income earners and those who wish to protect their assets from liquidation to pay off debts. This is outlined in a repayment plan designed by the debtor together with the supervision of the trustee to be presented in the court for approval.

As mentioned above, certain assets can and can’t be protected from creditors. Most of the debtors who use Chapter 7 protection are in danger of losing their non-exempt assets. This is why Pennsylvania bankruptcy laws have defined exemptions. These are the following:

• Clothing;
• Sewing machines;
• Bible and books; and
• Other personal benefits.

The state of Pennsylvania offers a very tightfisted term for exemptions, in this case the federal exemptions would be your only choice because a fresh financial start won’t hold any meaning if you stand to lose your car and even your family heirlooms.