What Is the Criteria for Bankruptcy in Pennsylvania?
A debtor living in Pennsylvania may file for bankruptcy at any time. The federal bankruptcy code provides debtors with relief from their creditors. Chapter 7 bankruptcy removes the burden of debt off of the debtor's shoulders, while Chapter 13 bankruptcy gives the debtor breathing room and allows him to pay his debts on a more relaxed schedule. A debtor wishing to file for personal bankruptcy must meet certain criteria.
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Means Test
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Federal law requires that a Pennsylvania debtor take a means test to determine which chapter of bankruptcy he should file. The debtor compares his family income to the median family income for a family of the same size in Pennsylvania. If the debtor's family income falls below the state median family income, then he can file for Chapter 7 bankruptcy. If the debtor's family income hovers above the state median family income, he must take another step to determine if he can file for Chapter 7 bankruptcy.
Monthly Disposable Income
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The debtor must calculate monthly disposable income as the next step in determining if he meets the criteria for filing for Chapter 7 bankruptcy. The debtor takes his monthly income and subtracts his allowed monthly expenses to come up with his monthly disposable income. If his monthly disposable income is less than $100, he can file for Chapter 7 bankruptcy. If his monthly disposable income is more than $100, but that amount would not pay at least 25 percent of his debts over the next five years, he can also file for Chapter 7 bankruptcy. If the debtor's monthly disposable income is more than $100, and that amount would pay 25 percent of his debts over the next five years, then he may meet the criteria to file for Chapter 13 bankruptcy.
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Regular Income Stream
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Once a Pennsylvania debtor has proven that he can fund a Chapter 13 bankruptcy plan based on the income he has reported, he needs to have a regular income stream. If he no longer has a regular stream of income, then he will not be able to complete a five-year Chapter 13 debt repayment plan. Entering a Chapter 13 debt repayment plan on a shaky income can cause a case to be dismissed, which could result in the debtor's house possibly being foreclosed and vehicles being repossessed.
Debt Limits
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A debtor who qualifies for Chapter 13 bankruptcy, after meeting all of the above criteria is not quite out of the woods yet. Federal law only allows debtors to file for Chapter 13 bankruptcy if they have less than $1,081,400 in secured debts and less than $360,475 in unsecured debts. Thus, if a debtor has purchased and not paid for a two-million-dollar house and wants to file for Chapter 13 bankruptcy with $1,100,000 owed on the house, he will need to find another solution to help him keep his house while paying down his debt.
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References
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