Are you behind in your credit card bills? Are you in danger of losing your home in a mortgage foreclosure? Are collection agencies hounding you and threatening to garnish your wages? If you’re experiencing any of these or other financial problems, you may want to consider filing for bankruptcy. While bankruptcy might not totally eliminate your debts or protect all of your assets, it can give you relief from creditors and provide a fresh start to get your life back on track.
You don’t have to live a lavish lifestyle or abuse your credit cards to become overwhelmed by debt. Many hardworking people who pride themselves on paying their bills can suddenly be in serious financial trouble if they incur large medical bills not covered by insurance, lose their jobs, or have other emergency expenses.
At Kansas City Accident Injury Attorneys, we understand that filing for bankruptcy isn’t a decision to be taken lightly. As your legal advisors, we’ll carefully evaluate your entire financial situation to help you determine if bankruptcy is the right choice.
Two Types of Bankruptcy That May Help You
There are two types of bankruptcies commonly filed by individuals: Chapter 7 and Chapter 13. When you file either bankruptcy, the court issues an automatic stay that stops creditors from taking any actions against you without court permission. Each type of bankruptcy has benefits and drawbacks—and it’s important to understand the differences between the two.
Chapter 7 Bankruptcy
A Chapter 7 bankruptcy is also referred to as a straight or liquidation bankruptcy. There are two goals:
- Discharge unsecured debts, like credit card bills, personal loans, and medical bills.
- Keep assets that can be exempted, such as a home, vehicles, furniture, clothing, and retirement accounts.
However, you must qualify for a Chapter 7 bankruptcy under a means test, which looks at your monthly income over the past six months. If your income is too high, you’ll have to file for Chapter 13 bankruptcy instead.
There are advantages and disadvantages to a Chapter 7 bankruptcy. Some benefits include:
- The action stops creditors from garnishing your wages, suing you, or taking other collection actions.
- Your bankruptcy can be completed in three to six months.
- At the end of your bankruptcy, you would eliminate all debt except for secured debts, such as mortgages, car loans, and other property that you want to keep and continue to pay off.
Here are a few of the drawbacks:
- If you cannot exempt your property under the bankruptcy exemptions allowed under Missouri or Kansas laws, the court trustee will take your nonexempt property and sell it to pay creditors.
- A bankruptcy action will only temporarily stop a foreclosure of your mortgage or repossession of your vehicle if you’re behind in your payments.
- If someone co-signed a debt for you, that individual is responsible for paying it.
- You’re only allowed to file a Chapter 7 bankruptcy once every eight years, and the action remains on your credit report for 10 years.
Chapter 13 Bankruptcy
A Chapter 13 bankruptcy is an adjustment action that requires you to pay some or all of your debts over five years. As a protective measure, you could file Chapter 13 to stop the foreclosure of your home or repossession of vehicles if you could catch up on payments during the bankruptcy period.
You would also need to file this action if:
- You have assets that aren’t exempt, which you don’t want to lose in a Chapter 7 bankruptcy.
- You’re not eligible for a Chapter 7 bankruptcy due to your income.
In a Chapter 13 bankruptcy, you and creditors agree on a Chapter 13 plan to pay your debts. A court-appointed trustee oversees your payments.
Some advantages of a Chapter 13 bankruptcy include:
- If you make all required payments, you can keep all exempt and nonexempt property.
- You can avoid losing your home or vehicle if you can afford to bring your payments current over three–to–five years.
- You can pay other debts not discharged in either type of bankruptcy, such as income taxes and back child support, over a longer period of time.
- If you pay all debts in full, a cosigner isn’t responsible for assuming any of them.
Here are some disadvantages:
- You’ll be placed on a restricted budget while making payments under your Chapter 13 plan.
- If you fall behind on plan payments and they’re being used to stop a home foreclosure or vehicle repossession, creditors could obtain court permission to move forward with those actions.
- Your bankruptcy repayment plan will most likely not be complete for five years, but in limited circumstances, a Chapter 13 action can be finished more quickly.
- This action remains on your credit report for seven years.
Questions You Need Answers to If You're Considering Bankruptcy
Filing for bankruptcy can be a complicated, confusing process. You probably have many questions. Our bankruptcy legal team is ready to answer all your questions, including these common ones that many of our clients have:
- How will a bankruptcy attorney help me?
- Will I have to go to any court hearings?
- What documents will I need to give my lawyer if I want to file bankruptcy?
- How long will it take to complete my bankruptcy?
- How much will it cost me to file for bankruptcy?
- Am I required to go through credit counseling before filing for bankruptcy?
- Will I be able to get credit after my bankruptcy is completed?
- How can bankruptcy stop a mortgage foreclosure?
- Can I get my car back if it was already repossessed?
- Can I discharge my student loan in a bankruptcy?
- When does the bankruptcy order go into effect and stops creditors from contacting me?
- Can I keep my bankruptcy secret?
- Can I discharge income taxes in my bankruptcy?
- How much of my property can I keep when I file for bankruptcy?
- What is an Order of Discharge?
- What other debts or obligations does Chapter 7 or 13 cover?
Are You Considering Filing For Bankruptcy?
If you feel bankruptcy is the best option for your financial situation you need to speak with an experienced bankruptcy lawyer as soon as possible. Please contact us online or call our office directly at 888.348.2616 to schedule your free consultation.