St. Louis Bankruptcy Lawyers Blog

Yes, you can. And sometimes that is the best decision to make. Especially if the home is completely underwater (i.e. there is absolutely no equity, and in fact, the amount you still owe is far more than the fair market value of the house), the monthly payments on the house note are too high (as a result of an adjustable interest rate attached to the mortgage, or a refinancing that went wrong), or you just simply do not want the asset any longer.

I have had many clients in the last several years who have tried valiantly to keep their homes. They tried with everything they had to receive a modification of their home loan, filling out all the paperwork, sending everything in on time. And every attempt met with the same result: The mortgage company claimed that they didn’t get the paperwork, or that they needed more documentation, or that it was sent to the wrong department, etc. These tactics used by the mortgage industry are infuriating and have only caused further angst. And of course, a common response from the mortgage industry when they receive complaints from home owners is: “Hey, you took the risk when you bought the house. Real estate is and can be a risky venture. You rolled the dice, and you lost.” Of course there is hint of truth to this. Whenever you buy anything, you are taking the risk that the seller is accurately representing themselves with honesty and integrity. And it is possible that when times get rough, they will blame the buyer for having the audacity to trust them. But when attempts to keep the asset are rebuffed by something like “we didn’t get your paperwork,” the frustration grows stronger.

This is a long-winded way of saying, yes, you can get out from underneath the burdensome asset when you file a bankruptcy. When you do, all arrearage that has built up (i.e. the amount that you have fallen behind on) and unpaid real estate taxes follow the house. So you literally get out of the debt completely.

When you file for bankruptcy, the court imposes something called the ‘automatic stay.’ The automatic stay is the protective shield that the court wraps around you after you have filed. It protects you against your creditors trying to collect on the debts that you previously owed. This means they can no longer call you, or sue you on the debt, or even mail you a letter. It literally prevents the creditors from ever again having contact with you ever again.

Now does that mean that there aren’t creditors who will in fact violate the automatic stay? Of course there are! My office has filed many Motions to Enforce the Automatic Stay, coupled with sanctions, punitive damages, and attorney fees. Creditors will from time to time call an individual who has already filed a petition, and demand payment. Even when they are reminded of the fact that a bankruptcy has been filed, several of the collectors will state that they don’t care, or that they still have the right to collect on the debt. None of this is true, but the more aggressive collectors will pursue a debt, even when doing so is in clear violation of federal law.

The remedy is simple: A motion is filed with the court stating the facts as they occurred, how such conduct was in violation of the statute, and then what kind of damages should be assessed. The creditor is free to defend their conduct if they wish, but they would have to make the argument that going after the debt after a petition for bankruptcy relief was filed was just and right. And how they would make that argument I have earthly idea.

There certainly are some major differences between the two types of bankruptcies that an individual or married couple may file. But the end goal is always the same: Getting rid of as much debt as possible, and keeping all of your assets safe.

A St. Louis Chapter 7 bankruptcy is described as a discharge of unsecured debt, wherein your unsecured creditors (things like credit cards, medical bills, payday loans) are knocked out for good. It is a fairly quick process, and gets you on the road to financial recovery in a relatively short period of time. You also will have the chance to keep assets like your car and house, so long as the fair market value of the asset does not exceed the amount you owe by too much.

A St. Louis Chapter 13 bankruptcy is described as a repayment plan over the course of three to five years, in which certain creditors are paid back. The primary usage of this kind of bankruptcy is for stopping a home foreclosure or a car repossession. By filing a Missouri Chapter 13, the creditor (usually a bank) is unable to take the asset away from you. This will give you a chance to pay off the car note over the course of several years at a much lower interest rate. And it will give you a chance to come current on any arrearage that you have fallen behind on with regards to your mortgage. In addition, it is also possible to get your unsecured debts (or at least a portion of them) discharged in a Chapter 13 as well.

Yes, you can. More often than not, people who have outstanding debts will have collectors calling them at all hours of the day and night. Their calls can be excessive, their tactics can be rude, and their demeanor can be quite aggressive. And frequently, the collectors will contact friends, family, and your place of work in their attempts to collect on the debt. These tactics are illegal.

The main body of law that addresses this issue is the Fair Debt Collection Practices Act (FDCPA). It is a federal law that lays out what a collection agency must do when it attempts to collect on a debt, and what constitutes a violation thereof. So for example, a collection agency may call your land/home line, but they may not call you on your cell phone. This is clearly laid out in the statute. Therefore, each time you receive a call on your cell phone, the collector has violated your rights. The general amount that the collector must pay you in damages for having violated these rights is around $500.00. Assuming you are like most people, and therefore have a great number of collectors calling you, the amount of damages that may potentially be awarded to you could be quite high.

Another example is the letters that the collection agencies send you. There is certain information that must be included in each piece of mail that they send. For instance, if the letter in question does not clearly indicate that the letter is from a debt collector, and that they are attempting to collect on a debt, the collector has violated your rights. If the collection letter does not indicate that you have the right to ask for validation of the debt, the collector has violated your rights. Each violation is handled by an award of damages (i.e. money) to you.

When you file a Missouri bankruptcy, the court will officially discharge (i.e. knockout) your unsecured debts. The federal government of the United States (by way of the US Constitution) preserves this right, and gives the court system the legal authority to do so. The US Congress may from time to time change or tweak the underlying rules, but the concept remains the same: As a citizen of the US, you have the right to file for bankruptcy.

Of course, what kind of discharge you receive depends largely on which type of petition you file. In a St. Louis Chapter 7 bankruptcy, unsecured debts (like credit cards, medical bills, payday loans) are discharged right away (typically within three to four months of filing). In a St. Louis Chapter 13 bankruptcy, it is possible to have all of your unsecured creditors discharged. But it is also a possibility that you would have to repay some of that debt. The goal, of course, would be to put you in a plan that only required a minimum amount to be paid back (and get the vast majority of it knocked out).

Either way, once the debt is discharged, it’s gone forever. The creditor can never demand payment from you again, and you are under no further obligation to pay for it. Your credit report will reflect this change as well. In fact, once the debts are officially discharged, your credit score will typically jump 20 to 30 points up right away. And of course the ability to rebuild your credit rating even further will be immediate.

Well, it depends on what your intentions are regarding the underlying property (which in the case of real estate taxes is of course the house you live in or use as rental property). If you choose to keep the property, then yes, you will have to make good on any real estate taxes you may have fallen behind on, and any future taxes associated with the property. But if your choice is to surrender the property, then no, you will not be held responsible for the taxes (because the taxes are said to ‘follow the house’).

There is also a difference in how real estate taxes are handled based on which chapter you file. If a St. Louis Chapter 7 bankruptcy is filed, and you want to keep the property, any real estate taxes will need to be paid to the county fairly soon after the petition is filed with the court. Unless of course you surrender the home, in which case you will not be held responsible for the taxes.

If a St. Louis Chapter 13 bankruptcy is filed, and you want to keep the property, then any arrearage will paid off inside the Chapter 13 plan. This spreads the payments out over a period of three to five years. In this way, the tax debt becomes less of a burden, as it gives you a chance to get caught up over a much more reasonable time frame. And as was mentioned before, if you choose to surrender, then the taxes will follow the house and you will not have to pay them.

The answer to that question is a resounding YES!!

Most people with whom I meet all believe the same thing at the initial consultation: That filing for bankruptcy will signal the end of times, and that they will never be able to do anything ever again. That bankruptcy may get rid of their debts, but that they won’t be in a position to purchase or finance another item for the rest of their lives. Well, the exact opposite is true.

To begin with, the courts describe bankruptcy as a ‘fresh start / clean slate‘. It is a chance to wipe the slate clean, and start fresh. It is a chance to pick yourself up, and dust yourself off. And the opportunities to rebuild your credit (in terms of score and rating) will be immediate following the discharge of your debts. In a St. Louis Chapter 7 bankruptcy, you will receive a discharge of your unsecured debts (like credit cards and medical bills) roughly three to four months after filing. Upon receiving your discharge, you can expect your credit score to jump 20 to 30 points up just from that. And then depending on how aggressive you want to be in rebuilding your credit (the credit card companies, for instance, will flood your mail box with applications once you receive your discharge), you can achieve a credit rating that exceeds anything that you had previously enjoyed. But then that’s the whole point: To put you in a position where you can reestablish your financial standing.

No, you aren’t able to do that. All unsecured debts (like credit cards, medical bills, payday loans) must be included in a bankruptcy. In fact, not disclosing these debts could be considered fraudulent (because the court may view such an act as unfair to your other creditors who have been properly included).

When you file a St. Louis Chapter 7 bankruptcy, all unsecured debts will be discharged. But the opportunity to get a new credit card will be available very soon after the discharge is ordered by the court. Once this discharge occurs, you will be flooded with credit card applications. And the reason for this barrage of applications that you will receive is simple: All of your debts will have been knocked out, so on paper, you will look like the most attractive candidate in the world (because you will presumably be able to make monthly minimum payments to the creditor with relative ease). This in turn will raise your credit score over time.

Of course, I’m not suggesting you would run right out and get a bunch of credit cards after you get a discharge in bankruptcy (from debts that probably included a great deal of existing credit card debt!!) You may never want to do that again in your life! But the opportunity will certainly be there.

I’m often asked this question from people who have had a friend or relative who has filed for bankruptcy in the past. They wonder why it is that for some people, it is necessary to pay back their debts, while others only have to pay back a small percentage (or none at all).

Well, the answer is actually pretty straightforward (believe it or not). To begin with, there are two main chapters of the bankruptcy code for individuals and married couples. A St. Louis Chapter 7 bankruptcy involves a discharge of unsecured debt (like credit cards and medical bills), and a St. Louis Chapter 13 bankruptcy is described as a repayment plan over the course of three to five years. If your household income is below a certain level (for instance, the average income (according to the government) for a household of two is: $51,120.00, as of August 2011), then you generally qualify for a Missouri Chapter 7, and will get a discharge of your unsecured debts. If your household income is above that certain level, then you will most likely have to file a Missouri Chapter 13.

If the route that needs to be taken is a Chapter 13, the question becomes, ‘How much do I have to pay back?’ This is of course the very thing that bankruptcy attorneys spend all their time on, because it is our goal to put you in a plan in which you only have to pay back a small percentage. Depending on how many deductions and/or exemptions can be taken in your particular set of circumstances, the monthly payment to the Chapter 13 Trustee can vary quite a bit. So things like how much you pay towards insurance each month (life or medical) become important to know about; and how much tax withholdings are taken from your check each pay period; and how much you contribute monthly towards charitable organizations; and how much your average monthly medical/dental costs are; and how you pay for child care services; and on and on. Because these expenses are used as deductions from you disposable income to show the court that you only have a certain amount left over at the end of each month. And the amount that you need to pay back to your unsecured creditors in a Chapter 13 is largely dependent upon that.

Not if you are in a St. Louis Chapter 13 bankruptcy. The court is very clear when it comes to taking on new debt like a credit card; you simply cannot do it. The reason for this is pretty simple: If you are in a repayment plan to pay back your creditors, then why in the world would the court want you taking out new debt that you would have to repay as well?

Now of course, there are exceptions to this rule. For instance, if your car is totaled in an accident or it just stops running, you will probably need a new means of transportation. And unless you are in a position to buy a car outright with cash, then it is likely that you will have to finance the car. In this scenario, it would be necessary to file a Motion to Incur New Debt (yes, it is literally that fancy sounding). All you would need to do is pick a car out and get a Good Faith Estimate from the dealership (a document that lists the amount to be financed, interest rate, and monthly payment). Assuming the Chapter 13 Trustee does not have any objections to the Motion, you can get your car.

Or another example would involve someone whose job requires that he/she keep a credit card on them to pay for traveling expenses (such as lodging, gas, food, etc.), and the employer then reimburses the expenses that are charged. Assuming that the employer requires the employee to have such a card, the normal prohibition against taking on new debt while in a Chapter 13 is often waived by the court through a similar motion (like the one described above).