Often people who file bankruptcy wonder what will happen to their credit score after filing bankruptcy and have concerns about the balances on their accounts. The answer to this is the credit report will not show any balances on the accounts as the creditor can no longer report to the credit bureaus about the debt. However, the credit score will increase or decrease based on a number of factors and previous credit information. The major factors are:    Credit card or loan repayment history Ÿ   Amount of debt owed Ÿ   Length of credit history Credit history is based on credit card repayment and the debt owed on these cards. If someone had a high balance on the cards and bad payment history may have an increase in the credit score after filling bankruptcy. On the contrary, for many others the bankruptcy will decrease the credit score. However there are many ways your credit score can be improved after filing bankruptcy. The most important is paying your mortgage payment or car payment on time as some of the creditors do report these payments to the credit bureau if the debt is been reaffirmed by bankruptcy filer. You may also choose to open new credit accounts or obtain the secured card or prepaid cards, which may require a security deposit and allow the cardholders to use the limited allowed money. This is reported to the credit bureau. Timely credit card payments will have a very positive effect on your credit score.  There are many services available, by paying a minimal fee that monitor accounts after filing bankruptcy and dispute any incorrect information reported to the credit bureaus. They also correct discrepancies on the credit report. Managing money wisely by monitoring interest and only using credit card when you can pay the balance in full each month will help you increase your credit score and become more financially secure.

Can the trustee really make me turnover documents or property? No, the trustee cannot MAKE you turn them over. However, if you filed bankruptcy to receive a discharge, which most people do, then you will want to turnover items requested by the trustee. Failure to cooperate with the trustee can result in dismissal of your case or denial of your discharge. What does denial of discharge mean? It means that your debt is not dissolved. It means that you essential (in most cases) hired an attorney, took a credit counseling class, attended a 341 meeting, and a hit to your credit all for nothing. You are back as square 1 with the same debt you start with and are now out of even more money for the fees and costs associated with the filing of the bankruptcy. Can’t I just tell the trustee that I did not get a tax refund? Or that I do not have any money at the time of filing? How will they know if I have cash in my wallet? Simple. You are going to tell them. Can you lie to them? Sure, if you want to commit perjury. All of the bankruptcies schedules, statements, and related documents are signed by you under penalty of perjury as being true and accurate. You are also sworn in under penalty of perjury at your 341 meeting where you will be asked if your schedules are accurate and whether you valued your items fairly and honestly. So by lying to the trustee or intentionally listing incorrect information on your schedules, you are risking prosecution for a perjury, which is a federal crime. For obvious reasons, I do NOT recommend this. If you are concerned about property you have being an issue in your bankruptcy, talk to your attorney BEFORE the case is filed. Your attorney can advice you on whether or not bankruptcy is the best option and whether there are ways to legally protect your property.

In a case of first impression for the Fifth Circuit or any other court of appeals, the Fifth Circuit has ruled that inherited IRA accounts may be claimed as exempt under 11 U.S.C. Sec. 522(d)(12). Matter of Chilton, No. 11-40377 (5th Cir. 3/12/12), which can be found here.In Chilton, one of the debtors inherited an IRA account in the amount of $170,000. The debtors established an IRA account to receive distributions from the inherited account. The trustee objected that the account was not a "retirement account" and was not the type of tax exempt account identified in section 522(d)(12). The bankruptcy court sustained the objection, but was reversed by the district court. Section 522(d)(12) allows a debtor who elects federal exemptions (an option available only to debtors in about eleven states since most states have opted out of federal exemptions), to exempt "(r)etirement funds to the extent that such funds are in a fund or account that is exempt from taxation under section 401, 403, 408, 408A, 414, 457, or 501(a)of the Internal Revenue Code of 1986." Thus, there are two requirements: 1. the funds must be retirement funds and 2. they must be held in an account exempt from taxation under one of the designated sections.The court rejected the argument that funds set aside for the retirement of another could not be "retirement funds:"The plain meaning of the statutory language refers to money that was “set apart” for retirement. Thus, the defining characteristic of “retirement funds” is the purpose they are “set apart” for, not what happens after they are “set apart.” Here, there is no question that the funds contained in the debtors’ inherited IRA were “set apart” for retirement at the time Heil deposited them into an IRA. This reasoning finds further support from 11 U.S.C. § 522(b)(4)(C), which provides that “a direct transfer of retirement funds from 1 fund or account that is exempt from taxation under section . . . 408 . . . of the Internal Revenue Code of 1986, . . . shall not cease to qualify for exemption under . . . subsection (d)(12) by reason of such direct transfer.” In other words, the direct transfer of “retirement funds” does not alter their status as “retirement funds.” As we see no reason to interpret the statutory language differently from its plain meaning, we hold that the $170,000 contained in the inherited IRA constitute “retirement funds” as that phrase is used in section 522(d)(12).Opinion, p. 5.The Court also ruled that the account was held under the proper section of the Internal Revenue Code. The Trustee argued that the account was tax exempt pursuant to 26 U.S.C. Sec. 402(c)(11)(A), while the Debtor contended that section 408(e) was the relevant section. While this discussion of the Internal Revenue Code would seem arcane and of little interest to bankruptcy lawyers, the Court relied on the expansive language of section 408(e), which stated that "(a)ny individual retirement account is exempt from taxation under this subsection . . . " Because the account was an individual retirement account, it fell within the definition of "any" individual retirement account. Thus, common sense construction carried the day even thought the subject matter was the tax code.On a final note, the Court of Appeals decided this appeal quite expeditiously. The case was argued on February 22, 2012 and decided on March 12, 2012, just nineteen days later. Judge Carl Stewart should be commended for his prompt work.

The answer is that it depends.  The short answer is that the more recent the debt is the less likely it is that it will be dischargeable.  The more detailed answer requires analysis of a series of qualifications.  First, to be dischargeable, the tax debt must be at least three tax years prior to the time the debtor files for bankruptcy.  On March 13, 2012 a 2008 tax debt is not dischargeable.  After April 16, 2012 a 2008 tax debt may be dischargeable.  (Note, generally taxes must be filed by April 15, however, this year the date falls on a Sunday so taxes will need to be filed or postmarked by April 16, 2012.)  If the tax debt is at least three years old, the next issue is that the tax return must have been timely filed, or filed at least two years prior to the bankruptcy.  This can become an issue where otherwise dischargeable taxes may not be dischargeable if returns are not filed on time.  If a debtor did not prepare a return for any given year and the IRS assessed a deficiency for that year the amount is not dischargeable unless the debtor files a tax return for that year.  However, if this applies to you, remember, that your return must be timely or must be filed at least two years prior to a bankruptcy.  The most simple concept to take from this is to file your tax returns on time.  The tax return cannot be fraudulent in any way to be dischargeable.  If you were married at the time and there was fraud that you were not a part of there may be some options for you to pursue with the IRS regarding the debt.  Taxes are not dischargeable in any event where the taxpayer is guilty of any intentional act of evading tax laws.  When filing for bankruptcy, if you are required by law to file a tax return, you need to have filed your returns for the previous four years.  If for some reason, i.e. unemployment, you are not legally required to file you will be excused of this obligation in the bankruptcy, but will still need to provide a copy of your most recent tax return. If you have questions about whether your taxes are dischargeable, make an appointment with a St. Louis Bankruptcy Attorney today!

Following last year’s Stern v. Marshall bombshell, cases are slowly trickling up to the Court of Appeals level. After I wrote about a recent Fifth Circuit opinion which held that the jurisdiction of U.S. Magistrate Judges was not invalidated, a commenter pointed out a recent Seventh Circuit decision. In this post, I will look at that case, In re Ortiz, 665 F.3d 906 (7th Cir. 2011), in which the Seventh Circuit granted a direct appeal and then concluded that it did not have a final decision to review, as well as an even more recent First Circuit case which appears to reach the opposite conclusion. The Seventh Circuit Undoes a Direct Appeal Ortiz involved a health care provider that filed proofs of claim in an estimated 3,200 bankruptcy cases in the Eastern District of Wisconsin over a five year period which disclosed the debtors’ confidential medical information. Two sets of debtors filed class action proceedings under a Wisconsin non-disclosure statute.* Bankruptcy Judge Susan Kelley** granted summary judgment for the health care provider, finding that the debtors had not shown actual damages as required by the Wisconsin statute. Both parties requested a direct appeal to the Seventh Circuit, which was approved. However, in light of Stern v. Marshall, the Seventh Circuit concluded that it was not permitted to allow the direct appeal because there was not a “final” order. Direct appeals to the Court of Appeals are authorized under 28 U.S.C. §158(d) in three instances: *Final orders; *Interlocutory orders increasing or decreasing the debtor’s exclusive period to file a plan; and *With leave of court over interlocutory orders and decrees. Even though no party had raised the jurisdictional issue, the Court concluded that it had “an independent duty to determine whether we have jurisdiction.” The Court noted the schizophrenic nature of the Stern decision which, on the one hand, claims to be a narrow decision, but on the other hand, appears to prohibit the bankruptcy courts from going beyond the power to adjudicate claims. The Court wrote:The first question (whether the bankruptcy court had authority to enter a final order) requires a close reading of Stern v. Marshall. Although the Court noted that the question presented was "narrow," it was quite significant as Congress "may no more lawfully chip away at the authority of the Judicial Branch than it may eliminate it entirely." (citation omitted). The Court held that Article III prohibited Congress from giving bankruptcy courts authority to adjudicate claims that went beyond the claims allowance process. (citation omitted). The decision rebuffed an intrusion into the Judicial Branch that would "compromise the integrity of the system of separated powers and the role of the Judiciary in that system, even with respect to challenges that may seem innocuous at first blush." (citation omitted). 665 F.3d at 911. Prior to Stern, the bankruptcy court’s authority would have appeared clear for this was a matter “arising in” a title 11 case. Because proofs of claim only exist in title 11 proceedings, claims arising from proofs of claim could only arise in the bankruptcy context. However, the Court found that the Wisconsin non-disclosure claims were similar to the counterclaim filed by Vicki Lynn Marshall in the Stern case: Just as Pierce's filing of a proof of claim in Vickie's bankruptcy did not give the bankruptcy judge authority to adjudicate her counterclaim, Aurora's act of filing proofs of claim in the debtors' bankruptcies did not give the bankruptcy judge authority to adjudicate the debtors' state-law claims. The debtors' claims seek "to augment the bankruptcy estate--the very type of claim that . . . must be decided by an Article III court." (citation omitted). Non-Article III judges may hear cases when the claim arises "as part of the process of allowance and disallowance of claims," (citation omitted), or when the claim becomes "integral to the restructuring of the debtor-creditor relationship," (citation omitted). Although there is some factual overlap between the debtors' claims and Aurora's proofs of claim, the bankruptcy judge "was required to and did make several factual and legal determinations that were not 'disposed of in passing on objections' to" Aurora's proofs of claim. (citation omitted). In granting Aurora's summary judgment motion, the bankruptcy judge interpreted a Wisconsin state law to require proof of actual damages as an essential element of the debtors' claims and found that there was no genuine issue of material fact as to the lack of actual damages. Nothing about these decisions involved an adjudication of Aurora's proofs of claim and there is no "reason to believe that the process of adjudicating [Aurora's] proof[s] of claim would necessarily resolve" the debtors' claims. (citation omitted). Stern reaffirmed that "Congress may not bypass Article III simply because a proceeding may have some bearing on a bankruptcy case; the question is whether the action at issue stems from the bankruptcy itself or would necessarily be resolved in the claims allowance process." (citation omitted). The debtors' action owes its existence to Wisconsin state law and will not necessarily resolve in the claims allowance process. That the circumstances giving rise to the claims involved procedures in the debtors' bankruptcies is insufficient to bypass Article III's requirements. Stern v. Marshall makes plain that the bankruptcy judge in our cases "exercised the 'judicial Power of the United States' in purporting to resolve and enter final judgment on" the debtors' Wisconsin state-law claims. (citation omitted). We thus hold that the bankruptcy judge lacked authority under Article III to enter final judgments on the disclosure claims. 665 F.3d at 914. The Court of Appeals concluded that because the bankruptcy court lacked authority to enter a final order, that it lacked authority to grant a direct appeal. If the court had stopped there, its decision would have been clear. However, it added a cryptic comment suggesting that the bankruptcy court lacked any authority in the matter: For the bankruptcy judge's orders to function as proposed findings of fact or conclusions of law under 28 U.S.C. § 157(c)(1), we would have to hold that the debtors' complaints were "not a core proceeding" but are "otherwise related to a case under title 11." (citation omitted). As we just concluded, the debtors' claims qualify as core proceedings and therefore do not fit under § 157(c)(1). The direct appeal provision in 28 U.S.C. § 158(d)(2)(A) also does not authorize us to review on direct appeal a bankruptcy judge's proposed findings of fact and conclusions of law. 665 F.3d at 915. Many commentators have concluded that the Stern decision created a third category of claims to the core/non-core taxonomy: core claims in which the bankruptcy court could not enter a final judgment. The prevailing sentiment, indeed one fostered indirectly by the Stern decision itself, is that the bankruptcy courts may enter proposed findings of fact and conclusions of law in all matters in which they lack authority to enter a final judgment. The Ortiz opinion suggests that this may not be the case, but finds it unnecessary to decide the issue. The First Circuit Shrugs Off Stern in a Footnote The Ortiz opinion can be contrasted with a brief discussion contained in a First Circuit opinion. In re Divittorio, 2012 U.S. App. LEXIS 248 (1st Cir. 1/6/12). In re Divittorio is another chapter in the home mortgage wars being fought in the courts. In that case, the debtor consented to an order conditioning the automatic stay and modifying the underlying loan. After the debtor defaulted, the creditor obtained relief from the automatic stay. The debtor then sought to “rescind” the loan. He filed an adversary proceeding for rescission under the Massachusetts Consumer Credit Cost Disclosure Act and sought to vacate the order lifting the automatic stay. The bankruptcy court declined to vacate the prior order, but stayed the foreclosure for 90 days to determine the rescission claim. The bankruptcy court concluded that the creditor had not violated the MCCCDA and the debtor appealed. In a footnote, the court noted its belief that its jurisdiction was unimpaired.We do not believe that the Supreme Court's recent decision in Stern v. Marshall, 131 S. Ct. 2594, 180 L. Ed. 2d 475 (2011), affects the jurisdiction of the bankruptcy court to render a decision in this matter. Stern held:Article III of the Constitution provides that the judicial power of the United States may be vested only in courts whose judges enjoy the protections set forth in that Article. We conclude today that Congress, in one isolated respect, exceeded that limitation in the Bankruptcy Act of 1984. The Bankruptcy Court below lacked the constitutional authority to enter a final judgment on a state law counterclaim that is not resolved in the process of ruling on a creditor's proof of claim.(citation omitted). Here, however, it first was necessary to resolve the validity of Mr. DiVittorio's claim under the MCCCDA to determine whether HSBC was entitled to relief from the automatic stay. 2012 U.S. App. LEXIS at *18, n. 4. The Court ultimately decided the appeal in favor of the creditor. The First Circuit’s discussion is rather unsatisfying because it assumes that determination of the counterclaim was necessary to determine the motion to lift stay. However, how is this distinguishable from the argument that the Wisconsin non-disclosure claims were necessary to determine proofs of claim filed by the health provider? If anything, the automatic stay context is less compelling than determination of a proof of claim, since a motion to lift stay is a summary proceeding. Grella v. Salem Five Cent Savings Bank, 42 F.3d 26 (1st Cir. 1994). While the Court’s stated rationale may be unsound, it can probably be vindicated based on consent, since both parties litigated the matter through the bankruptcy court, district court and court of appeals without objection. The Ortiz court rejected consent. However, that case was factually distinguishable because BOTH parties objected to determination by the bankruptcy court. The debtors asked the bankruptcy court to abstain or remand, while the creditor sought to withdraw the reference. What It Means The two decisions may or may not signal a split between the circuits. The First Circuit’s decision is so perfunctory that it may be possible for the court to distinguish it away. However, the larger lesson for creditors is that Stern v. Marshall cuts both ways. If a creditor litigates and wins in bankruptcy court, an appellate court may decide that jurisdiction to enter a final judgment was lacking and send the creditor back to relitigate. Thus, the legacy of Stern may be unending litigation. *--While Federal Rule of Bankruptcy Procedure 9037 imposes privacy restrictions with respect to bankruptcy court filings, including proofs of claim, courts are split over whether it creates a private right of action. Cases allowing a claim for sanctions, include Matthys v. Green Tree Servicing, LLC (In re Matthys), 2010 Bankr. LEXIS S.D. Ind. 2010); French v. American General Financial Services (In re French), 401 B.R. 295 (Bankr. E.D. Tenn. 2009), while cases rejecting such a right include Carter v. Flagler Hospital, Inc., 411 B.R. 730 (Bankr. S.D. Fl. 2009); Lentz v. Bureau of Medical Economics (In re Lentz), 405 B.R. 893 (Bankr. N.D. Ohio 2009); Cordier v. Plains Commerce Bank (In re Cordier), 2009 Bankr. LEXIS 2009). **--Judge Kelley’s current claim to fame is that she is the judge presiding over the case of the Archdiocese of Milwaukee. As a woman and a practicing Catholic, she is in the unusual position of exercising at least some temporal authority over the male hierarchy of her own church.

    Some mistakes the Chapter 13 trustee will call you on;  others go unremarked.   So let’s discuss some simplistic thinking that has your Chapter 13 client paying too much into the plan. I’ve reviewed any number of newbie plans that use the non exempt equity in the debtor’s possessions as the liquidation premium. Subtract the exemptions from the value of the assets and you have, they think, the measure of the “best interests of creditors” test for confirmation. Nope.  Let’s look at the Code to see why that’s too much. Confirmation test The Code requires for confirmation that a plan give each unsecured claim no less than the amount that would be paid on the claim in a Chapter 7 liquidation.  § 1325(a)(4). The difference between the newbie world view and the Code encompasses the trustee’s costs of administration. In a Chapter 7, tangible assets don’t become distributable dollars at the wave of the trustee’s wand.  The trustee generally incurs expenses, payable from the estate, in turning assets into cash. The trustee also gets paid from the estate for his work.  The formula for paying trustees is found in §326(a).  So the trustee’s commission comes off the gross total of dollars distributed to creditors. (The trustee does not get a commission on any money paid to the debtor on account of exemptions, or any money paid to co owners of assets he sells). Asset by asset In calculating the plan pot, debtor’s counsel needs to analyze how much it will cost the trustee to administer the estate up to the point where he is ready to cut checks to creditors. If the asset is cash in the bank, there are no “costs of sale”.  Trustee writes a letter and the money is turned over. If the asset is real estate, the estate will be paying a realtor and closing costs.  A sale of land will usually require the estate to file a tax return, so subtract something for an accountant. Suppose the real estate is depreciated real property:  there may be capital gains taxes which the estate must pay before paying out money to creditors.  Take that off the sum of non exempt equity. And if the asset is a preference action, some allowance has to be made for the costs of collection.  Or an analysis of whether a preference of small size would actually be recovered.  You must make deductions here for either the costs of suit, including professional fees, and for any discount offered to reach settlement. You get the picture.  Imagine what it takes to turn the debtor’s non exempt assets into cash and quantify the costs of doing so. It is the net, non exempt equity that measures what unsecured creditors, priority and general unsecureds, must get to have a confirmable plan. Go forth, readers, and calculate. If you are local to the San Francisco Bay Area, I’m presenting a two hour live class on crafting Chapter 13 plans.  A more detailed look at the liquidation test is just a part of that exploration of how to get to the right numbers for a Chapter 13 plan.  The date is April 14th.  There are more details at Law-full.com. Image courtesy of Sharon Drummond.

Bankruptcy and divorce often coincide with one another. The divorcing couple will have to decide if they want to file bankruptcy together or apart. There are pros and cons to either decision. Generally a married couple can file bankruptcy together; however the courts do not care if they are living separately. However both people’s income and assets will be used to determine if either a chapter 7 or chapter 13 bankruptcy can be filed. In addition if the couple files together they will only need to pay one court filing fee and can be represented by the same attorney for one fee. If instead the couple divorces and then files, they each must file their own bankruptcy case with their own attorney. This increases the cost of actually filing for bankruptcy for each individual.   If however you decide to divorce before filing for bankruptcy, the bankruptcy may not be able to be filed for a long time. Divorce proceeding can take time to finish because of division of marital property, such as houses, businesses, or bank accounts. If the divorcing couple has dependent children the issue of child support must be dealt with before the divorce is finalized. Some states allow spousal support or alimony and that legal issue has to be arranged before the divorce is final. Each person will have to file their own bankruptcy case with the court and have separate attorneys to represent them during the bankruptcy proceedings.   Bankruptcy will not discharge certain types of debt. Spousal support, child support, or alimony payments will not be discharged during bankruptcy. Property settlements from the divorce may or may not be dischargeable depending which chapter the bankruptcy case is filed under. Besides of support obligations, other debts incurred by the debtor in the course of a divorce or settlement proceeding might be dischargeable in a chapter 13 bankruptcy case. Even though the divorce decree titles something as support it might not be support in the bankruptcy proceeding and even though the divorce decree does not specify an obligation as support it might be nonetheless non-dischargeable in either chapter. If a non-filing spouse has a claim against the filing ex-spouse, it might be necessary in a chapter 13 bankruptcy case to file a claim with the court if the support payment is being paid by the trustee.   If one person files bankruptcy and includes joint debt, the other ex-spouse is still liable for the debt. This is also true even if the divorce decree or settlement agreement states that the filing spouse is responsible for paying the debt. The responsibility for the filing spouse to the ex-spouse and the creditor might be eliminated in a chapter 13 bankruptcy case. The non-filing spouse would be left with paying the joint debt. However, the non-filing spouse might be able to modify the divorce decree or settlement agreement. For example if both individuals names were on credit cards, mortgage documents, lease agreements, or other types of debts; then creditors can legally demand payment. In some cases during divorce proceedings debts are listed and the person responsible for paying is clarified as part of the divorce decree. 

When considering filing for bankruptcy there are a number of things to consider.  One common question is how bankruptcy will affect finding new employment or government employment or security clearances.  The answer depends on a number of circumstances.  Some employers may be interested in whether you have filed for bankruptcy as a measure of financial responsibility.  With respect to applications you, many applications state that if there is any fraud or intentional misrepresentation on the application you can be terminated.  In this case it would be better to be honest about your bankruptcy and perhaps explain the situation than to face potential termination at a later date.  In some instances, government employers may actually encourage an individual with a lot of debt to file for bankruptcy to decrease their debt to income ratio.  This can be true especially where the individual debtor deals with money.  An individual with a considerable amount of debt may be more likely to be tempted to divert funds or sell secrets of a company or government for sums of money.  The bankruptcy code does state than an individual cannot be passed up for a security clearance or a promotion simply because he/she has filed for bankruptcy.  The military has addressed this issue explaining that such decisions are based on a number of considerations, but bankruptcy can play a role in the decision.  Not filing may make you more of a risk, as explained above; however, some may look at filing as a way out of paying for obligations.  In this case, you may be able to explain the circumstances surrounding your filing, whether it was largely medical issues or if there was on trigger.  At the end of the day, it can affect security clearances, but filing for bankruptcy is not an automatic bar to a security clearance or a promotion in a government or military position.  According to the military, your relationships with your chain of command and your reputation in your field are equally, if not more important in making such decisions. Private employers may be able to exercise much more discretion pursuant to the laws of your state.  If you are concerned about finding new employment, or how bankruptcy may affect your current career you should speak with a St. Louis Bankruptcy Attorney today!

Is a Debtor Required to Forfeit Property in a Bankruptcy? When someone is considering filing bankruptcy, there are a lot of questions and concerns they may have.  They may be worried about having to forfeit property and may think they will have to surrender their property, such as vehicles, houses, pension, household goods, etc. There are certain occasions where debtors may have to turn over to the Trustee some of their property.  However, this does not often happen and only happens if the property cannot be exempted and/or if there is a large amount of equity.  Property exemptions will vary state to state.  In Missouri, there is a $15,000 homestead exemption to protect equity a debtor has in their real property.  Equity is the difference between what a piece of property is worth and how much is owed against the property.  Therefore, if a person owns a house worth $150,000.00 and $135,000.00 is owed against the property, they have $15,000.00 equity in the property.  Since there is a $15,000.00 homestead exemption, that equity would be protected, and the Trustee would not be able to sell the property.  As long as the debtor is current on the house and continues making their payments, they will be able to keep the real property.  The exemption for a mobile home is $5,000.00. There are other exemptions to protect personal property in Missouri.  There is a $3,000.00 exemption for household goods, furnishings, and clothing.  It is $6,000.00 for a joint filing.  Those values can be determined by estimating garage sale prices for the personal property.  There is also a $1,500.00 wedding ring exemption per person filing and a $500.00 exemption for other jewelry per person filing.  There is a $3,000.00 tools of the trade exemption that covers work-related tools and supplies.  There is also an exemption for qualified retirement plans. The Missouri vehicle exemption is $3,000.00.  If a debtor has $3,000.00 or less equity in a vehicle, they will be able to keep their vehicle as long as they continue making their payments on the vehicle and are current on the vehicle.  Debtors can only exempt one vehicle per person filing.  There is a wildcard exemption of $600.00 per person, which can exempt anything not covered by any other specific exemption.  The wildcard can be used to cover any money a debtor has in the bank at the time of filing, cash on hand, additional equity in houses or cars, collectibles, etc.  There is also a head of household exemption which can be used in certain circumstances and would also cover any property not covered by other specific exemptions.  If you have any questions regarding this issue, please contact a St. Louis or St. Charles bankruptcy attorney.

Should a Debtor Reaffirm a Vehicle When Filing a Chapter 7 Bankruptcy? A Chapter 7 bankruptcy makes a debtor no longer liable under their contracts.  That is why a debtor can surrender a house or vehicle through the bankruptcy with no penalty.  The deficiency will be discharged through the bankruptcy, and the debtor will no longer be responsible for that debt.  The deficiency is the difference between what a debtor owes on a secured debt, such as a vehicle, and what the secured debt is sold for by the creditor after surrendering the property. Reaffirmation essentially puts a debtor back into a contract with the car creditor.  Some creditors do not require a debtor to sign a reaffirmation agreement and will allow the debtor to continue to pay on the vehicle without such an agreement.  However, many car creditors do require debtors to sign a reaffirmation agreement if they intend to keep the car.  In that case, if debtors do not agree to sign the reaffirmation agreement, they can repossess the vehicle.  In that case, a debtor would need to decide whether they want to surrender the car or reaffirm the vehicle and continue to pay for it. Once a reaffirmation agreement has been signed, the debtor will once again be liable under the contract.  If the debtor does not make payments on the vehicle, the creditor can repossess the vehicle, and the debtor will be responsible for the deficiency on the car, and it will not be discharged through the bankruptcy.  When considering whether it is advantageous to reaffirm a vehicle, there are a few pros and cons a debtor can consider.  One benefit of signing a reaffirmation agreement is that some creditors will report those on-time payments to the credit bureaus;  however, not all creditors will do this.  Another benefit is that some car creditors will send statements to the debtor if a debtor reaffirms.  Otherwise, they may not do this.  A benefit of not signing a reaffirmation agreement is that if a debtor does not sign the reaffirmation, the debtor can walk away from the vehicle with no penalty if they cannot afford the payments and will not be responsible for the deficiency.  A debtor may not want to reaffirm when they owe much more on the vehicle than what it is worth or if the debtor questions whether they will be able to maintain the payment on the vehicle.  A debtor may want to reaffirm if there is a low loan balance and if the payments are manageable and can be easily maintained.  If you have any questions, please contact a St. Louis or St. Charles bankruptcy attorney.