How Long Will Bankruptcy Remain On My Credit Report?

People considering filing bankruptcy in Kansas City are often concerned about the consequences to their credit report and how long the bankruptcy will be reported on their credit report.  After filing bankruptcy your credit report will list the date filed, the chapter filed, the case number, case status and closing date.  The Federal Fair Credit Reporting Act (FCRA) allows credit reporting agencies to keep this information on your credit report for up to ten years.  However, the FCRA does not mandate that the bankruptcy remain on your credit report for that long, only that it must be removed after ten years. 

Each credit reporting agency has its own policy regarding the length it reports a bankruptcy.  Generally, Chapter 7 bankruptcy cases are reported for ten years and Chapter 13 cases are reported for seven years.  However, either chapter may be reported for up to ten years.  The ten year period begins on the date the bankruptcy case is filed.  A credit reporting agency may also choose to report your bankruptcy for a shorter period of time.

Many individuals may be scared to file bankruptcy because of it being reported on your credit report for up to ten years and the effect it will have on your credit report and score.  However, most individuals filing bankruptcy already have a lower credit score because of the debts they have incurred and possibly missed or late payments and/or judgments against them.  In return for having your bankruptcy posted on your credit report for up to ten years, individuals filing bankruptcy are often relieved of the overwhelming debts that have been burdening them.  Bankruptcy in Kansas City can provide the opportunity for a fresh start free of most debts and a second chance at a better future.  For more information on bankruptcy please visit my website at http://www.thesmalleylawfirm.com or contact me at (913) 601-3549 for a free consultation.

What is the Means Test?

Individuals who are unfamiliar with bankruptcy often ask what the "means test" is and how it relates to filing bankruptcy.  When filing Chapter 7 bankruptcy in Kansas City" all debtors are required to complete the means test.  The means test determines your eligibility to file for Chapter 7 bankruptcy.  Most individuals filing for bankruptcy are able to pass the means test.  A Kansas and Missouri bankruptcy attorney like myself, Cary Smalley of The Smalley Law Firm, can help you determine if you are able to "pass" the means test and be eligible to file for Chapter 7 bankruptcy.

The means test is essentially a method to compare your income to the median income of your state.  It looks at your actual income for the six months immediately prior to filing bankruptcy.  However, there are certain individuals that do not have to take the means test.  For example, military personnel are exempt from the means test.  If you are required to take the means test and your income falls below the median income for your state, based on the number of individuals in your household, then you will automatically be eligible to file Chapter 7 bankruptcy.

If your income is above the median income for your state you may still be eligible to file for Chapter 7 bankruptcy if the filing is not considering "abusive" under the Bankrupty Code.  In order to determine if the filing is "abusive" additional information must be provided about the debtor's monthly expenditures, along with IRS allowances for certain expenditures.  The filing is not considered "abusive" if the debtor does not have any "disposible income" after deducting expenses from income.

If the debtor still has disposible income after deducting expenses, you may still be eligible to file for Chapter 7 based on a formula.  Even if you are not eligible for Chapter 7 after the formula, you may still be eligible for Chapter 7 in Kansas City by demonstrating certain "special circumstances".

As you can see from above, there are number of ways to meet the means test, but it is complicated.  However, with an experienced Kansas City bankruptcy attorney most debtors are able to satisfy the means test.  For more information about bankruptcy please visit my website at http://www.thesmalleylawfirm.com or contact me at (913) 601-3549 for your free initial consultation.

Can I Keep My Retirement Plan In Bankruptcy?

People often inquire if they can keep their retirement plan funds if they file for bankruptcy in Kansas City.  Generally, the answer is "yes".  Most retirement plans are ERISA (Employee Retirement Income Security Act of 1974) qualified.  The ERISA law was enacted to protect your retirement accounts from risky investments by your employer or plan administrator.  If your plan is ERISA qualified then it cannot be seized by the bankruptcy trustee to pay your creditors.  Your retirment plan documentation, generally the plan summary, will tell you if the plan is "ERISA qualified".

A 401(k), which is a deferred compensation plan, is the most common retirement plan.  Most 401(k) plans are automatically ERISA qualified.  Another common retirement plan is an IRA (Individual Retirement Account).  Generally, IRAs are also ERISA qualified.  However, there are several types of IRAs that are not ERISA qualified.  These include plans in which your employer does not contribute money to the plan, voluntary plans for yourself that are not connected to employment (such as through a bank) and deferred compensation plans.  As advised, please check the plan summary to see if your plan is "ERISA qualified".

Additionally, in Kansas KPERS, deferred compensation plans, Social Security, federal civil service, 401(k)s, IRAs, Roth IRAs and 403(b) plans are all exempt.  There are also similar state exemptions in Missouri bankruptcy.

However, beware that the trustee may try to claim your retirement plan as non-exempt if you make a large contribution to your plan right before filing bankruptcy in Kansas City in an attempt to hide your money.  This could be considered fraud.  For more information please visit my website at http://www.thesmalleylawfirm.com

Credit Card Use Before Bankruptcy

People considering bankruptcy in Kansas City often ask if they can use their credit cards immediately before filing bankruptcy.  Generally there should not be any problem with using your credit card to pay necessities such as food, clothing and shelter shortly before filing bankruptcy. 

Section 523 of the Bankruptcy Code specifies certain situations in which credit card debt will not be discharged in bankruptcy.  Section 523(a)(2)(c) states that consumer debt totaling over $500 for luxury goods and services owed to any one creditor incurred within 90 days of filing and cash advances totaling $750 or more owed to any one creditor within 70 days of filing are non-dischargeable.  Section 523(a)(2) also states that debt owed to a creditor incurred by false pretenses or fraud is not dischargeable.  http://www.law.cornell.edu/uscode/text/11/523

Essentially Section 523 allows credit card lenders to challenge the discharge of debts in bankruptcy incurred within three months of filing for bankruptcy for anything other than necessities such as food, clothing and shelter and any credit card use within the past year if a debtor makes charges where there is no reasonable expectation of repayment, such as for goods deemed to be luxuries.  For more information please contact me, a Kansas City bankruptcy attorney, at (913) 601-3549 or visit my website at http://www.thesmalleylawfirm.com

Can I Keep My Jewelry If I File Bankruptcy?

Many individuals inquire as to whether they can keep their jewelry if they file for Chapter 7 bankruptcy in Kansas City.  The answer depends on how much your jewelry is worth.  In Kansas an individual is entitled to a $1,000 exemption for jewelry.  If you are married and filing bankruptcy jointly in Kansas you are entitled to a total of $2,000 in jewelry as exempt.  See K.S.A. 60-2304(b).  http://kansasstatutes.lesterama.org/Chapter_60/Article_23/60-2304.html  For example, if you are married in Kansas and the husband owns a wedding band valued at $300 and the wife owns an engagement ringt valued at $1,300 you would be able to keep both items, as you could combine your exemptions for a $1,600 exemption out of $2,000 allowed.

In Missouri an individual is entitled to a $1,500 exemption for a wedding ring and an additional $500 exemption for other jewelry.  If you are married and filing jointly in Missouri you are entitled to a total exemption of $3,000 for wedding rings and an additional $1,000 total exemption for other jewelry.  See R.S. Mo. 513.430.1(2)  http://www.moga.mo.gov/statutes/c500-599/5130000430.htm  For example, if you are married and the husband has a wedding band valued at $800 and the wife has an engagement ring valued at $2,000 then you would be able to keep both items, as you would still be under the $3,000 wedding ring exemption.  You would also be entitled to exempt a combined total of $1,000 for any other jewelry pieces you may have.

Your jewelry should be valued at its current fair market value, not the purchase price.  If you are considering bankruptcy in Kansas City and are concerned about the value of your jewelry, I suggest you have it appraised or check the sale price of the item from a retailer.  For more information please visit my website at http://www.thesmalleylawfirm.com

Do You Have a Will?

I know this is a Kansas City bankruptcy blog, but I find this topic so significant that it needs to be discussed here.  In conversations with family, friends and clients over the last few months it has become apparent that many individuals have never had a will drafted, even if they have spouses and/or children.  If you own a home, a car, or have a bank account you should have a will.

Many people are unaware that if you do not have a will most of your assets will pass to your heirs through a statutory process known as "intestate succession".  For example, in Kansas if you are married with children and do not have a will, half of your property will pass to your spouse and the other half will pass to your children.  If you do not have a living spouse or children, Kansas law would pass the property to other more remote relatives.  If you have no heirs in Kansas, your property would revert to the state.  Also, without a will in Kansas, the Court will decide who administers your estate and who would serve as guardian of your minor children.  For more information I suggest you review the Kansas Bar Association's webpage on wills at:  http://www.ksbar.org/public/public_resources/pamphlets/important_will.shtml

I have significant experience drafting wills and would be more than happy to meet with you for a free initial consultation.  I can ensure that your assets go where you want them to go and that any children you may have are taken care of by your selected guardian.  I am able to draft wills in both Kansas and Missouri.  Even if you have a will, I suggest it be reviewed if there have been changes in your family, finances, state of residence, or your intentions.  For more information please visit my website at http://www.thesmalleylawfirm.com

Student Loan Discrimination and Bankruptcy

After my previous blog post on employment discrimination and bankruptcy I have had several inquiries as to whether filing bankruptcy in Kansas City will prevent an individual from obtaining student loans.  The simple answer is "no".

Bankruptcy Code Section 525(c) mandates that any government unit that administers student grant or loan programs, or any person that has a business that includes making student loans that are guaranteed or insured under a student loan program, "may not deny a student grant, loan, loan guarantee or loan insurance" to a person who has filed for bankruptcy, or to someone associated with a person who has filed for bankruptcy, solely because that person either filed for bankruptcy, or is insolvent.  The text of this code section can be found here:  http://codes.lp.findlaw.com/uscode/11/5/II/525

Therefore, the Bankruptcy Code prohibits discrimination by government or private lenders in issuing student loans based solely upon you or anyone you are associated with filing for bankruptcy or being insolvent.  However, you may still be denied a student loan based on some other reason.  For additional information please visit my website at http://www.thesmalleylawfirm.com  I, Kansas City bankruptcy attorney Cary Smalley can also be reached at (913) 601-3549 or cary@thesmalleylawfirm.com if you have legal questions.  I offer a free initial consultation.