There is no minimum amount of debt that you have to owe to file for bankruptcy. Many of our college-age filers and our elderly filers have in the range of $5,000 in debt, but the amount can still be overwhelming.

You don’t have to be behind at all to file for bankruptcy. However, the majority of our clients are far enough behind to experience lawsuits and garnishments and disrupt their ability to manage their everyday expenses.

You should always try to work a payment arrangement with your creditors. But after a time, broken promises turn into lawsuits and garnishments. Keep bankruptcy in your back pocket as Plan “B.”

To determine eligibility (income wise) and to be able to provide documents to the Trustee assigned to your case, I will need two years of tax returns-Federal and State, as well as 6 months of paycheck stubs. If you are self-employed, we can give the Trustee an affidavit in the place of the pay stubs, but an Income and Expense statement for the business will be needed to justify our number given in the Schedules for the Budget.

The Trustee is a court-appointed person who generally represents the creditors as a whole. It is the Trustee’s job in a Chapter 7 case to determine that the debtor was eligible to file the case and that the petition, schedules and related documents are true and complete. After that, the Trustee is tasked with job of taking and selling any assets that the debtor owns that are not exemptible under the rules and laws. A chapter 13 Trustee has a broader task because chapter 13 cases normally take from 3-5 years. And while Chapter 13 Trustees do not take and sell the Debtor’s assets, the Trustee has broad authority to oversee the case, and to make objections to confirmation of the case, or to manage the case in various other ways.

In broad strokes, Chapter 7 is a liquidation that allows the Trustee to take and sell non-exempt assets of the debtor, and Chapter 13 is a payback plan over a 3-5 year payment plan.

In a chapter 7 case, a debtor (In Missouri) can exempt $3,000 in value in a car. In addition to the car exemption, a debtor has a “wild card” exemption, and a person may have other exemptions available if the debtor has minor children in the household. So generally, speaking, if their car is worth less than $3,000, it would be “safe” from taking. Likewise, a person can own a $20,000 car, on which $17,000 is owed. The equity that the debtor has in the car is the difference between the two, or $3,000, so that it would theoretically be safe from taking too. A debtor should seek the advice of counsel on this matter because each district uses different standards to determine the value of an automobile. In addition, the Debtor needs to stay current on the car payments during the case so that the car lender won't be interested in repossessing it.

The filing of a bankruptcy will stop a garnishment but it may take a paycheck or two to get is stopped. The reason for this is that a wage garnishment must be served by the sheriff. Likewise, the release of garnishment must also be served by the sheriff, and the sheriff has other duties to which to attend, so the release may take some time. Some employers will take a copy of the release from the debtor or the debtor’s counsel, but the employer does not have to do this, and can wait on the sheriff for the official form.

The cost for chapter 7 depends on the complexity of the case, and will vary from attorney to attorney. As of the publication of this section, the Court charges $335.00 for the filing fee ($310 for chapter 13), and the required credit counseling classes may be as little as $10 each (two are required) and can often cost much more. I use Moneysharp.org, and I pay for my clients credit counseling classes. My average fee for a “vanilla” case is currently $1,000.00 (more for chapter 13), and my fee is typical. Yes, you can probably find somewhat cheaper attorney fees, but believe me, you get what you pay for, so choose wisely. The less an attorney charges, especially in the bankruptcy arena, the busier they are likely to be, and the less time they will be able to devote to any individual case. Super busy attorneys have less time to communicate effectively, and lack of communication constitutes the majority of complaints made to the Missouri Bar Association.

Not a chance. You MUST list everything you own, and everybody you owe, without exception. Now, the Court will give you a discharge, so that you don’t have to legally repay most creditors. However, the Court will not keep you from voluntarily repaying someone that you want to pay. After all, most people want to repay their mothers, right?

I have been practicing law for over 20 years, and I have encouraged clients to call me and let me know if the client’s doctor refuses service to them after having listed them as a creditor (just because I’m curious!) and no client has EVER called me and told me that their fear was justified. Maybe it happens, or maybe my former clients decide to voluntarily work something out with the doctor, but I’m not aware of any refusal of continuing services.

If you otherwise qualify, we still have to make sure that you are not time-barred from filing. We count time between cases from filing date to filing date, not from the discharge of the last case. Your ability to file depends on whether you filed chapter 7 or 13 before, and which chapter you want to file next. Here’s generally how long you have to wait between cases:

7 to 7 ................... 8 full years

13 to 7 ................. 6 full years

7 to 13 ................. 4 full years

13 to 13................ 2 full years

Most lenders will want you to wait 3 years, but some may make the loan after 2 years with a good explanation. I know a mortgage broker that doesn’t represent any particular mortgage company, and he can explain how long you would have to wait based on the type of loan you want to get, such as FHA, VA, Freddie Mac, etc. Most mortgage lenders will want to see that you can be responsible for 3-4 credit lines, and pay them on time for at least a two year period before extending credit to you.

Your credit score will probably take a hit immediately after filing bankruptcy, typically 50 to 100 points. But most of my clients have scores that are in the toilet anyway, so bankruptcy, in my assessment, is not ruining anybody’s credit. Normally, you will start right away making your car payment or house payment which will start to rebuild your credit right away. If you don’t have a car payment or a house payment, it is like turning you 18 again, and you will want to take steps to establish good credit from scratch. A secured credit card would be a good first start, if the available credit limit is low, like $500. You can charge something necessary each month, like gas only, and pay it off each and every month. This will start those numbers ticking up again.

I will have suggestions to do that, and the credit counselors will also have suggestions and resources. There are books at the library on the subject as well.

All Court actions, no matter whether it is a divorce, an eviction or a bankruptcy, it will stay on your credit report for 10 years. Individual creditors will typically fall off the credit report after 7 years.

If you are not time-barred, you will have to qualify for bankruptcy chapter 7 based on you income. Basically, you have to be “poor enough” or the Court will want you to be in Chapter 13, and be paying back creditors some money. In essence what we do is we look at your income for the 6 month period prior to the filing of the case and double that number to come up with an annual amount. We then look at how your income compares to the median income for a family of your size, and if your household income is below the median, then you qualify. Its not quite as black and white as the what I just described, but there is a process, and some number crunching going on. So, its darn good that I’m good at 8th grade math, right?

If you don’t qualify for Chapter 7, then Chapter 13 might be an option for you. In a Chapter 13 case the debtor has to give the Chapter 13 Trustee all available income not needed for the debtor’s monthly expenses. Whatever the amount is (I call it “disposable income”), it also has to be enough money per month to cover all the creditors that are required to be paid through the Chapter 13 plan. There are other requirements, so you should talk to me about all those obligations, to see if Chapter 13 is right for you.

Chapter 13 has certain perks that Chapter 7 does not have. Most people who file Chapter 13 do so to stop a foreclosure on their house. Chapter 13 will allow a debtor 4 years to catch up the past-due amount (the arrearage) while Chapter 7 will afford an average debtor maybe a week or two delay in the foreclosure process. The Judge will freely grant the creditor “relief from the automatic stay” to allow the creditor to finish the foreclosure sale. Some people file Chapter 13 to keep their car, or to get taxes or child support paid while enjoying the protection of bankruptcy.

Go to irs.gov and search for transcript.

Your bankruptcy will only discharge your obligation to pay a debt. The cosigner will still be responsible for paying the loan.

Your court date (called the "341 Meeting of Creditors") will happen approximately 30 days after your case is filed, and you will have at least 2 weeks notice of the hearing date in case you need to ask off from work. The hearing normally takes about 2 hours, and there are normally 18 people on each docket. The dockets are filled up in order of the case numbers, so you are just as likely to be first as you are to be last. Your participation at the hearing will normally take about 5 minutes. But sometimes we get held up by more complicated cases that are called before ours.

While most debts are dischargeable, there are some debts that are non-dischargeable that you will have to pay even though you filed bankruptcy. These debts are generally, taxes, alimony, child support, student loans and some property settlements. Other non-dischargeable debts are ones resulting from fraud, willful or malicious injury, certain fines or penalties, and claims incurred from driving under the influence of alcohol or drugs.

If you are in Chapter 13, each year, withing 2 weeks of filing your tax returns, you MUST turn over a copy of your returns to the Chapter 13 trustee. You will be able to keep a portion of your tax refund, and the Trustee will send you a letter letting you know how much of your refund you will need to send to her. Do NOT spend any of your tax refund until after you have "settled up" with the Trustee. This payment each year to the Trustee is in addition to your monthly plan payment, it DOES NOT count toward your plan payments.