Bankruptcy

Representation covers the full spectrum when it comes to creditors’ rights representation in the federal bankruptcy court.  A bankruptcy filing delays or prevents creditors from enforcing or collecting on the debt and affords the debtor an opportunity to reaffirm, restructure and/or discharge debts.  A Chapter 7 is used to liquidate debts.  There is a bad faith filing presumption so a debtor needs to pass a Means Test to show insufficient income to pay back the debtor’s unsecured debts.  A Chapter 13 has a plan to pay back debts usually over 5 years. A Chapter 11 is used by businesses and individuals with large amounts of assets which also has a plan to pay back debts over a number of years.

The Bankruptcy Code provides that upon the filing, a stay (or injunction) automatically prohibits all creditors from collecting against the person filing (debtor).  There are circumstances where a creditor is entitled to relief from the automatic stay for cause such as lack of adequate protection or lack of equity in property or lack of need for the property to effectively reorganize.  A creditor must seek and obtain court approval prior to pursuing collection activity.

Highlight of services offered:

  • File motions for relief from the automatic stay:  A creditor may obtain an order from the court limiting, modifying, annulling or terminating the automatic stay to enable debt collection enforcement.
  • File motions to dismiss:  When a debtor fails to perform as required, a motion to dismiss the case is appropriate.  This could entail not appearing at the Meeting of Creditors, not filing the required schedules, not attending Credit Counseling, not paying the filing fee, or not paying the Trustee.
  • File proofs of claim:  Chapter 7 filings generally do not have proof of claims due to no assets for the Trustee to distribute to unsecured creditors.  In the event the Trustee discovers assets, then creditors will receive notice to file a proof of claim.   Chapter 13 filings must have a claim if the creditor wants to be paid.  The Trustee has a duty and the debtor/attorney for debtor should examine the claim and may file an objection to the validity, amount or priority of the claim.  Objections that cannot be resolved by agreement are determined by the court after notice and an opportunity for hearing.
  • File objections to disclosure statements and plans of reorganization:  A careful review of the plan and schedules is necessary to analysis and determine if the debtor has filed in good faith and whether the plan sets out to repay creditors as required by law.  No plan can be confirmed by the court until all objections are resolved.  So a proper and timely objection by a creditor can ensure a just repayment of the debt.
  • Prepare reaffirmation agreements:  In a chapter 7 setting, the secured creditor may choose, with the consent of the debtor, to have the debtor sign an agreement to reaffirm the debt.  The agreement must be entered into and filed with the court prior to the chapter 7 discharge.  The debtor who wants to keep the house will agree to owning the entire balance of the debt and will continue to make payments even after the bankruptcy is over.
  • Prosecute and defend adversary actions, including preference actions, objections to discharge and lien priority.

Chapter 13 “Wage order”.  A person filing (debtor) such a bankruptcy does not need “wages” in the form of a job, but he does need income so he could repay creditors.  A “Wage Order” is entered by the bankruptcy court ordering the employer to submit the Chapter 13 plan payments from the employee’s paycheck.  The success rate of receiving a discharge from completion of the Chapter 13 bankruptcy is substantially higher when a debtor makes plan payments by a wage order than by sending the payments directly.

Often, when making direct payments to the Chapter 13 Trustee, a debtor finds other places the money needs to be spent…their gas bill was higher than anticipated, their child needs new clothes, a new iPhone comes out that they simply must have…the list goes on and on. When the payments are taken from a debtor’s wages, it alleviates the burden of the debtor having to budget around their Chapter 13 plan payment.  A wage order is issued by the Court and sent to the employer. The employer takes the monthly plan payment amount and divides it between the debtor’s paychecks.

 Exemptions:  When an individual or couple files for bankruptcy in Missouri, the debtors can exempt or protect property from creditors.  Examples of the types of exemptions available for bankruptcies in Missouri are listed below.   Additionally, there is a set of federal exemptions that may be used.

Homestead – Real property up to $15,000 or $5,000 for mobile homes. RSMo 513.430(6), 513.475.

Motor Vehicle – Motor Vehicle up to $3,000. In re Mitchell, 73 B.R. 93.

Jewelry & Wedding Rings – Jewelry up to $500, Wedding Rings up to $1,500. RSMo 513.430(5)

Household Goods/Furnishings – Appliances, household goods, furnishings, clothing, books, crops, animals, musical instruments, computers, etc. up to $3,000. RSMo 513.430(1).

Tools of the Trade – Implements, books & tools of trade up to $3,000. RSMo 513.430(4).

Public Benefits – Missouri exemptions outline for the protection of several types of public benefits such as social security and unemployment benefits. RSMo 513.430(10)(a), 288.380(10)(I), 53.430(10)(c).

Pensions – Much like public benefits, Missouri exemptions exist for multiple types of pension benefits. 513.430(10)(e), 71.207, 104.250 and others.

Wildcard – Missouri has an exemption commonly called the “wildcard” exemption allowing debtors to protect an additional amount towards any property (including cash!). The amount allowed is based on family size and situation. A head of household may claim an exemption amount up to $1,250. An individual may claim $600.  An additional $350 may be claimed per child by the head of household. RSMo 513.430(3), 513.440.

This list of Missouri bankruptcy exemptions is not an exhaustive list of exemptions available to debtors filing bankruptcy in Missouri and is only provided as examples of the types of exemptions available.

Chapter 7 Means Test:  In order to file a chapter 7 bankruptcy a debtor may have to complete the bankruptcy “means test”.  Additionally, there are exceptions where the “means test” does not apply and will not be completed as part of a chapter 7 bankruptcy filing. For example, if a debtor’s debts are primarily business debts, the “means test” will not apply.

The “means test” was developed as a way to determine if a debtor has the financial means to repay at least some of his debt or is truly unable to do so. A debtor who does not qualify for chapter 7 bankruptcy under the “means test” may ultimately have to file bankruptcy under another chapter.

The “means test” compares your income to that of other similarly situated households in Missouri to determine if there is a “presumption of abuse”.  If a “presumption of abuse” is found and cannot be rebutted,  the debtor will likely have to file under another chapter.  If the debtor’s income is below the median in the area, there is no “presumption of abuse.”  If  the income is above the median, then the test goes on to evaluate the income and expenses to determine if there is a still a “presumption of abuse.”