Bankruptcy is not a source of free money. Instead, bankruptcy gives an opportunity for individuals to rebuild their lives after a tragedy or financial disaster. A car accident, divorce, medical diagnosis, or coronavirus outbreak is all it takes to put many people in financial distress. A bankruptcy will allow these individuals to get out from under crushing debt and provide a better future for themselves, their families, and the community.
If you have any questions about filing for bankruptcy in Missouri, talk to your experienced bankruptcy attorney to understand your options and protect your future. Contact the Joshua Wilson Law Firm today at 816-331-9968.
What is Bankruptcy?
Bankruptcy can help a person or business reduce their debt, discard debt, or make debt repayment plans. Filing for bankruptcy can temporarily stop bill collectors and protect certain assets while the bankruptcy case proceeds. Bankruptcy can be filed by individuals, spouses, or corporations.
According to the U.S. Bankruptcy Court, federal bankruptcy laws “give debtors a financial ‘fresh start' from burdensome debts.”
A difficult decision to make is when to file for bankruptcy. Finances can quickly get out of control with loss of a regular income, incoming bills, and high-interest rates on credit cards. Individuals may put off facing bankruptcy hoping that something will come through to provide relief. Others may not have told their spouse or family about the dire financial situation. If you have questions about when to file for bankruptcy, your local bankruptcy lawyer can help.
Types of Bankruptcy
There are a number of types of bankruptcies, depending on the situation of the filer. These bankruptcy types are generally referred to by their chapter in the U.S. Bankruptcy Code, including:
- Chapter 7 Bankruptcy for Individuals or Businesses
- Chapter 13 Bankruptcy for Individuals
- Chapter 11 Bankruptcy for Businesses
- Chapter 9 Bankruptcy for Cities, Towns, and Municipalities
- Chapter 12 Bankruptcy for Farmers
Chapter 7 Bankruptcy
Chapter 7 bankruptcy, also known as straight bankruptcy, is the most straightforward type of bankruptcy. In a Chapter 7 filing, the debtor's assets are liquidated, or sold off. The trustee takes over the assets, sells the assets or reduces them to cash, and distributes the proceeds to creditors. Secured creditors may have the right to retain secured property or assets. The process for Chapter 7 bankruptcy from beginning to discharge of debt generally takes 3 to 5 months.
To qualify for Chapter 7 bankruptcy, the debtor may be an individual, a partnership, or a corporation or other business entity. The debtor also generally has to have credit counseling within 180 days before filing.
If the debtor's current monthly income is more than the state median, the debtor needs to meet the “means test" to determine whether the filing is presumptively abusive. However, abuse is rebuttable by a showing of special circumstances that justify additional expenses or adjustments.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is also known as wage earner's bankruptcy or reorganization bankruptcy. To qualify for Chapter 13 bankruptcy, the individual can only have a limited amount of secured or unsecured debt.
Chapter 13 bankruptcy allows the debtor to keep certain property in exchange for paying a portion of the debts as monthly payments to a trustee. After making the required payments under the payment plan, the remaining debt may then be discharged. The payments for Chapter 13 bankruptcy generally last from 3 to 5 years.
Chapter 11 Bankruptcy for Businesses
Chapter 11 bankruptcy is usually for corporations or partnerships and involves reorganization of the business. A reorganization bankruptcy reorganizes the business assets and debts. The Bankruptcy Court will help the business reorganize and generally allows the business to stay open and continue operating. Chapter 11 bankruptcy is generally more complicated than Chapter 7 or 13 bankruptcy
Dischargeable and Non-Dischargeable Debts
Dischargeable debt is debt that can be cleared away in bankruptcy. Not all debt is dischargeable. Dischargeable debts may also depend on the type of bankruptcy. Examples of dischargeable debt in Chapter 7 and Chapter 13 bankruptcy include:
- Medical bills,
- Credit card bills,
- Lease obligations, and
- Personal loans.
Some debts are not dischargeable, even after going through bankruptcy. Some debts are dischargeable after additional restrictions. Generally, student loan debt is not discharged but the court can approve student loans for dischargeable debt in bankruptcy. Nondischargeable debts may include:
- 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.
Missouri Homestead Exemption
There are also exemptions for certain property in Missouri bankruptcies. Exemptions allow individuals to protect certain assets, to a limited extent, from being turned over to creditors. The Missouri homestead exemption protects up to $15,000 in net equity in a primary residence. However, spouses both filing for bankruptcy cannot double the homestead exemption amount.
There may also be exemptions for a mobile home, motor vehicle, firearms, other property, and a “wildcard” exemption. Talk to your Missouri bankruptcy attorney about what debts are dischargeable, not dischargeable, and what exemptions you can claim to protect your property.
Property Transfers Before Bankruptcy
Some people transfer property to a relative or sell property to a friend before filing for bankruptcy. However, the bankruptcy trustee can reverse transfers made within a year of filing for bankruptcy if the transfer was made for less than fair market value. Make sure to speak with your Missouri bankruptcy lawyer before making any sales or transfers shortly before filing for bankruptcy.
Alternatives to Bankruptcy
If bankruptcy is not the right option for you or your business, there may be other alternatives. Options may depend on the source of debt and what assets you need to protect. Alternatives to bankruptcy may include:
- Loan modification,
- Foreclosure mediation,
- Foreclosure protection,
- Debt consolidation,
- Business reorganization,
- Liquidating assets,
- Debt settlement, and
- Payment plan negotiations.
Missouri Bankruptcy Lawyer
Bankruptcy can put an end to bill collectors, repossessors, and banks harassing you and your family. Getting started on filing bankruptcy today can be a way to get a fresh start after financial hard 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 safe.