Chapter 7 liquidation is what most people consider bankruptcy. Chapter 7 liquidates all non-exempt assets without any repayment. Most believe they have nothing to lose, since only non-exempt assets are liquidated in bankruptcy, but that could be a mistake. Though administered quickly, Chapter 7 can only be filed every eight years. Continued borrowing versus Chapter 7 may not be your best choice if you can't balance your monthly expenses with your monthly income. With any bankruptcy, you are given immediate stay protection from creditors while the bankruptcy proceeds. There is typically no court appearance or meeting with the judge who oversees the bankruptcy by appointing a trustee. The trustee makes a report recommending the judge to enter a discharge order that wipes out most or all of your unsecured debts. Unsecured debts are debts where no property is used as security to repay them. There is a stay on collections the day you file, permanent collection injunction on the discharge date.
Chapter 7 stay no longer protects your personal property from repossession unless you indicate you want to maintain personal responsibility and reaffirm the debt demonstrating an ability to repay. Only Chapter 13 allows you rewrite and repay your car loan and secured creditors at the present value, typically around 5 percent without personal responsibility. Chapter 7 Attorney fees are required to be paid "upfront" whereas Chapter 13 does not. Additionally, the savings between your contract rate and the Chapter 13 present value rate is typically why many clients file Chapter 13. Unfortunately, the "upfront cost" prevent many from filing Chapter 7, whereas Chapter 13 may be less, upfront and less overall when considering the overall cost and debt repayment cost.
Filing for bankruptcy compares to filing your taxes, both should be handled carefully. As a CPA/Attorney, I always consider and generally recommend Chapter 13 because it generally serves the client better. Surprisingly, Chapter 13 may actually be less expensive when repaying the car loan than paying the contract rate in Chapter 7. Chapter 7 ends with a subsequent four year no discharge period, eight years in between Chapter 7 cases, whereas a Chapter 13 can be filed every two years and protects you from subsequent creditor collection attempts while you complete your plan. Before you run out to buy a new car and trade in that old clunker, converting the old loan interest rate to the present value rate in Chapter 13, come see us. We don't recommend trading that old clunker!
Chapter 7 is involuntary once you file. Under Chapter 7 your case will be dismissed if you can repay $10,000 unsecured debt, in five years. Generally this is not an issue since 50 percent of all household incomes are above the means test calculations, but don't file bankruptcy. Most above the median income level, despite increased scrutiny, still pass the test based on the IRS collection standards and expenses allowed by Congress before repaying unsecured creditors. In these situations, Chapter 7 may be the better choice over Chapter 13.
In any bankruptcy, unsecured creditors are paid after secured creditors, priority taxes, and reasonable and necessary expenses. You only pay only what you can afford in any bankruptcy. Chapter 13 is purely voluntary. You may budget to repay only your secured car loan, excessive non exempt equity, administrative court (attorney) fees..
More so in Chapter 7 than Chapter 13, property valuation accuracy is especially important. Exemptions in Missouri only protect property equity, the property value less associated debts. The asset with excess equity is sold or liquidated in Chapter 7. In Chapter 13, the excess is repaid within five years, preventing having all property and belongings being sold out from under you. Prudent bankruptcy filing requires accurate property valuation. When in doubt, a "voluntary" Chapter 13 Bankruptcy filing is your best option..
Bankruptcy is what we do. The laws are extensive, complex and personal. The Court requires us to meet with you, personally. All of your questions cannot be answered entirely with an email, web site discussion, or phone call that is why the Court requires us to personally meet with you. You only get relief when you file, so we need to meet, personally.
Email or call our office to set up an appointment with Mr. Noel (Neal) Bisges to discuss your situation and have your options explained to you by an attorney who wants to maximize your wealth by minimizing your debt.
If you have filed Chapter 7 within the past four years you are ineligible for a Chapter 13 discharge. If you have filed a Chapter 7 within the past eight years, you are ineligible to file another Chapter 7 but you may file Chapter 13 obtaining bankruptcy protection and debt relief while paying what you can afford.
Good general information regarding Chapter 7 Bankruptcy is available from the US Courts Federal
Judiciary at: Chapter 7 - Bankruptcy Basics
Jefferson City: (573) 635-6850
Columbia: (573) 442-8160
529 East High St.
Jefferson City, MO 65101
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The information provided in The Bisges Law Firm, P.C. web page is offered for informational purposes only, and it does not constitute legal advice. The Bisges Law Firm, P.C. does not have an attorney-client relationship with you based upon your visit to this web page. If you have a specific legal question, you should contact an attorney. The Bisges Law Firm is a debt relief agency.