How does Bankruptcy Work?
In the first scene in the series Schitt’s Creek, the comedy that exploded in popularity via Netflix, we see government agents swarming the stately home of the Rose family. They take their furniture, clothing, purses, even the enormous family portrait from the walls of the living room. Then they send them off to live in Schitt’s Creek, the only asset the Rose family owns that the IRS doesn’t deem worthy of seizure. We see this all the time on TV or in the movies. When you declare bankruptcy, or you don’t pay your bills, people come and cart everything you own away to sell, and then they lock you out of your own home. But that’s not how bankruptcy works!
What is Bankruptcy?
Bankruptcy is a legal process overseen by federal bankruptcy courts. The process helps people and businesses eliminate all or some of their debt or help them repay part of what they owe. For individuals, the two most common types of bankruptcies are Chapter 7 and Chapter 13, both named for chapters of the U.S. bankruptcy code.
Chapter 7 Bankruptcy
Chapter 7 is also incorrectly known as “liquidation bankruptcy” because unexempt assets are sold pay creditors. Some of your assets are exempt, like your car up to a certain amount, basic household furnishings, and clothing. Bankruptcy won’t eliminate debts secured by property, like your mortgage. As long as you keep paying your mortgage, you can probably keep your house. You can also exempt a certain amount of equity in your home, as well as most retirement accounts.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy allows you to keep your property in exchange for repaying the debt in part or in full. You must have a source of income to qualify for chapter 13. We will develop a budget and you enter in a three to five-year plan to repay a portion or all of your debt through one monthly payment to the bankruptcy trustee.
Hire a Skilled Missouri Bankruptcy Attorney!
If you’re considering bankruptcy, don’t worry about what you’ve seen on TV. No one is barging in to cart your clothes away. At Doyel Law, we can tell you more about how bankruptcy works and help you find a path forward. Don’t let TV and myths on the internet keep you from taking action. We will give you the real story and help you make an informed decision. Give us a call at 314-909-9909 or contact us online to set up a consultation.