Chapter 7 bankruptcy is the most common form of personal bankruptcy in the U.S. Also known as straight bankruptcy, Chapter 7 filings involve a trustee taking control of most of the debtor's non-exempt property and assets, liquidating the assets, and distributing the proceeds to creditors.
Not all property is subject to seizure and liquidation by the trustee and not all debt is dischargeable in Chapter 7 bankruptcy. It is important to understand the Chapter 7 filing process, benefits, and drawbacks. If you have any questions about bankruptcy, getting a new start, or how to get out from under debt, talk to your Missouri bankruptcy attorney. Contact the Joshua Wilson Law Firm today at 816-331-9968.
Process for Filing for Chapter 7 Bankruptcy in Missouri
Chapter 7 bankruptcy involves liquidation of existing assets to pay off debt. Generally, the debtor's assets are not enough to cover the total debt. Creditors will get a portion of their outstanding debt repaid and at the end of the process, any remaining debt will be discharged.
From beginning to end, the entire process for bankruptcy generally takes four to six months. The process can take longer, so it is important to talk to your lawyer about the process so that you can complete the forms as soon as possible to get through bankruptcy quickly and begin rebuilding your financial life.
The debtor is required to attend an approved credit counseling session within six months (180 days) before filing for bankruptcy. You can find a list of approved credit counseling agencies from the U.S. Trustee Program website. Most of the programs are available online, so you can complete the credit counseling from your home. Limited credit counseling sessions are available in person in Missouri.
Immediately after filing, creditors are prohibited from attempting to collect outstanding debt. An automatic stay goes into place after filing, which prohibits further action in a collections lawsuit, wage garnishment, foreclosure, eviction, or contact by phone or mail from collection agencies.
After filing, the debtor will fill out paperwork. Any problems with the paperwork, leaving out information, or incorrect information may delay the bankruptcy process. The forms and schedule include:
- A list of all creditors and the amount and nature of their claims;
- Source, amount, and frequency of the debtor's income;
- List of all of the debtor's property;
- Detailed list of the debtor's monthly living expenses, (food, clothing, shelter, utilities, taxes, transportation, medicine, etc.); and
- All the exemptions to be claimed.
After the paperwork is filed, a trustee will be appointed to take any nonexempt assets, liquidate the assets, and distribute them to the creditors. A meeting of the creditors (341 Meeting) will be held where the debtor may have to respond to creditors about any debts, finances, and bankruptcy declarations. However, in many situations, the creditors will not show up.
If you pass the means test, you may be eligible for Chapter 7 bankruptcy. If you cannot pass the means test, you may have an option to file for Chapter 13 bankruptcy instead. Finally, you may have to complete a debtor education course and file a Certification About a Financial Management Course form before your debt will be discharged.
After discharge, your bankruptcy case is over and you will not be liable for any of the discharged debt.
What property can I keep after filing for Chapter 7 bankruptcy?
With liquidation bankruptcy, debt is eliminated after any assets or property are sold off. However, under Missouri laws, there are a number of “exemptions,” for property that a debtor can keep that is not subject to liquidation. Some of the most common exemptions include:
- Homestead Exemption: Protects equity in a home for up to $15,000 or up to $5,000 in a mobile home. Married couples filing for bankruptcy cannot double the homestead exemption.
- Motor Vehicle Exemption: Equity in a motor vehicle of up to $3,000
- Firearm Exemption: Firearms and ammunition up to $1,500.
- Insurance Benefit Exemptions: Disability insurance and life insurance up to $150,000.
- Alimony or Support Exemption: Alimony, maintenance, or support of up to $750 per month.
- Wildcard Exemption: Up to $600 of any property.
- Tools of the Trade Exemption: Tools or instruments of trade or business up to $3,000.
- Benefits Exemptions: Workers' comp, unemployment, veterans' or Social Security benefits.
- Jewelry and Wedding Ring Exemption: Wedding ring up to $1,500 and other jewelry up to $500.
- Personal Property Exemptions: Up to $3,000 in clothing, household goods, furniture, and appliances.
There are a number of other exemptions and the limits and exemptions change all the time. Make sure you talk to your Missouri bankruptcy lawyer about what property may be exempted from seizure in a bankruptcy.
What debt is not dischargeable after bankruptcy?
A bankruptcy may not erase all your debts and liabilities. Some priority debts will remain after bankruptcy and other debts may require special treatment by the court to be discharged. Among the most common debts that are not dischargeable after bankruptcy are:
- Child support obligations,
- Alimony or spousal support,
- Debts for willful and malicious injuries to person or property,
- Debts to the government for fines and penalties,
- Debts for personal injury caused by DWI, and
- Debts for certain condominium fees.
For example, a debtor has $50,000 in debt from a medical emergency and owes $5,000 in back child support. After going through bankruptcy, the debtor is discharged from the $50,000 in medical debt but is still liable for the $5,000 in child support and any continuing child support obligations.
Bankruptcy Court in Western Missouri
Bankruptcy filings fall under federal law, although some protections are covered by state law. Bankruptcy filings in Western Missouri are handled by the U.S. Bankruptcy Court, Western District of Missouri, in Kansas City.
U.S. Bankruptcy Court
Western District of Missouri
400 E. 9th Street, Room 1510
Kansas City, MO 64106
For how long will a bankruptcy show up on my credit report?
A bankruptcy can limit your borrowing options for years to come. Any loans and borrowing may also be subject to a much higher interest rate. Under the Fair Credit Reporting Act, credit agencies can not report a bankruptcy case after 10 years from the date the bankruptcy case is filed. After 10 years from the date of filing, your credit report should be clear of the bankruptcy.
Missouri Chapter 7 Bankruptcy Lawyer
Bankruptcy may offer a fresh start for you and your family after difficult financial times. If you have questions about filing for bankruptcy in Missouri, contact the Joshua Wilson Law Firm in Raymore today. Contact us online or by calling (816) 331-9968. We maintain a virtual capable law office to keep you and your family safe.