“Do I have to list all my stuff in bankruptcy?”
Yes. All the property you own, in the broadest sense of the word, has to be listed in your case. Everything. There’s no legal way to pick and choose. Trying to do so could be a crime.
Do not jump to the conclusion that you will lose property you list! Listing everything correctly is part of the process of keeping your property — not the start of losing it.
Most people filing bankruptcy keep everything they want to keep and can afford to keep paying for, if they owe a debt on it.
Let us repeat that: Everything is listed in your case in order to help you keep it. Here’s an example of what can happen if you do it wrong.
“Do I have to list all my debts?”
Yes. All the debts you owe have to be listed. Everything. There’s no legal way to pick and choose. You have to swear under oath you did and lying under oath is a crime.
Don’t jump to the conclusion that you will lose property you owe money on! Listing the debt correctly is the first step to assuring you can keep the property you need to keep — and get rid of the debt you don’t need any more.
Even if you don’t want to wipe out a debt, like one owed to a friend or relative, or a doctor you want to visit again, they should be listed.
You can always repay discharged debts after the bankruptcy voluntarily. Or you can even reaffirm your legal obligation to debts.
You should even list debts you do not think you owe for some reason. This is your chance to be sure, for good, that you don’t ever have to pay it. It’s not just a fresh start, it’s a clean sweep.
“Who is going to know I filed bankruptcy?”
Your creditors, your lawyer, the bankruptcy court, and trustees.
A bankruptcy filing is a public record. It will be on your credit report. But there’s very little public interest in individual bankruptcy cases.
Are you a celerity or public official? No? Then why would the newspaper care?
We know it can be embarrassing to file. We don’t think it should be but we appreciate your privacy. So does the court. They don’t go out of their way to embarrass anyone. It’s not about punishing you, it’s about helping you get a fresh start.
Here’s the reality: You probably know several people who filed bankruptcy but you don’t know it. They didn’t get branded by the judge. There’s no scarlet letter you have to wear around. No sign in your yard. No ad in the newspaper. And unless you are a celebrity, no one wants to report it on the nightly news.
Further reading: Debt: The Last American Taboo
“Can I keep my house?”
Can you afford it? If so, then the answer is almost always yes.
If you are current — and keep current — on payments and have less than $15,000 equity in your Missouri home, you should be able to keep it. That is true in either Chapter 7 or Chapter 13. The lender may ask for a reaffirmation agreement in certain situations.
If you have more than $15,000 of equity in your Missouri homestead, you may need to file a Chapter 13 Plan instead of straight Chapter 7 bankruptcy.
The home equity amount protected can be different if you have moved to Missouri from another state in the last three years.
If you are behind on payments, a Chapter 13 may be necessary to cure the missed payments in the repayment program. And you need to be able to keep making the regular payments. We typically have no tools available to change your monthly payment obligation — so if you can’t afford the mortgage and the mortgage lender won’t or can’t change your loan terms, then you may not be able to afford the house.
You can usually keep mobile homes in Missouri.
If you are current — and keep current — on payments and have less than $5,000 equity in your Missouri mobile home, you should be able to keep it. That is true in either Chapter 7 or Chapter 13. The lender may ask for a reaffirmation agreement in certain situations.
If you have more than $5,000 of equity in your Missouri mobile home, you may need to file a Chapter 13 Plan instead of straight Chapter 7 bankruptcy.
This is true if you rent the pad or do not own the land the mobile home is on. If you do own the land, you should make sure the home is permanently attached to the land and made a “fixture.” In doing so, you will be able to protect the land and the mobile home as your homestead for $15,000, instead of only $5,000. If you do not, you may not be able to protect either the land or the mobile home in Chapter 7.
The home equity amount protected can be different if you have moved to Missouri from another state in the last three years.
If you are behind on payments, a Chapter 13 may be necessary to cure the missed payments in the repayment program. And you may need to be able to keep making the regular payments. Changing the terms of a mobile home loan that doesn’t include the land is possible but it depends on your finances and the amount owed.
“Can I keep my car?”
Usually you can keep your car. Sometimes several cars.
If you are current — and keep current — on payments and have less than $3,000 equity in your car, you should be able to keep it. (If you and your wife on the car or cars, you c an protect up to $6,000 of equity.) That is true in either Chapter 7 or Chapter 13. The lender may ask for a reaffirmation agreement in certain situations.
If you have more than $3-6,000 of equity in automobiles, you may need to file a Chapter 13 Plan instead of straight Chapter 7 bankruptcy.
The car equity amount protected can be different if you have moved to Missouri from another state in the last three years.
If you are behind on payments, a Chapter 13 may be necessary but we can typically change and even lower hw much has to be paid to the car lender, making some high payments much more manageable.
There is also an option in Chapter 7 to “redeem” a car for its retail value in a lump sum from the lender. This can be useful if your car is worth much less than you owe on it and you can either borrow the money to redeem it or a friend or family member might give you the money to do it.
Further reading: Reaffirmation agreements, bank screw-ups in Chapter 13, bank screw-ups in Chapter 7, Redemptions
Can I keep my retirement plans?”
Almost without any exception, the answer is YES!
Missouri protects most types of retirement plans, including traditional pensions, IRAs, Roth IRAs, 401(k)s, 403(b)s, profit-sharing plans and so on, inside or outside of bankruptcy. In addition, bankruptcy law provides additional protection for most of these assets when you fie bankruptcy.
There are some limited exceptions. You may not be able to protect unusual contributions made in the recent past to such accounts. And many of these accounts can be pursued by or for some special creditors — like child support or some taxes.
However, for most people those accounts are safe from creditors. This is one of the reasons we strongly encourage folks to not touch those accounts to deal with current debt problems — and to keep up their regular contribution programs, if at all possible.
Further reading: Take Care of Yourself First, Uncle Same Does Asset Protection
“Will bankruptcy stop wage garnishments?”
Almost without any exception, the answer is YES!
If you have been sued on a consumer debt, like a credit card or signature loan, we can usually stop the garnishment with a bankruptcy filing. Creditors have to obey the automatic stay imposed by a bankruptcy filing.
There are some limited exceptions. You can’t stop a child support deduction. Bankruptcy can’t be used to stop your child support payment. It might be used to stop the extra payment for back or missed support payments but you won’t get rid of them in the long-run. You will typically need to file Chapter 13 in order to address back support payments owed, through a payment plan. And if the debt can’t be wiped out (e.g. support or most student loans) the garnishment could resume after your case is over.
But for most people, garnishments are for old consumer debts they can’t afford to pay. And the deduction is making them fall behind on more important debt, like rent or mortgage and car payments. Bankruptcy will allow you to put the order of payment right again — to allow you to decide who gets paid and who does not.
Additional Information: Protecting Unemployment Benefits
“Do I have to go through credit counseling before I file?”
You have to be briefed by an approved credit counselor within 180-days before before you can file bankruptcy.
Don’t be confused or misled about this obligation! The credit briefing you have to receive takes very little time, usually no more than an hour or two. Most or all of it can be done over the Internet or by phone, although in-person is available as well.
You do not have have to go into a payment plan with the credit counselor. Many counselors are paid by credit card lenders to manage their collection of the debt you owe the card. They may be trying to help you but they are also helping themselves. Let us repeat this: You are not required to go into a payment plan in order to “qualify” for any bankruptcy though.
The credit counselors are approved by the U.S. Trustee program for each district. These are the current approved agencies. We will provide a list of agencies our clients have worked with and who seem to be providing decent, efficient, unbiased information. However, if you do it before coming to see us, be sure you get a copy of the certificate showing you completed the briefing — it has to be filed with your case.
Remember: You have to do this before a case can be filed. It must be done within 180-days (6-months) of the case filing. But you do not assume you have to go into a payment plan or that you have to do it for 6-months. We’ve heard some rogue counselors have told customers this in order to get their money.
Further reading: Credit Counseling: Mostly a waste of Money But Could It Be More?
“I filed a bankruptcy before, can I file again?”
The rules are complicated. You can still file a case under different Chapters of the Bankruptcy Code — but in order to discharge — wipe out — debt, there are different “waiting” periods between cases.
If you filed a Chapter 7 bankruptcy before and received a discharge:
You have to wait eight (8) years before a new Chapter 7 will qualify for discharge;
you have to wait four (4) years before a Chapter 13 will qualify for discharge.
These time limits are measured from date of filing of the original case to the date of filing of the new case.
If you filed a Chapter 13 bankruptcy before and received a discharge:
You have to wait two (2) years before a new Chapter 13 will qualify for discharge;
You have to wait six (6) years before a new Chapter 7 will qualify for discharge – unless the prior Chapter 13 case repaid an amount equal to at least 70% of unsecured claims.
These time limits also are measured by most courts from the date of filing of the prior case to the date of filing of the new case.
“Who is the trustee?”
When you file bankruptcy under Chapter 7, 12, or 13, a trustee will be appointed to oversee your case. The trustee is not the judge, he or she is not even required to be a lawyer (although they all are in Eastern Missouri).
A Chapter 7 trustee is picked by the Office of U.S. Trustee from a panel. He or she is charged with holding the initial hearing in your case, investigating the assets and transfers of a debtor, and recovering any property that can be used to pay creditors, liquidating it and then paying the claims of the creditors.
A Chapter 13 trustee is either the single or one of only a few trustees who are assigned all Chapter 13 cases. In Eastern Missouri there is currently only one Standing Chapter 13 Trustee, Diana Daugherty. Her job includes all the obligations of a trustee except taking property to liquidate. Instead she takes payments periodically from you to be paid to creditors under the plan. She is also responsible for assuring the repayment plan complies with the law and you do what you promised in the plan.
A Chapter 12 trustee performs essentially the same functions as a Chapter 13 trustee.
All trustees are paid from the money they collect to repay creditors on a commission basis. They may also be entitled to a small commission from the filing fees paid in a case.
The trustee verifies the truthfulness of sworn statements and investigates some transactions to assure complete disclosure. Therefore, the trustee is often required to ask detailed questions and “pry” into things which may not always seem obvious. They typically do not enjoy this anymore than you do!
Further Reading: Is The Trustee Mean?
“Is the trustee going to be mad at me?”
Are you planning to do anything wrong? Seriously! That’s the only way to make a trustee really angry. If you want to play by the rules and do what is required in order to get help, a trustee is not going to be mad at you!
All of our trustees are also attorneys. All of them have represented people going through exactly what you are going through — and most of them still do that work too. They understand and sympathize with your situation.
A trustee is not there to punish you. Despite what some people think, almost everyone who files bankruptcy did nothing wrong. They are not bad people and they do not deserve to be mistreated or yelled at. Bankruptcy trustees see this every single day and they don’t want to be the bad guy.
The only way to get on a trustee’s bad side is to deliberately try to do something wrong. That will force the trustee to be the “bad guy.” Most trustees understand folks make mistakes — even once they are in a case — and they try to work with anyone who is cooperative, honest, and deserving.
Remember: The trustee has a specific job to do, he or she is not there to punish you for falling into debt or spending too much on your credit cards.
If anything, the trustee is on your side in one way: They hope you will get through the process easily and be able to take full advantage of the fresh start offered.
Further reading: Is the Trustee Mean?
“Is the trustee going to come to my house?”
If you’d like to invite them over, they might. But trustees do not normally make home calls.
The trustee in any bankruptcy case is obligated to investigate the assets — the property — and affairs of the debtor. That means they have the right, when you file a case, to inspect your property.
But the system relies — depends — on the honor system. You have to tell the truth, under oath, about what property you own — everything. Like any honor system, the punishment can be harsh for failing to live up to the standards — lying to the bankruptcy court and trustee is a federal crime.
And the system works very well. Most — almost everyone — entering bankruptcy try to tell the complete truth. And they do their best to disclose everything. This has historically kept the costs very low because no one has to run up a lot of expenses going around town looking into everyone’s home. They don’t want to embarrass or intrude on your private life any more than you want them walking in on your dinner.
So while a trustee can come to your home and inspect your property, they will only do it when they suspect something is wrong, confusing or incomplete about your testimony. They have a reason to think you haven’t told the complete truth or what you have told them just doesn’t make a lot of sense. A doctor with a six-figure income is likely to have more valuable household goods than the low-income mechanic down the street, for example. If the doctor says he does not, the trustee will reasonably want an explanation why. Wouldn’t you?
Experienced attorneys will be aware of the issues which might cause a trustee to ask further questions or need more documentation. The crucial thing is to be completely honest with your attorney and with the trustee.
“Can I get audited?”
Yes. At least 1 in 250 cases are supposed to be randomly audited by a CPA or accountant. Additional cases can be audited if the U.S. Trustee believes for some reason additional investigation is required.
Remember we said bankruptcy largely works on the honor system? That’s how most people inside the system prefer it but Congress, in response to the credit industry’s horror stories, decided some auditing should be done to see if the existing system is missing anything.
The typical audit is focused on verifying the accuracy of your statements about income and expenses from the six-months prior to the bankruptcy filing as well as prior year’s income from tax returns. They may ask for copies of paychecks and bank records going back over that six-month period. And they will compare this information to the schedules filed in your case. In most situations this is handled entirely by mail.
They will also compare your schedules of property to public records. If there is a discrepancy, they will ask for an explanation of course. Most real estate and automobile records are available over the Internet through a variety of sources so it is relatively easy to see if someone has failed to disclose land or motor vehicles.
Even if you made a mistake in the paperwork, it is not necessarily serious. The auditor is not a prosecutor trying to trick you into a trap. If the error did not effect your qualification for the relief you are seeking, it is likely to be harmless. It is only if you have been deliberately withholding information that these audits will really harm anyone.
“Why do I have to hand in all my paystubs?”
It’s required under the bankruptcy law.
In order to put together a Chapter 13 case, or a Chapter 7 involving primarily consumer debt, a “means test” must be completed. One part of the test requires the calculation of your last six full (completed) months of income from virtually any source. In order to do this calculation properly, we need the records to work with.
We are also required to provide to the court and/or trustee copies of some or all of these paystubs.
So although we sound a little crazy constantly asking for more paystubs as we prepare a case, it’s not because we want to bug you. We don’t have any choice! So bear with us.
Further Reading: Why Does My Lawyer Want Useless Things?
“Does my spouse have to file bankruptcy with me?”
It is possible for your spouse to file with you but not required. A joint case is an administrative convenience but it is simply two cases filed together. (And you must both qualify to file the case in the first place.)
Your spouse may want to file a joint case with you, if there is joint debt, though. In Missouri, if you file bankruptcy and discharge a debt owed by you and your spouse, they will still owe that debt. It would likely cost nothing more to include your spouse in the case in such situations but it is definitely not required.
There can be some complicated situations in which it is advisable that your spouse not file a case at this point, too.
Further reading: Do I Have to File with My Spouse
“I owe my family some money, do I have to list them?”
If you owe anyone money, you have to list them. You may have heard you don’t have to list debts you don’t want to “go bankrupt” on. This is wrong and dangerous — when you deliberately don’t put down some debt, you are committing a crime. (It is not a crime to mistakenly leave out a debt, only to do it on purpose.)
Most people don’t want to wipe out their debt to family. But your family was never going to sue you for the bill were they? So would they really care if you wiped it out?
Nothing will prevent you from voluntarily repaying any debt you wiped out, including what you owe your family. Repaying them before can create worse problems, see here.
If your concern is you don’t want them to know you had to file bankruptcy, that’s harder to deal with. You don’t really have a choice. In order to get rid of the other debts, you have to include anything you owe now. If your family legally forgave the debt you owed them, it may not be required that it be listed anymore. But that may be harder to accomplish than simply telling them upfront that you may need to file bankruptcy.
In reality, most people are sympathetic when they find out you need to file. Sometimes they’re too sympathetic. Many times we’ve had to face family willing to nearly bankrupt themselves in order to help our clients avoid the “shame” of filing bankruptcy. Only if family is very wealthy does it make sense. Most of the time we encourage folks to help our clients recover from bankruptcy and rebuild their credit after filing, instead of trying to pay off debt instead of filing.
“I owe my family some money, can I just pay that back first?”
Yes, but they may be sued as a result. So it might not be a good idea!
A core idea of bankruptcy is that all creditors are treated equally, as much as possible, before and during a bankruptcy case. Historically this was more important than whether you could get any relief from your debt!
So if you repay friends of family more than a very small amount of money within the year before filing a bankruptcy, two things will happen. First you will have to tell the truth that you did it. It’s easy to find out you did it and you can go to jail for lying about it. The second thing that will normally happen is the trustee will sue the folks you paid, so he can take the money you paid them and redistribute it evenly among your other creditors. The technical term is “avoiding a preferential transfer” because you “preferred” one creditor over the others.
Since you can always repay a debt after a bankruptcy is over, it is almost always better to spend any money you have right now on things or services you really need. Then repay these debts, if you wish, after the case is complete.
“Do I have to have a lawyer to file bankruptcy?”
No. You have every right to represent yourself in federal courts, unless you are a corporation or other business entity. The owner of a business entity cannot “represent” his business in court unless he is a lawyer.
So you have the right to do it on your own. But should you? Never.
Bankruptcy is one of the most complex and technical areas of law a regular person can get involved in. It is also extremely dangerous — you are risking literally everything you own. It is very easy under the 2005 law to get it wrong and be thrown out for failing to do something that seems unnecessary or pointless, but required nevertheless. And if your case is thrown out, it is possible you cannot refile another case to get it right. Or you will have made too many mistakes for even the best bankruptcy lawyer to fix.
Think about your job for a minute: How many things do you know how to do that no one taught you and most people wouldn’t know if they didn’t do your job for a long time? That’s the way bankruptcy is, only with the risk of losing all your property and going to jail if you really get it wrong. It’s what you don’t know — or what you think is true but isn’t — that is dangerous.
Yes, we make a living from folks like you hiring us to file their cases and get them through those cases successfully. So no doubt we want to discourage people from doing this without our help. But here’s a little secret: We make a lot more money cleaning up after people try to do this on their own and get into trouble. It usually costs a lot more to clean up a disaster — if it can be cleaned up — then it would have cost to do it from scratch. Of course in many cases the situation cannot be completely fixed anyway.
If you are tempted, or you have heard about petition preparation services, please ask a lawyer about them first. Contact the Better Business Bureau. Check the Internet for the experience others have had with the company. We are licensed and governed by the Supreme Court of Missouri and the federal courts. We answer to judges and we carry insurance in case we make a mistake. Ask the petition preparers who they answer to.
“Can I just file for my business instead?”
Yes, you can but it may not do much good. You may need to consider personal bankruptcy.
A non-living legal entity like a corporation or an LLC can file bankruptcy. But unless you plan to reorganize it under a Chapter 11, it won’t discharge any debt. So it won’t typically do you — or your business — any good.
If your business is a sole proprietorship — that is, it has no separate legal entity — or a partnership, even if you obtained a fictitious name to use, then there is no separate business. You are the business.
For most lare business debt you promised to pay it personally too. There were probably personal guarantees you signed promising to repay the debt if your business did not. Bankruptcy only helps wipe out this guarantee if you file personally.
On the positive side, a person who has a majority of his debt from business (non-consumer) sources cannot be forced into a repayment plan instead of Chapter 7. So even if you have substantial income after the failure of prior business, you may be able to move on rapidly.
“I have good credit, will a bankruptcy ruin it?”
That depends on what you think your “good credit” is.
If you are currently qualifying for low interest loans from most lenders, then bankruptcy will make that more difficult for a time. But it may eliminate enough debt that this doesn’t matter as much.
If by “good credit” you mean that you have a lot of debt but you still have credit available from somewhere, that’s not really “good.” Sure, it may be higher interest and the terms are tough, but you are keeping on top of it right now. This type of “good credit” is basically qualifying for more of the same that made you visit our site in the first place.
In either case, your credit is something you are paying for. If you are paying thousands per year on credit card balances that never seem to go down, then that is what you are paying for “good credit.”
The real question to consider: Can you live in this asset you are paying for? Can you drive it to work? Can your kids go to college on it? Does it cover your retirement?
“Credit” is not a sign of how good or bad a person you are. It is a measure of your riskiness to future lenders. Credit is not a measure of your value as a person. For lenders it is a business decision. It should be for you too.
Further reading: Is Your Credit An Asset?, How to Make a Debt Trap, Does Your Lender Report Your Good Credit?
“How many times do I have to go to court?”
Typically you only have to go to court once.
You have to attend a 341 Meeting, sometimes called the Meeting of Creditors. This hearing is overseen by your trustee. We attend it with you. Your creditors can attend but they usually do not (so don’t let the “Meeting of Creditors” label scare you!).
The hearing is usually painless and short. It is public — but most of the people there filed bankruptcy like you, or are their lawyers. It’s not a public spectacle anyone comes to watch. In fact, it mostly resembles a quiet meeting of a few people around a small table with some other folks in the room trying not to look too bored.
By law, the judge does not attend this hearing. There may be other hearings before the judge but even many of those are attended only by the lawyers and you do not need to attend.
We will tell you which hearings you have to attend and which ones you do not need to attend unless you wish. You are always welcome to come down if you wish, of course.
Further reading: Why Is It Called a “Meeting of Creditors?”, Here Comes the Judge!, Who Will Be at My Hearing?
“Do I have to do credit counseling after I file bankruptcy?”
No. But you do have to take a second similar “financial management” course in order to qualify for a discharge in your bankruptcy case. It cannot be taken before you file the case, though.
The program must be provided by an approved agency, just like the credit counseling before a case could be filed.
Typically the program consists of about 90-minutes of information in-person or over the Internet or by phone, or some combination.
There are deadlines to complete these programs which we can explain in more detail as you prepare to file but it is often a good idea to have this completed by the time you come to your first hearing. If it is not completed and the certificate of completion then the case may be closed without a discharge being granted. In order to get the discharge, an additional court filing fee will be charged and the judge has to decide if you should be allowed to reopen the case for it.
Hopefully the course will assist you in the process and also help you rebuild your finances and avoid financial problems in the future.
Further reading: Debtor Education Courses