Missouri Bankruptcy: Is There A Better Alternative?
As of 2021, Missouri’s total state debt was approximately $16.9 billion, according to the US Debt Clock. This includes both outstanding bonds and other forms of long-term debt, as well as short-term borrowing. Missouri’s debt per capita was approximately $2,748 in 2021, which is lower than the national average of $4,459 per capita. According to the US Courts, Missouri had a total of 19,130 bankruptcy filings in 2021. Of these filings, 14,396 were Chapter 7 bankruptcy cases, which is the most common form of bankruptcy that allows individuals to discharge most of their unsecured debts. There were also 4,520 Chapter 13 bankruptcy cases, which is a form of bankruptcy that involves a repayment plan for debt over a period of three to five years. The remaining filings were either Chapter 11 or Chapter 12 bankruptcies, which are typically filed by businesses or farmers. Learn More about the 3 main types of bankruptcy
Bankruptcy Laws in Missouri
Bankruptcy laws in Missouri are governed by federal law, specifically the U.S. Bankruptcy Code. The bankruptcy process in Missouri generally follows the same procedures as other states. Here are some key features of bankruptcy law in Missouri:
- Eligibility: To file for bankruptcy in Missouri, the debtor must meet certain eligibility requirements, which include completing a credit counseling course, passing the means test, and filing the appropriate forms with the bankruptcy court.
- Exemptions: Missouri has its own set of exemptions that can be used to protect certain assets from being liquidated during bankruptcy. These exemptions include homestead, personal property, retirement accounts, and certain tools of the trade.
- Automatic stay: Once a bankruptcy case is filed, an automatic stay goes into effect, which prohibits creditors from continuing collection activities, such as foreclosing on a home or repossessing a vehicle.
- Chapter 7: Chapter 7 bankruptcy is the most common form of bankruptcy filed in Missouri. It allows individuals to discharge most unsecured debts, such as credit card debt and medical bills, and typically takes around three to six months to complete.
- Chapter 13: Chapter 13 bankruptcy involves a repayment plan over three to five years, allowing individuals to catch up on past-due payments on secured debts such as mortgages and car loans.
What You Should Know About Business Bankruptcy
Here are some key things to keep in mind when considering business bankruptcy in Missouri:
- Explore all options: Bankruptcy should be considered a last resort. Before filing, it’s important to explore all other options, such as negotiating with creditors, restructuring debt, or seeking additional financing.
- Understand the type of bankruptcy: There are several types of bankruptcy available to businesses, including Chapter 7, Chapter 11, and Chapter 13. Each type has its own advantages and disadvantages, so it’s important to understand which one is right for your business.
- Seek legal advice: Bankruptcy can be a complex and challenging process, so it’s important to seek the advice of a qualified bankruptcy attorney who has experience with business bankruptcies in Missouri.
- Review your financial records: Before filing for bankruptcy, it’s important to review your financial records and make sure they are accurate and up-to-date. This will help ensure that you are able to file the appropriate forms and schedules with the bankruptcy court.
- Be prepared to liquidate assets: In some cases, businesses may need to liquidate assets to pay off creditors. It’s important to be prepared for this possibility and to have a plan in place for selling assets and distributing the proceeds.
- Protect personal assets: In some cases, business owners may be personally liable for business debts. It’s important to understand how bankruptcy will impact personal assets and to take steps to protect them, such as setting up a separate legal entity for the business.
- Keep good records: Throughout the bankruptcy process, it’s important to keep good records of all communications and transactions related to the case. This will help ensure that everything is properly documented and can be easily referenced if needed.
Are All Debts Discharged in Bankruptcy?
While bankruptcy can discharge many types of debts, there are some debts that cannot be discharged under any chapter of the U.S. Bankruptcy Code. Here are some common examples:
- Certain taxes: Some types of taxes, such as income taxes, may be discharged if they meet certain criteria, such as being at least three years old. However, other taxes, such as payroll taxes or taxes for which a return was never filed, are generally not dischargeable.
- Student loans: In most cases, student loans cannot be discharged in bankruptcy, except in rare cases where the debtor can show undue hardship.
- Child support and alimony: Debts for child support and alimony are not dischargeable in bankruptcy.
- Debts arising from fraud or intentional wrongdoing: Debts that were obtained by fraud, misrepresentation, or intentional wrongdoing are generally not dischargeable.
- Fines and penalties: Debts for fines or penalties owed to government agencies, such as traffic tickets or criminal restitution, are not dischargeable in bankruptcy.
- Debts for personal injury or wrongful death caused by the debtor’s intoxicated driving: Debts arising from personal injury or wrongful death caused by the debtor’s intoxicated driving are not dischargeable in bankruptcy.
How Bankruptcy in Missouri Affects Your Credit Score and Your Ability to Get a Loan in The Future
Bankruptcy can have a significant impact on your credit score and your ability to get a loan in the future in Missouri, as it does in most other states. Filing for bankruptcy will remain on your credit report for up to ten years, which can negatively affect your credit score. The exact impact on your credit score will depend on several factors, including the type of bankruptcy you filed, the amount of debt you discharged, and your credit history before the bankruptcy. Generally, the higher your credit score was before the bankruptcy, the greater the impact it will have on your credit score. Additionally, filing for bankruptcy can make it more challenging to get a loan in the future. Lenders are likely to view you as a higher risk borrower and may be less willing to lend you money or may offer you less favorable terms, such as higher interest rates or stricter repayment terms.
How Does Bankruptcy in Missouri Affect Tax Debt?
Bankruptcy in Missouri can affect tax debts in different ways, depending on the type of tax debt you have and the type of bankruptcy you file. In general, tax debts are treated differently from other types of debts in bankruptcy. Income tax debts that are more than three years old and meet certain other criteria can be discharged in bankruptcy. However, certain types of taxes, such as payroll taxes or fraud penalties, cannot be discharged in bankruptcy. If you file for Chapter 7 bankruptcy in Missouri, any income tax debts that meet the criteria for discharge will be wiped out, and you will not be responsible for paying them. However, if you have non-dischargeable tax debts, you will still be responsible for paying them after your bankruptcy case is closed. If you file for Chapter 13 bankruptcy in Missouri, you may be able to include tax debts in your repayment plan. This can allow you to pay off your tax debts over time while keeping your other assets, such as your home or car.
Will You Lose Your Home or Car in Bankruptcy in Missouri?
Whether or not you will lose your home or car in bankruptcy in Missouri depends on several factors, including the type of bankruptcy you file, the value of your home or car, and the amount of equity you have in those assets. In Chapter 7 bankruptcy, your non-exempt assets, including your home and car, may be sold to pay off your debts. However, Missouri law provides certain exemptions that may allow you to keep your home and car. For example, under Missouri law, you may be able to exempt up to $15,000 of equity in your home, or up to $3,000 of equity in your car, if you own it outright. If you file for Chapter 13 bankruptcy in Missouri, you may be able to keep your home and car, as long as you continue to make your monthly mortgage and car payments. In Chapter 13 bankruptcy, you create a repayment plan that allows you to pay back some or all of your debts over a period of three to five years.
Statute of Limitations for Collections in Missouri
In Missouri, the statute of limitations for collections on most types of debts is five years. This means that a creditor has five years from the date that the debt becomes due and payable to file a lawsuit to collect the debt. If the creditor does not file a lawsuit within that time frame, they may be barred from collecting the debt through legal action. It’s important to note that the statute of limitations may be different for certain types of debts or under certain circumstances. For example, the statute of limitations for debts related to written contracts, such as credit card debts, is five years in Missouri. However, the statute of limitations for debts related to oral contracts is only three years. Additionally, the statute of limitations may be paused or “tolled” under certain circumstances, such as if the debtor leaves the state or if they file for bankruptcy.
Cons of Bankruptcy in Missouri
While bankruptcy can be a useful tool for individuals struggling with debt, there are some potential drawbacks or “cons” to consider before filing for bankruptcy in Missouri. Some of the cons of bankruptcy include:
- Negative impact on credit score: Filing for bankruptcy can have a significant negative impact on your credit score and may stay on your credit report for up to 10 years. This can make it more difficult to obtain credit or loans in the future.
- Loss of assets: Depending on the type of bankruptcy you file, you may be required to surrender certain assets to be sold to pay off your debts. This could include your home, car, or other property.
- Public record: Bankruptcy is a matter of public record, which means that anyone can access information about your bankruptcy filing.
- Potential for discrimination: While it is illegal for employers or government agencies to discriminate against individuals who have filed for bankruptcy, some employers or landlords may view bankruptcy as a negative mark against an individual.
- Emotional impact: Filing for bankruptcy can be a stressful and emotional process, as it involves admitting that you are unable to pay off your debts.
Compare the Pros and Cons of Bankruptcy: Pros and Cons of Filing Bankruptcy
Why People Regret Filing Bankruptcy
There are several reasons why people may regret filing for bankruptcy, including:
- Negative impact on credit score: As mentioned earlier, filing for bankruptcy can have a significant negative impact on your credit score and may stay on your credit report for up to 10 years. This can make it more difficult to obtain credit or loans in the future, which can be a source of frustration or regret for some people.
- Loss of assets: Depending on the type of bankruptcy you file, you may be required to surrender certain assets to be sold to pay off your debts. This can be a difficult decision for many people, and they may regret having to give up their home, car, or other property.
- Public record: As mentioned earlier, bankruptcy is a matter of public record, which means that anyone can access information about your bankruptcy filing. Some people may regret having their financial struggles become public knowledge.
- Emotional impact: Filing for bankruptcy can be a stressful and emotional process, as it involves admitting that you are unable to pay off your debts. Some people may regret having to go through this process and feel embarrassed or ashamed about their financial situation.
- Stigma: Although bankruptcy is a legal and legitimate way to deal with debt, there is still a stigma attached to it. Some people may regret filing for bankruptcy because they feel like they have failed or that they are being judged by others.
What Are The Alternatives To Bankruptcy?
If you do not qualify for bankruptcy in Missouri, there may be other options available to you to help address your debt issues. One of which is debt settlement. Debt settlement involves negotiating with creditors to settle debts for less than the full amount owed. There are some potential benefits to debt settlement over bankruptcy that may make it a more favorable option for some individuals.
- No BK on your credit report: Filing for bankruptcy shows on your credit report for up to 10 years. On the other hand, debt settlement does not show as a bankruptcy.
- Cost: Filing for bankruptcy can be expensive, with filing fees, attorney fees, and other costs adding up quickly.
- Emotional Impact: People report horror stories of the negative emotional impact of BK.
- With a bankruptcy for the rest of their life: Employers or lenders can ask if someone has filed BK for the rest of their life. It is much less likely to be asked if one ever used debt settlement to pay back an agreed to amount.
- Control: With debt settlement, you may have more control over the process and negotiations with your creditors, whereas with bankruptcy, a court will make the final decision.
- Less severe consequences: Filing for bankruptcy can have significant consequences, such as the liquidation of your assets, whereas debt settlement may allow you to negotiate a more manageable repayment plan while keeping your assets.
Bankruptcy vs. Debt Relief: What’s Right For You and How We May Be Able To Help
CuraDebt – An Alternative To Consider
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