Bankruptcy Frequently Asked Questions

Filing for bankruptcy is one of the most important financial decisions you can make. Attorney Michael Alan Siddons has helped thousands of clients throughout Pennsylvania, New Jersey, Maryland, and New York navigate the bankruptcy process successfully. Here are answers to the most common questions.

Chapter 7 Bankruptcy Questions

What is Chapter 7 bankruptcy?

Chapter 7 bankruptcy, often called “liquidation bankruptcy,” is the most common form of consumer bankruptcy. It eliminates most unsecured debts, including credit cards, medical bills, personal loans, and utility arrearages, typically within 3-4 months of filing. A court-appointed trustee reviews your assets to determine if any non-exempt property can be sold to pay creditors, though in the vast majority of Chapter 7 cases, filers keep all of their property thanks to federal and state exemptions.

Do I qualify for Chapter 7 bankruptcy?

To qualify for Chapter 7 in Pennsylvania, you must pass the Means Test, which compares your household income to the state median income. If your income is below the median for your household size, you automatically qualify. If your income is above the median, additional calculations determine whether you have enough disposable income to fund a Chapter 13 repayment plan. As of 2025, the median income for a single earner in Pennsylvania is approximately $60,440. Attorney Siddons can evaluate your specific situation during a free consultation.

What debts does Chapter 7 NOT eliminate?

Chapter 7 generally cannot discharge: student loans (except in cases of undue hardship), child support and alimony obligations, most tax debts less than three years old, debts from fraud or willful injury, criminal fines and restitution, and debts not listed in your petition. However, it does eliminate credit card debt, medical bills, personal loans, deficiency balances on repossessed vehicles, and many other common debts.

Will I lose my house or car in Chapter 7?

Most Chapter 7 filers keep their homes and vehicles. Pennsylvania allows you to choose between federal and state bankruptcy exemptions. The federal homestead exemption protects up to $27,900 in home equity (as of 2024, adjusted periodically). If you are current on your mortgage and car payments and your equity falls within the exemption limits, you will typically keep both. Attorney Siddons will analyze your specific assets and advise on the best exemption strategy.

Chapter 13 Bankruptcy Questions

What is Chapter 13 bankruptcy?

Chapter 13 bankruptcy, known as a “wage earner’s plan,” allows individuals with regular income to create a 3-to-5-year repayment plan to catch up on missed payments while keeping all of their assets. It is ideal for homeowners facing foreclosure, individuals with car loans they want to keep, those who earn too much to qualify for Chapter 7, and people with non-dischargeable tax debts they need to pay over time.

How much will my Chapter 13 monthly payment be?

Your Chapter 13 plan payment is calculated based on your disposable monthly income (income minus allowed expenses), the total amount of secured and priority debts you must repay, and the liquidation test (unsecured creditors must receive at least as much as they would in a Chapter 7 case). Payments can range from under $100 to several thousand dollars per month depending on your financial situation. Attorney Siddons will calculate your estimated payment during your free consultation.

Can Chapter 13 stop a foreclosure?

Yes. One of the most powerful features of Chapter 13 is the automatic stay, which immediately halts foreclosure proceedings the moment your case is filed. Your repayment plan then allows you to catch up on missed mortgage payments over 3-5 years while continuing to make current payments. This is one of the most effective tools available to save your home from foreclosure in Pennsylvania.

Chapter 11 Bankruptcy Questions

What is Chapter 11 bankruptcy?

Chapter 11 bankruptcy is primarily used by businesses but is also available to individuals with debts exceeding Chapter 13 limits. It allows the debtor to reorganize debts and operations while continuing to run the business. The debtor proposes a plan of reorganization that creditors vote on and the court must approve. Small businesses may qualify for Subchapter V of Chapter 11, which provides a streamlined and less expensive process.

Chapter 12 Bankruptcy Questions

What is Chapter 12 bankruptcy?

Chapter 12 is a specialized bankruptcy chapter designed exclusively for family farmers and family fishermen with regular annual income. It functions similarly to Chapter 13 but with higher debt limits and provisions tailored to the seasonal nature of farming income. To qualify, the debtor must receive more than 50% of their gross income from farming or fishing operations, and total debts must not exceed specified limits.

General Bankruptcy Questions

How much does it cost to file for bankruptcy in Pennsylvania?

The court filing fee for Chapter 7 is $338, and for Chapter 13 it is $313. Attorney fees vary but typically range from $1,200-$2,000 for Chapter 7 and $3,000-$5,000 for Chapter 13 in the Philadelphia region. At Siddons Law, we offer affordable payment plans and can often include attorney fees within the Chapter 13 repayment plan itself, reducing your upfront costs.

Will bankruptcy ruin my credit forever?

No. While a Chapter 7 bankruptcy remains on your credit report for 10 years and Chapter 13 for 7 years, the practical impact diminishes significantly over time. Many of our clients begin receiving credit card offers within months of their discharge and can qualify for auto loans within 1-2 years. Some clients have qualified for mortgages within 2-3 years after Chapter 7. The key is to use credit responsibly after your discharge and pay all bills on time.

What is the Section 341 Meeting of Creditors?

The Section 341 Meeting (named after 11 U.S.C. § 341) is a required hearing that takes place approximately 30-45 days after filing. The bankruptcy trustee asks the debtor questions under oath about their finances, assets, income, and expenses. Creditors are invited but rarely attend in consumer cases. The meeting typically lasts 5-10 minutes. Attorney Siddons attends every 341 meeting with his clients and prepares them thoroughly beforehand.

Do I need to take a class before filing for bankruptcy?

Yes, two courses are required. First, you must complete a pre-filing credit counseling course from an approved agency within 180 days before filing your petition. Second, you must complete a post-filing financial management (debtor education) course before receiving your discharge. Both courses are available online, typically take 1-2 hours each, and cost approximately $15-$50 per course. We provide our clients with information about approved providers.

Can I file for bankruptcy without my spouse?

Yes, you can file for bankruptcy individually even if you are married. However, your spouse’s income may still be considered for the Means Test if you share a household. In some situations, filing jointly with your spouse may be more advantageous as it eliminates both parties’ debts with a single filing fee. Attorney Siddons will analyze both options and recommend the approach that provides the most benefit for your specific situation.

Bankruptcy Courts We Practice In

Siddons Law Firm files bankruptcy cases in the Eastern District of Pennsylvania (Philadelphia), Middle District of Pennsylvania, Western District of Pennsylvania (Erie), District of New Jersey, and District of Maryland. Our offices in Media PA, Rising Sun MD, and our service areas throughout the tri-state region ensure accessible representation wherever you are located.