Remember that song “Closing Time” with the chorus, “Every new beginning comes from some other beginning’s end”? That is a pretty apt way to describe the bankruptcy process for an individual or small business. Filing for bankruptcy does certainly indicate the end of a period of economic activity when it becomes clear that continuing to make payments on your debt is not worth the financial cost. But it also signifies a whole new economic beginning for individuals and businesses to break free from crippling debt and harassing creditors and work towards a second chance at solvency and prosperity. Filing bankruptcy is, of course, not to be taken lightly, but it is a time-sensitive matter and delaying by even a few days can cost you big in the long run. Certainly, you will want to speak with an attorney who can guide you in filing for bankruptcy, but here is a simple three-point checklist to keep in mind before you take those first steps towards your new beginning.
1) Do I Have Debts That Can Be Discharged in Bankruptcy?
By filing for bankruptcy, you are essentially asking the bankruptcy court to discharge your debts and/or force creditors to accept reduced payment amounts and schedules. But not all debts can be discharged in a bankruptcy. Notable debts that cannot be discharged include most student loan debt, taxes, back alimony and child support, and secured debt (in those cases, the debtor can simply repossess the security). But, if you have any of the following types of debt, filing for bankruptcy may give you the ability to discharge such debts:
- Credit card debt
- Personal loans
- Business loans
- Personal injury judgments
- Civil claim judgments
- Utility bills
- Medical bills
2) What Type of Bankruptcy Filing Should I Make?
The two main types of bankruptcy filings for an individual are Chapter 7 and Chapter 13 filings. With a Chapter 7 filing, you are asking the court to discharge all dischargeable debts, and at the culmination of a successful bankruptcy proceeding, you will owe nothing on those debts and your creditors will not be able to ask you to repay. With a Chapter 7 filing, however, the downside is that you will have to relinquish all of your assets except those exempted by state below (see question 3 below).
In a Chapter 13 bankruptcy, however, you can achieve the same benefit of being able to stop creditor harassment as soon as you file, but instead of discharging your debts, you will work with your attorney and creditors to develop a payment plan with reduced balances and/or extended payment schedules. Furthermore, you will not have to relinquish your assets as in a Chapter 7 filing.
3) What Assets Can I Keep Following Bankruptcy?
If you file for a Chapter 13 bankruptcy, then you do not need to worry about this question, but if you file for a Chapter 7 bankruptcy, then Missouri law will dictate what assets you will get to keep following your bankruptcy proceeding (the remainder of your assets, if any, will be liquidated in order to pay your creditors). Under Missouri law, bankruptcy filers are entitled to keep the following items:
- Household goods, furnishings, and personal belongings worth up to $3,000
- A wedding ring worth up to $5,000 and other jewelry worth up to $500
- Any other property worth up to a combined $600
- Professional books and tools of trade worth up to $3,000
- Vehicles worth up to $3,000
- Mobile homes used as principal residences worth up to $5,000
- Life insurance policies worth up to $15,000
- The right to receive some types of benefit payments, including VA benefits, social security, alimony, disability benefits, and certain pension and retirement benefits
Talk to your attorney about additional exemptions you may be eligible for.
Schedule a Free Consultation With a Bankruptcy Attorney Today
The attorneys at The Law Store are here to answer any questions you have about the bankruptcy process, and to help you assess your financial situation. We can help you decide if filing bankruptcy is right for you, or whether a debt negotiation, settlement, or other option is a better option. Drop by The Law Store, call for an appointment, or schedule one online. We are open on weekends and keep evening hours for your convenience. Our attorneys and staff are there when you need us, and your first consultation with The Law Store is free.