Chapter 13 bankruptcy is also known as adjustment of debt personal bankruptcy. Chapter 13 bankruptcy provides a court-supervised payment method to pay back creditors over a period of time. The Chapter 13 process generally takes between three to five years and remains open as long as the play payments are being made.
Chapter 13 bankruptcy may also be an option for individuals who want to file for Chapter 7 bankruptcy but cannot pass the means test. It is important to understand the Chapter 13 filing process, benefits, and drawbacks. If you have any questions about bankruptcy and restructuring your debt, talk to your Missouri bankruptcy attorney. Contact the Joshua Wilson Law Firm today at 816-331-9968.
Benefits of Chapter 13 Bankruptcy in Missouri
Chapter 13 bankruptcy is also called a “wage earner's plan.” In contrast to a Chapter 7 filing that discharges most of the debtor's debts and liabilities, Chapter 13 allows the debtor to repay all or part of their debt over time. The repayment period may depend on the amount of debt and the debtor's monthly income.
If the debtor's monthly income is less than the state median, then the repayment period will be for three years. (The median state income for a single wage earner in Missouri is $49,086 as of April 1, 2020). However, the court can approve a longer repayment period “for cause.” If the debtor's income is greater than the state median, the repayment plan will generally be for five years. According to U.S. bankruptcy laws, the plan cannot provide for payments longer than five years.
During the payment period, creditors are prohibited from starting collections efforts or continuing collections efforts against the debtor. This “automatic stay” can be a significant benefit to an individual who is regularly being contacted by bill collectors, threatened by collections agencies, or subject to collections lawsuits. It can also stop wage garnishment, foreclosure, or evictions. When making plan payments, payments are made through the trustee so the debtor does not have to have direct contact with the creditors.
Buying a home is generally the largest purchase most people will make in their lives. After falling on hard times, the risk of foreclosure could mean the loss of tens of thousands of dollars invested in mortgage payments. A Chapter 13 bankruptcy can stop foreclosure. The debtor may still be required to make all payments under the plan but it can save their most significant investment.
Filing for Chapter 13 Bankruptcy in Missouri
The filing begins with a petition to the bankruptcy court. 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
When filing the petition and paperwork for the bankruptcy, the individual has to file a certificate of credit counseling and copy of any debt repayment plan developed through the credit counseling. Filing also includes:
- Schedule of assets and liabilities,
- Schedule of current income and expenditures,
- Schedule of executory contracts and unexpired leases,
- A statement of financial affairs,
- Any evidence of payment from employers received 60 days before filing,
- Statement of monthly net income,
- Anticipated increase in income or expenses,
- Copy of the most recent tax return, and
- Record of any interest in qualifying education or tuition accounts.
To complete the official bankruptcy forms, the debtor must also provide:
- 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; and
- Detailed list of the debtor's monthly living expenses, (food, clothing, shelter, utilities, taxes, transportation, medicine, etc.).
After the paperwork is approved, a trustee will be appointed to administer the bankruptcy. The trustee will evaluate the case, collect payments from the debtor, and make distributions to the creditors. The trustee will hold a creditor's meeting between 21 and 50 days after the petition is filed. During the meeting, the trustee and creditors may ask the debtor questions under oath. After the meeting, the debtor, trustee, and any creditors who attend will go to the bankruptcy court for a hearing on the debtor's repayment plan.
Chapter 13 Repayment Plan
Generally, the debtor must file a repayment plan within 14 days of filing the petition, unless the court grants an extension. The court must approve the repayment plan for regular payments to the trustee, usually monthly or every two weeks. Within 30 days after filing for Chapter 13 bankruptcy, the debtor must start making payments to the trustee.
Repayment to priority claims must be made in full, unless the creditor agrees to a different repayment option. Priority claims include taxes, the cost of bankruptcy proceedings, and support obligations, like child support or alimony. Secured claims leave the creditor with a claim to take back the property as collateral. Unsecured claims generally leave the creditor with no right to collect against particular property. Talk to your bankruptcy attorney about how different claims are treated under a Chapter 13 repayment plan.
Are You Eligible for a Chapter 13 Bankruptcy?
An individual is eligible for Chapter 13 bankruptcy relief provided the individual's unsecured debts are less than $394,725 and secured debts are less than $1,184,200, (As of April 1, 2020). An individual also generally needs to receive credit counseling within six months (180 days) before filing. You can find a list of approved credit counseling agencies from the U.S. Trustee Program website.
Chapter 13 Bankruptcy Lawyer in Missouri
Bankruptcy can give you a chance to reorganize your financial life to give you a pathway out of debt. After tough financial times, a medical emergency, or loss of your job, bankruptcy can offer a fresh start. 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 safe and connected.