Debt Relief Options in Pennsylvania

Where do you go for help when you're in debt and live in Pennsylvania? In this article, you will read about your debt relief options and learn some of the rules and regulations that apply in Pennsylvania.

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Debt Statistics in Pennsylvania







Debt Relief Programs in Pennsylvania

Pennsylvania debt relief is available through banks, credit unions, online lenders and debt-relief companies (both nonprofit credit counseling agencies and for-profit companies).

Most people who seek debt consolidation in Pennsylvania are looking for help paying down high-interest credit card debt, but debt relief can also be used for other unsecured debt, like medical bills and personal loans.

The most common debt consolidation options in Pennsylvania are debt management, debt consolidation loans, for-profit debt settlement, nonprofit debt settlement and bankruptcy. Which one is best for you depends on your financial situation – they all have pros and cons.

Here is a look at debt consolidation in Pennsylvania:

Debt Management

Debt management relies on creditors agreeing to reduce interest rates on credit card debt, which means lower monthly payments, a lower overall payoff and a 3-5 year pay-off period. A nonprofit credit counseling agency works with the creditors to reach an affordable fixed monthly payment, which includes a service fee to the agency.

A debt management plan is not a loan. Your credit score is not a factor for enrolling. A debt management plan can reduce credit card interest of 20%-25% or more to somewhere around 8%. You can pay off a debt management plan early.

You also can leave the program at any time, but interest scores will increase once the credit counseling agency is no longer involved.

» Where to find it? – Nonprofit credit counseling agencies, certified by the National Foundation for Credit Counseling, offer debt management plans. There is a monthly fee of around $40 for their services and that is part of the fixed monthly payment you must make.

» Is it right for you? – Pennsylvania residents who have a reliable income and can afford the monthly payment, but need help paying high-interest credit card debt would do well in a debt management program.

Debt Consolidation Loans

Debt consolidation loans from a bank, credit union or online lender, use one large loan to pay off high-interest credit card debt. The big loan is then paid off in fixed monthly payments for a specific period of time, usually 3-5 years. With lower interest rates than the credit card debt that’s being paid off, they are more affordable than revolving credit. Some lenders pay off the creditors directly, while others send the borrower the loan money, and it’s up to them to use it to pay creditors.

» Where to find it? – Banks, credit unions and online lenders are the best sources of debt consolidation loans. Shop around for the lowest possible interest rate and fees, so that getting a loan to pay off credit cards makes financial sense.

» Is it right for you? – The best candidates for debt consolidation loans are people who have a good credit score (670 and above) and qualify for a low-interest loan with good terms. Consumers who can focus on paying the loan and not running up credit card bills again, will be the ones who benefit most from a debt consolidation loan.

Debt Settlement

Debt settlement companies claim they can reduce credit card balances by as much as 50%, but that is not always the case.  Debt settlement companies negotiate with creditors to agree on a settlement amount for consumers overwhelmed by credit card debt. The companies ask the consumer to stop making payments to the card companies. Instead, they tell the debtor to pay monthly into an escrow account until the agreed upon payment amount is reached.

The company then pays the creditor, and charges the debtor a fee for the service. The balance that’s not paid is forgiven, but is considered income by the IRS and will be taxed.

» Where to find it? – Debt settlement/debt consolidation companies specialize in this form of debt relief.

» Is it right for you? – Debt settlement can work for those who have a large balance on  high-interest credit cards and want to avoid bankruptcy. Anyone considering this option should do the math to figure out whether, after fees, late fee fines and taxes, it actually will save money.

Nonprofit Debt Settlement

Nonprofit debt settlement allows consumers to pay 50-60% of the balance on credit cards in a 36-month program, then discharges whatever the remaining balance.

Nonprofit debt settlement also is known as credit card forgiveness. There is no interest charged on the debt during the repayment period and the 36 monthly payments are at fixed amount. If the amount forgiven is more than $600, it will be taxed.

Where to find it? – This is a new program and only a few nonprofit credit counseling agencies certified by the NFCC offer this program. Also, only a few lenders have agreed to participate. You must go online and search “nonprofit debt settlement” to find the agencies and lenders that have this program.

Is it right for you? – People with a lot of credit card debt  would benefit from nonprofit debt settlement. To qualify, accounts must be more than 180 days overdue, there must be more than $1,000 in qualifying credit card debt and the creditors must be on the nonprofit agency’s participating list.


Bankruptcy is another Pennsylvania debt relief option, though usually only if all other options are exhausted.

Chapter 7 bankruptcy is the most common form of bankruptcy – 67% of Pennsylvanians who filed bankruptcy in 2021 filed Chapter 7. Chapter 7 aims to pay off unsecured debt by liquidating the debtor’s non-exempt assets. There are safeguards in place that allow consumers to keep their house, car, equipment used in their job and other necessities. Any unsecured debts that aren’t paid off through the bankruptcy are discharged, meaning the debtor no longer has to pay.

Chapter 13 bankruptcy is for those who need help paying down debt, but have enough income to make monthly payments. The court restructures the debt and sets up a 3-5 year payment plan that includes paying current bills as well as payments for those in arrears. Unsecured debt left after the plan is complete, is forgiven. Fewer than half of Chapter 13 bankruptcies are successful.

» Consequences of bankruptcy – Bankruptcy can have a severe impact on your finances for years afterwards, especially finding a home or car loan, renting an apartment or even getting a job. Bankruptcy stays on your credit report for 7-10 years. Chapter 13 filers who drop out of their plan still have debt that they need to address.

» Benefits of bankruptcy – Bankruptcy’s biggest benefit may be that it puts an automatic hold on foreclosures and other lawsuits from creditors. Chapter 7 is also quick – it usually takes six months or less. Those who stick with a Chapter 13 plan can get out of debt while keeping their assets. Those who can’t make the payments, may be eligible to file Chapter 7.

» Is it right for you? – Pennsylvania residents who are facing foreclosure or lawsuits from creditors can file for bankruptcy and temporarily put those actions on hold, giving them a chance to sort out their finances.

Statute of Limitations in Pennsylvania

Pennsylvania statute of limitations for a debt collector to take someone to court, is four years after the first missed payment. This doesn’t mean, however, the debt collector has to stop seeking payment. It just means they can’t sue for payment.

The Pennsylvania statute of limitations is for the debtor, not the company collecting the debt. If someone in Pennsylvania hasn’t paid a credit card bill for a card issued from a bank in state that has a different statute of limitations, Pennsylvania laws apply.

Debt Collection Laws in Pennsylvania

Pennsylvania debt collection laws are tougher than a lot of states. They are designed to protect consumers from predatory debt collectors, harassment and abuse. The state’s Fair Credit Extension Uniformity Act, adds to the provisions of the national Fair Debt Collections Practices Act. The Pennsylvania debt collection law is very specific about how and when consumers can be contacted, as well as what information they must be provided about the debt being collected, a list of false claims debt collectors are prohibited from making and more.

If a credit card company successfully sues a Pennsylvanian, state law prohibits wage garnishment (taking money from your paycheck to pay the judgment). Garnishment up to 10% of disposable income is allowed for some other types of debt, and the total of all debt garnishment can’t exceed 25% of a consumer’s paycheck.

While Pennsylvania law does not allow “payday loans” – short-term high-interest loans that are intended to be paid back in two weeks – it does allow installment loans that may have fees and interest high enough to double or triple the amount paid back. Pennsylvania law does not allow interest higher than 6% on consumer loans of $50,000 or less from unlicensed lenders. Licensed lenders, including banks and consumer loan broker, aren’t limited to what interest they charge; credit unions are limited to 18%.

More Debt Statistics in Pennsylvania

Pennsylvanians are doing a little better than the rest of the country when it comes to managing debt. Overall per capita debt by residents who have credit scores is $45,740, well below the national average of $55,810. Other Pennsylvania debt statistics:

  • Median household income: $61,744
  • Average credit card debt: $2,990
  • Average auto loan debt: $4,790
  • Bankruptcies filed in 2021: 10,123
  • Median monthly housing payments, including mortgage: $1,494.

About The Author

Maureen Milliken

Maureen Milliken has been writing about finance, banking, investment, entrepreneurship, real estate and other related topics for more than 30 years. She started as the “Business Beat” columnist for the now-defunct Haverhill (Mass.) Gazette and currently is one of the hosts of the Mainebiz business-focused podcast, “The Day that Changed Everything” in addition to her daily writing. She also is is the author of three mystery novels and two nonfiction books.


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