Deciding to file for bankruptcy is never an easy decision. Most people want to pay their debt and feel a sense of shame and embarrassment when they cannot. There are many reasons why people end up with such financial burden, but the most common are because of job loss, a divorce, or a medical crisis.
Know Your Options
Whatever the reason, you should know there are options out there. Filing for bankruptcy relief may be your best choice, however, the ability to provide you with all of the options and sound bankruptcy legal advice is what makes the Law Offices of Peter A. Jouras, Jr. a great Kansas City bankruptcy attorney. We’re here to help you ensure a strong future.
What is Bankruptcy in the state of Kansas and Missouri?
Bankruptcy is a legal way for people and businesses to get a fresh start and discharge their debts. It is federal law. However, each state, such as Missouri and Kansas, have their own exemption laws which determine the property the state considers fundamental to a fresh start. Property cannot be taken from you in a Chapter 7 or Chapter 13 bankruptcy.
How does Bankruptcy work in Kansas City?
There are several common steps which are taken prior to filing bankruptcy in both Missouri and Kansas.
First, the debtor must gather supporting documents, such as tax returns, bank statements, pay stubs, vehicle titles, insurance policies and other necessary items. Then, using these documents, the debtor must complete a checklist of questions on the federal bankruptcy forms. On these forms the debtor is asked to disclose all debts, assets, income and expenses they have.
Next, the debtor is required to complete a pre-filing consultation with an approved credit counseling group. Once the paperwork is filed with the federal bankruptcy court, the debtor and their attorney must appear at the first meeting of creditors, otherwise known as one’s section 341 hearing. At this hearing, the debtor can expect to be asked questions by the court appointed trustee and possibly any creditors who may appear regarding their filing.
Following the debtor’s court appearance, the debtor is required to take a class on financial management through an approved provider which they had done before.Then they are eligible for a discharge of their debts.
If all has been completed as required, the debtor can expect to receive a discharge of their debt within six months of filing a Chapter 7 and three to five years after filing Chapter 13.
Federal Bankruptcy Laws Changed
There was an overhaul in the federal bankruptcy laws several years ago. One of the biggest changes was the creation of the “means test”, which compares the income and expenses of each Missouri or Kansas debtor to the median income and average expenses of the people in their county and state. If the debtor is above the median income for their household size, and it is determined they have disposable income based on the rest of the test, then that debtor is presumed to need to file Chapter 13 and cannot file a Chapter 7. There are many exceptions to these rules and a debtor should consult with a Missouri or Kansas licensed attorney who has experience in the the area of bankruptcy law about all their options.
A Reorganization of Your Debts
There are two common groups of debtors who have to file Chapter 13. The first group files because they are behind on their home or car and want to avoid foreclosure or repossession. In such a case the debtor would make their regular monthly payment plus equal payments of their arrearage to the bankruptcy court to catch up on their payments over 36-60 months. The other common group of debtors may have to file Chapter 13 are those whose income allows them enough disposable income to repay a high enough percentage of their debts over the course of 60 months. Filing Chapter 13 is complex. It is in the best interest of the debtor to consult with an experienced Missouri or Kansas bankruptcy lawyer before they file.
A common scenario is a person gets laid off and can’t make their mortgage payments for several months. Then the person gets his/her job back, but can’t afford to pay back all the arrearage at once. The solution is Chapter 13 Bankruptcy, where the person will be allowed to pay the regular house payments and sprinkle out the arrearage over 60 months while avoiding the loss of their home to foreclosure.
A Straight Liquidation Bankruptcy
All non-exempt assets the debtor owns are liquidated in exchange for a discharge of his or her unsecured debt. A debtor in a typical Chapter 7 case can expect to receive their discharge within six months of the filing date. A discharge means the debtor is no longer legally obligated to pay on the debt any longer. A debtor may want to keep some debts, such as on a house or car, which they can do in bankruptcy by staying current on this secured debt and signing a reaffirmation agreement with the creditor.
Reaffirmation agreements are binding and are best entered into with the advice of an attorney. Likewise, there are exceptions to a full discharge of one’s debts, and a debtor should consult with an experienced bankruptcy attorney before filing.