Bankruptcy Law.

Stover McGlaughlin is a debt relief agency.  We are proud of our 40-year tradition of helping people file for bankruptcy relief under the Bankruptcy Code.

Ben Novak, a former attorney with the firm, served on the panel of trustees of the United States Bankruptcy Court for the Middle District of Pennsylvania.

Tonia Torquato combines divorce and family law expertise with bankruptcy law experience.  She is also serving as the first vice president of the Centre County Bar Association in 2015.

Don Hahn is the only bankruptcy attorney who is board certified in consumer bankruptcy law by the American Board of Certification in Centre, Blair, Clearfield, Clinton, Huntingdon, or Mifflin Counties.  He is also the first bankruptcy attorney from this area to serve as vice president of the Middle District Bankruptcy Bar Association.

Sometimes, filing for bankruptcy is the best legal/financial move.

Some of the common reasons for filing include:

Loss of income

  • unemployment and layoffs
  • disability and medical leaves
  • loss of household income due to divorce or separation
  • loss of household income due to care for children or disabled relatives

Unexpectedly high expenses

  • uninsured medical expenses

Recovery from economic difficulty

  • preventing mortgage foreclosures to have an opportunity to make back payments or to sell the house
  • preventing vehicle repossessions to have an opportunity to make back payments or to renegotiate the car loan
  • discharging deficiency balances after mortgage foreclosures and vehicle repossessions
  • selling a house free and clear of mortgages that exceed the value of the house
  • avoiding ordinary judgment liens on property
  • stopping sheriff sales pursuant to ordinary judgments

Business necessity

  • walking away from a business
  • keeping the business while catching up on the taxes
  • keeping the business while making back payments on the secured business loans

Key Concepts About Bankruptcy

Automatic Stay

The filing of a bankruptcy petition generally acts as a stay that temporarily prohibits a creditor from collecting while the case is pending. While the stay is in effect, creditors are prohibited from calling, billing, sending collection letters, starting or continuing lawsuits, enforcing judgments, and proceeding with sheriff sales.

Mortgages and Car Loans

Generally, liens are not dischargeable in bankruptcy. With secured loans, however, borrowers have the choice of (1) retaining the collateral by making regular payments or by paying the secured creditor the value of the collateral during the time of the bankruptcy, or (2) walking away from the debt by surrendering the collateral.

Discharge

Most debts are dischargeable in all chapters (legal forms) of bankruptcy. Major exceptions include most taxes, student loans, child support and alimony, debts that were incurred through fraud or willful and malicious injury, and nonsupport marital debts (still dischargeable in Chapter 13).

Exemptions

Most bankruptcy cases involve no loss of property because borrowers can exempt a limited amount of value from their assets. Major exemptions are (1) homestead exemption, (2) vehicle exemption: limit one vehicle per individual, (3) household goods exemption, (4) most pensions, and (5) wild card exemption. These exemptions double if husband and wife file jointly.

For a list of major exemptions and amounts available under federal law, click here.

Impact of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005

In 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act.  The primary purpose of this law was to force most high-income debtors into a five-year Chapter 13 repayment plan bankruptcy, rather than a quick Chapter 7 bankruptcy.

Debtors receive discharges in Chapter 13 as well, but only after the debtors pay creditors what they can afford for three or five years.  Debtors are eligible for Chapter 7 if they can demonstrate that they cannot afford to pay anything to their creditors over the next three to five years.

For more information about whether you qualify for Chapter 7, click here.

Bankruptcy example

Problem

A husband and wife have two dependent children and a combined income of $75,000 per year.  They own a $150,000 home with mortgages totaling $120,000, a $17,000 car on which they still owe $16,000, and a $2,000 car that they own free and clear. They also have $2,000 in the bank, a $5,000 gun collection, and furniture, appliances, clothing, and other household goods with a garage sale value of $11,000.

If husband and wife declare bankruptcy, what would they lose, if anything?

Would husband and wife have to file for Chapter 13 or for Chapter 7?

Solution

If they declare bankruptcy, they will lose nothing if they keep up with their mortgages and car loan. Although the home is worth $150,000, their equity in it is only worth $30,000, which is covered by their combined homestead exemption.  Click here to see the current amounts for federal bankruptcy exemptions. As long as they keep up with their mortgages, they can keep their home.

The $17,000 car has an equity value of $1,000, and the second car is only worth $2,000. The husband can use his vehicle exemption on one car, and the wife can exempt the other car.  Click here to see the current amounts for federal bankruptcy exemptions. Together, they can keep both vehicles as long as they keep up with their car loan.

Their combined household goods exemption will protect the furniture, appliances, clothing, and other household goods, which have a garage sale value of $11,000.  Click here to see the current amounts for federal bankruptcy exemptions. Because they used only $30,000 worth of homestead exemptions, they can transfer the remaining amount to their combined wild card exemption.  Click here to see the current amounts for federal bankruptcy exemptions. This can be used to protect the $2,000 in the bank and the $5,000 gun collection.

Because they are a family of four, their income is low enough to allow them to file a Chapter 7 case.  Click here to see the current median income amounts. However, if they only have one dependent child or no dependent children, they may still qualify for Chapter 7, if their allowed expenses exceed their net income.  Click here to see certain allowed expense amounts.

435 total views, 1 views today