Articles Posted in Fresh Start / Clean Slate

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Yes, it will.

I could just end the conversation there, but you are probably wanting a fuller explanation as to why!! Most people operate under the misperception that filing a St. Louis bankruptcy will ruin their credit rating forever. They believe that they will never be able to purchase a home, a car, or even finance a pair of socks at JCPenney. But as I mentioned, this is a misperception.

One of the biggest misperception people have about filing a Missouri bankruptcy is that doing so will completely limit their ability to reestablish a line of credit for seven to ten years. This is completely untrue. This perception is based on numbers that are frequently thrown around at will (normally by people who have no idea what they are talking about). The filing of a bankruptcy (or it might be better to say that the fact that you have filed a bankruptcy) will remain on your credit report for ten (10) years. The automatic assumption is that this fact will prevent them from gaining any ground within that ten year timeframe. But this is simply not the case.

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In a surprisingly shorter period of time than you may think. The filing of a Missouri bankruptcy allows for what is called a “fresh start / clean slate“. This means that once a discharge of your unsecured debts (like credit cards, medical bills, payday loans, etc.) occurs, you are in a perfect position to move forward with life. This would include opportunities to purchase big ticket items, such as a new car.

More often than not, when you are dealing with aggressive creditors and collection agencies, your stress level is pretty high. This is especially the case when you have lost your job, or if your hours have been severely cut. Financial stress can cause families to fight, relationships to fray, and your self-esteem to wither. But there is a definite light at the end of this tunnel.

The discharge of debts through a St. Louis bankruptcy can open the door to a whole new world. If for instance you are in need of a new car (because your current one does not run very well, or the one you have has an incredibly high interest rate attached to it, or even because the one you own right now just barely makes it down the street), you might first go to look into buying a new one. But when you attempt to purchase it, the dealer is very hesitant to negotiate a deal with you because of your credit rating.

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Because the Bankruptcy Code makes it clear that if you are an above-median household, and you are filing a Missouri or Illinois Chapter 13 bankruptcy, then you have to commit to a five (5) year plan. Other situations allow for varying lengths of time, but that is the general rule.

When you file for bankruptcy in the state of Missouri, it is necessary for you to disclose any and all sources of household income over the previous six (6) months before filing. This would include obvious things like money earned from your (and/or your spouse’s) job, like wages, bonuses, or other earnings. But it would also include monies from the government, such as unemployment benefits, Social Security Income, and food stamps; or money received from rental units, part-time jobs, pension/retirement funds, and anything else that you may have made money from over the entire six months prior. All of this data is collected by your attorney, and entered into what is called a “Means Test”. This test determines whether or not you are above or below median income for your particular household size.

For instance, according to the federal government, the average or median income for a household of four (4) is: $67,255.00. If your household income exceeds this level, then you are considered to an above-median income household (in other words, the total income earned in your household per year is above the national average for a family of four). When you file a St. Louis Chapter 13 bankruptcy, and you are above median, then you are required to enter into a five year repayment plan. If your household income level is below the national median, you can choose to do either a three (3), four (4), or five year plan.

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No, that is not true at all. There is no debt total that you must reach in order to qualify for a Missouri or Illinois bankruptcy. All that is necessary is your decision, based on all the information that you have attained on the subject, to file the petition for relief.

I am frequently asked by clients whether or not they should in fact file for bankruptcy. And to be honest, there are occasions when I will look at their debt levels, income earned, and equity in their assets, and tell them that, no, they do not need to file for bankruptcy protection. A good lawyer can look at your information, and honestly tell you if it is in your best interest to file such a case.

But more often than not, it is the individuals who believe that they absolutely do not need to file that are in need of relief the most. I am not in the business of trying to convince someone that they should file for bankruptcy, but there are any number of times when I have had to tell someone that the best and only option at this point is pulling that trigger. Most of the time, the apprehension comes from the stereotype that is attached to someone who files. There is a feeling in society that if you file for bankruptcy, this means that you are a deadbeat, or that you cannot handle your finances, or that you are ill-equipped to manage your money. This kind of stereotype comes largely from the credit industry. They of course have a vested interest in you not filing for bankruptcy, so they put out a lot of bologna information about the effects of filing.

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Only certain kinds of debts are paid back in a St. Louis Chapter 13 bankruptcy. These would include mortgage arrearage (in other words, the amount of money you have fallen behind on your house payments), car loans, tax debt, back child support, and sometimes a portion of your unsecured debt (like credit cards, medical bills, and payday loans). But the exact amount you pay back per month depends on a several key factors.

A Missouri Chapter 13 bankruptcy is described as a repayment plan over the course of three (3) to five (5) years during which you pay a certain monthly amount to the Trustee. The Trustee then distributes these funds to the various creditors listed in your Chapter 13 plan. At the end of the plan, all the remaining unsecured creditors are discharged (i.e. knocked out forever). This in contrast to a St. Louis Chapter 7 bankruptcy, where all the unsecured creditors are discharged right away.

The main reason why someone would file a Chapter 13 would be because they have fallen behind on their mortgage, are risking foreclosure, but are not in a position to come current on the note right away. Filing a Chapter 13 will stop the foreclosure sale from going through, and allow you pay back the arrearage over a period of years (which is far better than coming up with the funds immediately). Another major example would be a case in which your car is repossessed. A 13 will allow you to get the car back, and pay off the balance of the loan with a much better interest rate than you are probably handling right now. In addition, it may also be possible to cram down the amount owed on the car to the actual fair market value of the vehicle. This can often end up shaving several thousand off of what you owe.

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Yes, it does. And depending on how quickly you get your Missouri or Illinois bankruptcy filed, you can actually prevent the creditor from taking any action at all (so as to avoid any money being garnished from your pay checks).

The filing of a bankruptcy is accompanied by what is called an Automatic Stay. This is a fancy way of saying that everything stops. All creditor activity must immediately cease, including phone calls and letters. This Stay also extends to anything awarded to the creditor by way of a hearing. When a creditor sues you for breach of contract on a debt that you owe, the judgment from the court allows the creditor to do one of three things: 1) garnish your wages; 2) levy your bank account; 3) place a lien against your property. The creditor can execute one of these options, or it can do all three at once. The most likely, of course, is the wage garnishment. The creditor simply sends your employer the necessary documentation, and the payroll department begins to deduct.

But once a bankruptcy is filed (whether it is a St. Louis Chapter 7 bankruptcy, or a St. Louis Chapter 13 bankruptcy), the garnishment must end. Your bankruptcy attorney simply notifies the creditor’s attorney of this fact, and that attorney then sends a Release of Garnishment to your payroll department. In addition, the underlying debt is discharged, along with the rest of your unsecured creditors (whether they be in the form of credit cards, medical bills, payday loans, deficiencies from a repossession or foreclosure, etc.)

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I hear this comment a lot from clients. The level of stress that a mountain of debt can produce can literally be overwhelming. Credit cards, medical bills, payday loans, old utility bills, cell phone carriers, overdrawn bank accounts, deficiencies from a repossession, past due loans, etc. All of these things can build up and spiral out of control. And your life can seem like an inescapable trap.

But it does not have to remain this way. In fact, the relief that you seek is more easily attained than you may think. For instance, when you file a St. Louis Chapter 7 bankruptcy, all of your unsecured debt (the stuff mentioned above) is discharged. This means that the debt goes away forever. The creditors cannot demand payment from you anymore. The creditors cannot call you anymore, or write you letters, or harass you at work. And you are not obligated to pay them anything ever again, or explain anything to them, or even talk to them. They are all gone, in one fell swoop. Once this discharge occurs, you will be in a perfect position to begin rebuilding your credit score. Most people who file a Missouri or Illinois bankruptcy will typically find themselves making major purchases (like a house) within two years, and reestablish a good credit rating within one year.

Or if the better option for you is a St. Louis Chapter 13 bankruptcy, then the relief from debt is handled in a slightly different way. A Missouri Chapter 13 is a repayment plan. This allows you get caught up on things like your mortgage (so you can save your home from foreclosure), to make sensible payments on your car (so that it does not get repossessed), take care of your tax debt, and come current on any back child support obligations. All of these kinds of debts are consolidated into one easy, monthly payment to the Trustee. The Trustee then distributed the funds to the various creditors listed in your Chapter 13 plan.

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My suggestion would be, yes, you should appear in court on the day of your hearing. Not doing so can have negative consequences (even if you end up filing a Missouri or Illinois bankruptcy later on). let me explain why.

If you fall behind on your debts, one of the things that a creditor can do is to sue you for breach of contract. In other words, you agreed to make certain payments per month, you failed to do so, and now they want the court to recognize that you have breached your end of the deal. In order to make this happen, the creditor (through their attorney) will file the Petition for Breach with the proper jurisdiction, and then have you served with a summons. The summons is very important, because this is the document that informs you that a hearing has been set on matter, which includes date, time, and location. If you are not properly served with a summons, the hearing cannot take place.

Assuming you are properly served, the summons will indicate the date and time on which the hearing will be held. This hearing is your opportunity to make any argument you might have as to the validity of the debt in question. But if you do not appear on the designated date and time, the creditor will receive what is called a ‘Default Judgment.’ A default judgment is an order from the court essentially saying that the creditor wins by default (because you did not show up). Once the creditor receives this type of judgment, it may then move forward with its range of remedies. These would include a wage garnishment, bank levy, or placing a lien against your property. So this is why it is important to make an appearance.

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Yes, you can. But you will be limited to a Missouri or Illinois Chapter 13 bankruptcy. The federal bankruptcy code states that an individual may not file a St. Louis Chapter 7 bankruptcy more than once every eight (8) years. Once the eight year mark is passed (this is the date on which you filed the case, not when you received your discharge), you are again eligible.

But yes, you may still file for bankruptcy during this eight year window. You can still file a St. Louis Chapter 13 bankruptcy. This is described as a repayment plan over the course of three (3) to five (5) years, during which certain creditors are paid back. Examples of the types of debts paid back are mortgage arrearage, car notes, tax debt, back child support, and possibly a portion of your unsecured debt (however, there is always a good chance that even this type of debt can be fully discharged as well).

There are a number of beneficial things that you can do in a Chapter 13 that you cannot do in a Missouri or Illinois Chapter 7. For instance, you can get rid of a second (or junior) mortgage attached to your house in a 13. So long as the fair market value of your home is less than what you owe on the first mortgage, then any junior lien can be stripped off. This means that you would only have to deal with one mortgage thereafter. It is also possible to ‘cram down’ the amount that you owe on your car to the actual value of the automobile. Many people are upside down on their cars (i.e. they owe more than the car is worth). So long as you purchased the car 910 days or more ago (which works out to be roughly two and a half years), then you will only be required to pay back the value of the car as opposed to the balance on the note (which can sometimes be a difference of thousands of dollars).

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If you make it clear to the debt collector that you dispute the debt that they say you owe, then they may not contact you anymore until the dispute is resolved. If in fact the collector does contact you about the debt after such a dispute is made (but before it has been resolved), the collector has violated your consumer rights. If it can be shown that this happened, then you stand to receive an award of damages from the creditor.

The area of law that covers this particular subject is the Fair Debt Collection Practices Act (FDCPA). This is a federal statute that regulates what a collection agency may or may not do in their attempts to collect on a debt. Section 809(b) of the law states: “If the consumer notifies the debt collector in writing within thirty (30) days that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt… until the debt collector obtains verification of the debt or any copy of the judgment.”

So if a collection agency contacts you about a debt, and you dispute the validity of it (in writing, or by making this dispute clear over the phone), then the collector has to cease all collection activity until the debt is verified. This means that the collector must provide you with some sort of documentation proving that the debt exists. But very often (for whatever reason), the collector will continue calling and harassing you during this period (before they provide you with any document proving the validity). It is on those occasions that a violation occurs.

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