- November 3, 2024
- Kelvin Birk
- Bankruptcy
If you find yourself overwhelmed with debt, being harassed by creditors, and faced with the possibility of losing your home and possessions, Chapter 7 bankruptcy may be the answer you need to get a fresh financial start. While no one wants to be in a position of having to file for bankruptcy, it is a legal way to have many debts discharged (eliminated) and give you the breathing space you need to begin rebuilding your life.
How do you know if bankruptcy is right for you? An experienced Missouri bankruptcy attorney can help you explore your options and determine whether bankruptcy or some other debt-relief option is best in your individual situation. To get started, it is important to understand some basic things about what bankruptcy can and cannot do.
Understanding Chapter 7 Bankruptcy
The United States Bankruptcy Code provides five types of bankruptcy, and Chapter 7 is the most common form for consumers. Chapter 7 eliminates most unsecured debt such as credit card and medical debt, and it is over in a few months, so you can begin rebuilding credit quickly.
Chapter 7 bankruptcy is a liquidation bankruptcy. A bankruptcy trustee will be appointed to gather and sell your nonexempt assets to pay creditors, but this is does not mean you will lose everything. There are Missouri bankruptcy exemptions that list types of property that cannot be sold, so many Chapter 7 filers wind up with enough exemptions to keep much or all of their property.
Not everyone is eligible for Chapter 7. Your income and debt will be subjected to something called a “means test” to determine if you qualify, by calculating your current monthly income based on the past six calendar months. If your income is below the Missouri median for your household size, you are exempt from the test and may file Chapter 7. If you don’t qualify for Chapter 7, you may still be able to file for Chapter 13 bankruptcy.
Benefits of Chapter 7 Bankruptcy
Chapter 7 bankruptcy in Missouri provides a fresh financial start and benefits you in several key ways:
Many debts will be discharged. Chapter 7 bankruptcy allows you to discharge most unsecured debts – those not secured by collateral. Since you no longer have the legal obligation to repay them, you will have more disposable income to meet your other expenses without the burden of overwhelming debt.
Common dischargeable debts include:
- Credit card balances
- Medical bills
- Personal loans
- Certain tax debts.
Many assets are exempt, so you get to keep them. Recognizing that there are certain assets you need to live on and rebuild your life, Missouri law (see Missouri Exemptions) allows debtors to keep certain exempt property. This typically includes:
- A homestead exemption to protect equity in a primary residence
- Personal property like clothing, furniture, and household goods
- Tools of trade needed for work
- A portion of wages
- Retirement accounts.
You may be able to keep certain secured assets. If you want to keep certain secured debts such as your car or house, you may be able to do so, by signing a voluntary “Reaffirmation Agreement.” You must continue to make payments just as before you filed bankruptcy, and you must pay any back payments which are due.
You will be protected by the automatic stay. Once you file Chapter 7, the automatic stay immediately stops most collection actions by creditors and gives you time to reorganize your finances without creditor pressure. You receive immediate relief from foreclosure and repossession proceedings, wage garnishments, lawsuits from creditors, and harassing phone calls and letters.
Chapter 7 is over quickly. Chapter 7 bankruptcy in Missouri is usually completed within 3-4 months, which allows you to start rebuilding your credit and finances in a relatively short time.
The Chapter 7 Bankruptcy Process in Missouri
The Missouri Chapter 7 bankruptcy process involves several steps and is typically as follows:
Consult a bankruptcy attorney. Bankruptcy is a major decision. A bankruptcy attorney will discuss your options to help you decide whether or not to file. They will start the process if this is in your best interests. You will have to pay your attorney, bankruptcy court filing fees, and other costs.
File your petition and other forms. File the required packet of forms electronically with the bankruptcy court, including the bankruptcy petition, schedules listing your assets and liabilities, your income and expenses, your exemptions, any contracts, and an income form for qualification.
Get mandatory credit counseling. You must receive credit counseling during the six-month period prior to filing for Chapter 7 bankruptcy.
The court appoints a trustee. The trustee will supervise, analyze your paperwork and take any nonexempt property to distribute to your creditors.
Attend a meeting of creditors. Also called a “341 meeting,” this is where you will have to answer questions about your finances and bankruptcy forms, under oath, from the trustee and any creditors.
Nonexempt property is distributed. The trustee will seize nonexempt property and distribute proceeds to your creditors.
Pay secured debts. If you have secured debts, you must relinquish the property, redeem it by paying the creditor what it’s worth, or reaffirm the debt and still owe it.
Take a financial management course. After you file and before you get your discharge, you have to complete a debtor’s education course.
You receive your discharge. From three to six months after you file, you’ll receive your bankruptcy discharge in the mail. At this point, the automatic stay is lifted, your case will be officially closed, and you have a fresh start.
Considerations Before Filing Chapter 7
While Chapter 7 bankruptcy can give you that fresh start, it does have some disadvantages you should consider before filing:
- Chapter 7 does not wipe out all debts. You will still owe “secured” debts, state or federal income tax debts, or obligations such as child support, alimony or student loans unless you can show “undue hardship.” You still must pay fines and penalties for violating the law, including traffic tickets and criminal restitution.
- Bankruptcy does not protect co-signers on your debts, so the co-signer may still have to repay all or part of the loan.
- You may not qualify if you cannot pass the means test.
- Filing Chapter 7 impacts your credit, and the bankruptcy will remain on your credit report for 10 years, making it harder to obtain new credit in the short term.
- You must complete credit counseling from an approved provider before filing.
- You cannot file Chapter 7 if you received a discharge in a previous Chapter 7 case within the last 8 years.
- There may be other options like debt consolidation, negotiating with creditors, or Chapter 13 bankruptcy, which might be better for your situation.
Get Help Obtaining a Fresh Start
Bankruptcy laws are complicated, and making mistakes can be costly and result in not getting your debts eliminated, but you do not have to go through the process alone. The skilled and compassionate legal team at the Birk Law Firm can provide guidance and take care of all necessary legal hurdles and requirements to help achieve a satisfactory result. Attorney Kelvin Birk is a Certified Public Accountant as well as a lawyer, with more than 30 years of experience in accounting and tax and business consulting. He knows how to help you determine if Chapter 7 is your best choice and help obtain a fresh financial start while protecting as many of your assets as possible under Missouri law.
Call us today for a free consultation to discuss your individual situation and get started on the road to a brighter financial future.
FREE CONSULT CALL NOW 573-332-8585
Attorney Kelvin Birk
Kelvin Birk is a lawyer as well as a certified public accountant, with more than 30 years of experience in accounting and tax and business consulting, and more than 20 years of experience in numerous legal matters. This combined expertise allows our law firm to provide a level of service above that of other firms. Whatever your legal situation, your attorney at Birk Law Firm can counsel you as to the tax implications. We have experience in providing myriad legal representation services to residents of southeast Missouri and other areas.. [ Attorney Bio ]
