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Considering Bankruptcy in Olathe, KS? Discuss Your Options With a Bankruptcy Lawyer

When Should You Consider Bankruptcy?

Many people are understandably hesitant to declare bankruptcy. This legal proceeding leaves a scar on your credit record for at least seven years and can make declaring bankruptcy a second time considerably more difficult. Therefore, it's not a decision to be taken lightly. However, more than half a million households declared bankruptcy in 2020, meaning it is not as uncommon as you might think.

Bankruptcy is not for everyone. If you earn more than your monthly expenses and debt repayments amount to, then you are unlikely to be eligible, since you could probably pay off your debt by making some small adjustments to your lifestyle. However, if your monthly dues exceed your ability to pay, or your debt has led to excessive hardship, you may be able to use bankruptcy to resolve your situation.

Most courts will expect you to have taken action to resolve your debt prior to declaring bankruptcy. For example, restructuring your debt can reduce your monthly payments at little to no cost to you. You may also be asked to partake in financial counseling courses. In general, if you've exhausted your other options, bankruptcy becomes possible.

What Are the Types of Bankruptcy?

You've likely heard of chapter 7 and chapter 13 bankruptcies, as these are the most commonly used ones for households and businesses. However, there are actually several other chapters that apply to more specific situations.

For instance, chapter 15 allows individuals to declare bankruptcy with debts in other countries, a very specific scenario. Cases like these are far less common, with only a few thousand claims each year. Since these are unlikely to apply to you, we'll focus on the two chapters that most people in Olathe are likely to use.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy represents most people's idea of bankruptcy. It allows you to completely eradicate your debt, with few exceptions. However, to do this, you must liquidate your assets in order to pay off creditors as much as possible.

The whole process takes around 6 months to complete. First, you will need to declare all of your debts and assets. It's very important that you are transparent and honest throughout the process, as courts will scrutinize your declarations very thoroughly. This is where a bankruptcy lawyer is vital. On your own, you might miss certain items that need to be declared, or overlook a small debt in the process.

A bankruptcy lawyer can also help you stay out of trouble. You might have considered some ways to hold onto assets that need to be declared, but doing so can create major problems later on in the process. It's important that you consult a professional before taking any actions that could hinder your bankruptcy declaration.

Chapter 13 Bankruptcy

The second most popular bankruptcy solution is to use chapter 13. Unlike chapter 7, you can usually keep a large portion or even all of your assets under chapter 13. However, your debt will not be wiped out the way it would be with chapter 7.

Instead, your income will be evaluated to determine how much you are able to pay back to your creditors. Interest may be frozen while you make these payments, but this convenience comes with a stern condition. You must adhere to the repayment schedule perfectly. If you fail to make a payment, or even make a payment late, you could lose the benefits of your chapter 13 bankruptcy.

Chapter 13 may be a good choice for you if you fell into debt during a temporary job loss or other situation that you expect to bounce back from. If you expect that you can return to a stable financial situation soon and need extra protection for your assets, then chapter 13 might be right for you. However, if your situation is direr, chapter 7 provides the most security in the long term.

Other Chapters

Kansas residents may find themselves in need of a chapter 12 bankruptcy, which is meant for family farmers. It's very similar to a chapter 13 bankruptcy but is easier for farmers to access. If you are interested in getting more information about this type of bankruptcy, give us a call.

Bankruptcy Law in Kansas

Bankruptcy is governed by federal law, which means that you will need to file your petition with a federal bankruptcy court in Kansas. You cannot file at a local court or state court. However, federal law allows for states to have some influence over specific aspects of the bankruptcy procedure. Most notably, Kansas has a homestead exemption to help protect filers from losing their primary residence.

Section 1 of Article 23 of Chapter 60 of the state statutes establishes this exemption clearly. You are allowed to retain up to 160 acres of land in rural areas, or only one acre if you live within a city or properly incorporated town. This exemption is automatically applied to your filing; however, you may need to explicitly file for the exemption if a creditor has specifically motioned to have your home foreclosed upon.

The homestead exemption only applies to your primary residence; any other properties in your possession may be liquidated in a chapter 7 bankruptcy. The only exceptions to the exemption are when tax debt is involved, or when you have outstanding debt for improvements to your home. You must also have purchased the residence at least 40 months before you file for bankruptcy to receive full protection.

Why Do You Need a Bankruptcy Lawyer?

As you can see, while bankruptcy in Kansas is fairly straightforward, the process itself requires careful examination and attention to detail. A large number of documents will be required to successfully file for bankruptcy, and even the slightest error could render your case dead on arrival. In fact, the most common reason a debtor is denied their discharge is due to clerical errors.

With a good lawyer, you won't have to worry about whether your papers are in order or not. You'll have an expert ready to look over your entire case. At Stockton & Stern LLC, we understand that bankruptcy is a trying time and can be very stressful. Together, we can work to make it a smooth process and lift the burden of debt from your shoulders. Call Stockton & Stern LLC today to find out more.