Will I Receive a Tax Refund After Chapter 7 Bankruptcy?

The timing of your bankruptcy filing can affect whether you can keep your tax returns

The timing of your bankruptcy filing can affect whether you can keep your tax returns

Why the timing of your bankruptcy case could affect your tax refund

The timing of your bankruptcy filing will be important if you are expecting a significant income tax refund.  Pending tax refunds are generally considered part of the bankruptcy estate. Calendar proration is used to determine the portion of the tax refund that can be taken by the trustee. Typically, if you file your bankruptcy case at the first of the year, trustees are less interested in your tax refunds for that year.  However, filing your bankruptcy case at the beginning of the year often means you have not yet received your refund for the prior year, and as mentioned above, pending tax refunds become property of the bankruptcy estate to the extent they are not protected by exemption.  Thus many times there is a “sweet spot” for filing bankruptcy, which occurs as early in the year as possible, yet after the individual has received and spent their tax refunds from the previous year. 

It is usually a good idea to file bankruptcy early in the year, once you have received and spent your tax refunds. However, there are often other circumstances that require attention; for example, if you are facing wage garnishment or home foreclosure, losing your tax refunds may not be your primary concern.

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What is a Reaffirmation Agreement?

Even if a debt can be discharged, you may have special reasons why you want to promise to pay it. For example, you may want to work out a plan with the bank to keep your car. To promise to pay that debt, you must sign and file a reaffirmation agreement with the court. Reaffirmation agreements are under special rules and are voluntary. They are not required by bankruptcy law or by any other law.

Reaffirmation agreements–

  • must be voluntary;
  • must not place too heavy a burden on you or your family;
  • must be in your best interest; and
  • can be canceled anytime before the court issues your discharge or within 60 days after the agreement is filed with the court, whichever gives you the most time.

If you are an individual and you are not represented by an attorney, the court must hold a hearing to decide whether to approve the reaffirmation agreement. The agreement will not be legally binding until the court approves it.

If you reaffirm a debt and then fail to pay it, you owe the debt the same as though there was no bankruptcy. The debt will not be discharged and the creditor can take action to recover any property on which it has a lien or mortgage. The creditor can also take legal action to recover a judgment against you.

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Reasons People File Bankruptcy in Missouri

The 5 main challenges that force many into bankruptcy

causes for bankruptcy in Missouri

Top 5 reasons why people file bankruptcy

Bankruptcy is rarely anticipated. Usually there is some sort of event or problem that arises that is too tough to face and requires filing bankruptcy in Missouri to resolve it. Here are the top 5 reasons people file bankruptcy.

  1. Medical Expenses: Doctor bills can escalate to thousands of dollars for some treatments. This quickly becomes an unpayable bill for many.
  2. Unemployment: Joblessness is one of the toughest  challenges to face because the bills keep coming but income stops. Those without savings find themselves underwater in a hurry.
  3. Spending too Much: Overspending or overextending themselves, many find credit card debt, home payments, and car loans to become very burdensome.
  4. Divorce: Divorce brings financial strain through alimony, child support, and court costs.
  5. Unexpected disaster: Property damage can become too much to repair with hurricanes, tornadoes, earthquakes, and other disasters.

We can help you eliminate your debt if you are facing one or many of these issues. Our goal is to get you back on your feet again.

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What Does it Cost to File Missouri Bankruptcy?

4 things to consider about the cost of bankruptcy

missouri bankruptcy cost

Consider these 4 things about the cost of bankruptcy

Many of our potential clients ask us, “What does it cost to file bankruptcy?” The price varies based on several factors. We can give you a free estimate for your situation. In the meantime, remember these four things:

  1. Bankruptcy is an investment: Any money you spend filing bankruptcy will save you thousands of dollars in the debts that you will eliminate. In the long term, it is a good financial decision.
  2. Court fees are mandatory: Each state has the same court fees, which pay for administrative costs and other court-related costs. The fees are $306 for Chapter 7, $281 for Chapter 13, and $1,213 for Chapter 11.
  3. Attorney fees vary based on different factors: Attorneys are required by law to disclose their attorney fees. These fees vary based on how complex your situation is, how much time it takes to work on your case, and the type of bankruptcy that you file. The national average cost is around $1,200 for Chapter 7 and around $3,000 for Chapter 13.
  4. Avoid too high and low rates: When you look at price as a factor in choosing an attorney, remember that very low rates often mean low quality service and results. Very high fees means that the attorney may be overcharging. Try and find an attorney with mid-level prices who gives good service.

Learn more about our Missouri bankruptcy attorneys

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State of the Missouri Economy

A look at unemployment trends in Missouri and the U.S.

This economy has been tough for quite a while now. While the initial panic and devastation of the Great Recession is over, the recovery has been long and slow. Recent unemployment data show that this will likely be the story in the months to come as well.

The U.S. unemployment rate now lies at around 7.9%. While this a large improvement from the high numbers in 2009 (upwards of 10%), it still is not the news that most people are looking for. For over 2 years, the unemployment rate has been above 8%, with only recently has the rate dipped to current levels.


A Comparison of U.S. and Missouri unemployment rates

As for Missouri, there is good news. With an employment rate of 6.9%, its economy seems to be doing better than the nation as a whole. In particular, Kansas City’s rate fell to 6.8% last month.

What does this mean for you? It means that while this economy has been stagnant for a long time, it appears that the future holds a recovery in store.  So if you are struggling financially, remember that the economic outlook is better in Kansas City and Missouri than for others in the United States.

For help eliminating debt, please visit our Missouri bankruptcy home page.

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How to Choose a Missouri Bankruptcy Attorney

6 important characteristics to consider in an Missouri bankruptcy attorney

missouri bankruptcy attorney qualities

These 6 qualities are important in choosing a bankruptcy attorney

There are more attorneys in America than anywhere else in the world. This means that as you are considering hiring a Missouri bankruptcy attorney, you have lots and lots of choices. This can become overwhelming as you want to pick the best one to help you with your situation.

Here are 6 factors that you should consider as you pick an attorney:

  1. Experience: The more experienced the attorney, the more likely he or she is to have a successful outcome in your case and to avoid costly filing mistakes.
  2. Prices: The lower the price, the lower the quality, while the higher the price, the more likely you are being taken advantage of. Strive to find attorneys with mid-level prices.
  3. Personality: Having an attorney that is easy to talk to and enjoyable to be around makes filing easier, especially since you are sharing personal information with him or her.
  4. Law Firm Size: Large firms have higher costs, meaning you usually pay more, while smaller firms charge less and offer more personalized service.
  5. Free Consultation: Expect a good attorney to spend time looking at your situation and offering advice without charging you.
  6. Locally Based: Local firms are more accessible and convenient than working with a national, large firm.

Learn more about our Missouri bankruptcy attorney, Coleman Ellis.

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What is the Process of Filing Missouri Bankruptcy?

The 7 Main Steps of Filing Missouri Bankruptcy

kansas city bankruptcy filing process

There are 7 main steps for filing bankruptcy

If you are considering filing Missouri bankruptcy, we want you to feel comfortable that the process is much simpler and more straightforward than you might think.

Here are the 7 main steps that you should expect as you file Missouri bankruptcy:

  1. Have a consultation with an attorney: Your attorney is your best friend in this process. He or she will walk you through your options and help you decide the best path to take.
  2. Choose between Chapter 7 or 13: This choice will depend on whether you want to eliminate debt with some loss of assets or keep assets but have debt payments.
  3. File Chapter 7 or Chapter 13: You fill out the necessary paperwork and submit it to the courts.
  4. An automatic stay protects you: An “automatic stay” is a legal court order that allows you to be free from debt collections. Creditors are legally bound from pursuing you once you file bankruptcy.
  5. Attend the 341 Meeting and Confirmation Hearing: The 341 meeting is a non-court meeting with your trustee (the person in charge of looking over your case) and your creditors. It is required for both Chapter 7 and Chapter 13 cases and allows creditors to make sure that your financial statements are accurate. The confirmation hearing, on the other hand, is only for Chapter 13 cases, takes place in court, and deals with verifying the feasibility of your Chapter 13 payment plan.
  6. Take a credit counseling class: This mandatory class teaches principles of debt management, finances, and budgeting.
  7. Debt is discharged or paid off over time: In 3-5 months, your Chapter 7 case eliminates your debts completely. A Chapter 13 lets you keep your assets and continue to make payments on debt that are more manageable.

We hope you feel confident in your financial future. Our Missouri bankruptcy attorney can answer your questions and guide you through the bankruptcy process in depth.

To see how we can help you, visit our Missouri bankruptcy home page.

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Missouri Bankruptcy and Taxes: Can the Court Seize My Tax Refund?

With 2012 nearing an end, most Missourians that are considering bankruptcy are concerned about how a Missouri bankruptcy filing would affect their potential tax refund.  This is a valid concern. Tax refunds are an asset of your estate and therefore the court can act upon the refund depending on what type of chapter you file (7, 11, 13) and what type of refund you have.

Recently Missouri passed a new state exemption bill that directly impacts tax refunds.  All government benefits are exempted under the new Missouri law.  While it hasn’t been fully settled, the prevailing opinion is that any earned income credit or child credit will now be exempted.  Any refund due from interest paid or wages will still be actionable by the Court.

Depending on which bankruptcy you file (7, 11, or 13) also can impact your tax return.  In Missouri, specifically the Eastern District, if you file a Chapter 7 bankruptcy, your refund is a potential asset only once and generally will depend on your filing date.  In a Chapter 13, your refund is an asset every year you are in your Chapter 13 and you are only allowed to retain a specific portion of the refund.  The rest is turned over to the Trustee and used as additional payments in your Chapter 13 bankruptcy case.

In conclusion, if you are considering filing a Missouri bankruptcy in the near future you should contact an experienced bankruptcy attorney who can advise you on tax issues as they relate to bankruptcy.  Not only can our office advise you on how to protect your current refund, but how to avoid tax issues in the future.

Visit the Missouri Bankruptcy Center Home Page

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New Missouri Bankruptcy Exemption Status Law Passed

Yesterday (July 9, 2012) Governor Nixon signed a law that will change some Missouri bankruptcy exemption statutes, including the vehicle exception statute and the head of household statute. The new law clarifies that the Missouri bankruptcy exemption of a debtor’s interest in motor vehicles applies to all motor vehicles owned by the debtor to a total of $3000 no matter the number of debtor owned motor vehicles which are used to reach the $3000 exemption amount. It also clarifies that the exemption of a mobile home used by the debtor as a residence is $5000 when the mobile home is not attached to land which is also owned by the debtor; where the mobile home is attached to the land owned by the debtor the only exemption available to the debtor is that of the homestead exemption. The law also changes the Missouri bankruptcy exemption in public assistance programs to include all public assistance programs notwithstanding the source of the public assistance. Lastly it raises the age for dependents from 18 to 21 in the determination of the head of household exemption. This new law will apply to bankruptcies filed on or after August 28, 2012.

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I Owe Debt to a Family Member. Can I Pay that Person Off Prior to Filing Missouri Bankruptcy?

Unfortunately, paying off a debt owed to a friend or family member prior to the filing of
a bankruptcy can result in a costly and difficult situation for both the person paid and yourself. Under the Missouri Bankruptcy Code, any payments to a friend or family member made within a year prior to the filing of bankruptcy can be voided by the Court.

The concept is based on a principal of fairness for all creditors, including those that you
are related to or familiar with. When the payment is voided by the Missouri Bankruptcy Court, the individual you paid could be ordered to pay the money back to the court or you could be required to pay the money in order to receive a discharge.

Many individuals believe that if there is no record of the payment, it does not need to be
disclosed. This is patently false and can result in a dismissal of your bankruptcy and possible criminal penalties. If you are considering filing Missouri bankruptcy and you have paid a debt to a friend or relative within the last year, disclose this fact to your attorney. If planned properly, the issue can be avoided and you can still pay the friend or relative after your case has been filed.

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