Throughout Kansas, escalating consumer debt and the greater national economic failings of recent years have led residents of our state to declare bankruptcy protection in record numbers. As most Kansas heads of household already know, Chapter 7 and Chapter 13 bankruptcy programs provide a governmentally sanctioned maneuver in which consumers who’ve, for one reason or another, found themselves incapable of paying back the loans they signed obligations for during more prosperous times may guard their household against the predatory collection agents. For over one hundred years, bankruptcy has represented the promise of new beginnings for Americans too greedy or too foolish or simply so unfortunate that they would need the protection of the government to shield their families from collection agents. Whether the borrowers’ reach exceeded their grasp or whether they were truly the victim of hapless circumstance, debt elimination bankruptcies have saved the fortunes of many proud Kansans that had nowhere else to turn. As guarded by the United States bankruptcy code, every citizen has been guaranteed the right to the efficient discharge of consumer debts that they are demonstrably unable to satisfy, but, as an unfortunate percentage of Kansas borrowers have come to realize, recent modifications to the underlying legislation have significantly diminished the spirit in which the original protections were first enacted. Too many Kansans simply expect bankruptcy to be a final step should their life plans go awry, particularly those borrowers who never before seriously investigated alternatives as they attempted to repay their loans through traditional measures, and they only discover the limitations of modern bankruptcy protection after they have already met with the court trustee and been denied.
Ever since President Bush signed into law the Bankruptcy Abuse Prevention and Consumer Protection Act in the spring of 2005, the availability and potential security offered by Chapter 7 and Chapter 13 bankruptcy programs have been severely hampered by this new legislation. It’s far more complicated for middle class Kansans to enter the Chapter 7 debt elimination program under the current statutes, and those borrowers who are forced to enter Chapter 13 bankruptcy protection will find the payment schedule requested by the Kansas court trustee unfairly elevated. Worse yet, by the explicitly laid out strictures of the new bankruptcy code, these trustees will have their hands tied as regards judicial leniency in the appraisal of every different bankruptcy petition. As has happened, the Kansas courts (in compliance with the United States Trustee authority) shall only allow Chapter 7 debt elimination protection to the families whose proven incomes are below the median of all Kansan borrowers regardless of need. According to the most recent census data – though this shall soon change; borrowers should check the United States Census Bureau’s website for updates – that median income level for Kansas has been set at thirty eight thousand dollars for a household with one member, fifty two thousand dollars for two members, fifty eight thousand dollars for three members, sixty nine thousand dollars for four members, and prospective bankruptcy filers should add another seven thousand dollars for each additional member.
There’s also another method for Kansas borrowers who have made what has been judged to be too much money (despite the size of their credit holdings) to still claim eligibility for the Chapter 7 debt elimination program. In what’s become known as a means test, Kansas court officials will closely examine the past half year of earnings with an eye toward potential payback of consumer debts under ordinary circumstances. Planned payments toward household utilities, school loans, back taxes, governmentally imposed debts (primarily family support such as alimony and child support), secured debts like home mortgages and vehicle loans, and ordinary costs of living are all taken into account. After the deduction of these monthly obligations, the trustee shall examine whether or not the borrower could reasonably be expected to pay one hundred dollars a month to the various lenders – six thousand dollars overall – for the five years after bankruptcy petition. Unfortunately, ever after the BAPCA passage, the trustees selected by the Kansas courts will not be allowed to consider the actual household expenses that Kansas families endure each month but instead they will have to calculate the theoretical expenses for Kansan residents as determined by the Internal Revenue Service, and, if the mathematics don’t add up in favor of the borrower (whatever the realities of the families’ true budgets), then they will be forced into a Chapter 13 bankruptcy program.
There’s a point to the Chapter 13 bankruptcy protection, to be certain, and many Kansan home owners that quite reasonably worry over foreclosure proceedings consciously initiate Chapter 13 bankruptcies to make sure that their assets are shielded from harm. Within Chapter 13 programs, borrowers are granted an automatic stay from collector harassment, but they will still have to repay the debts that they have taken out. There’s a reason that most borrowers prefer Chapter 7 bankruptcies. Mounting credit card bills too often prevent even a governmentally mediated payment schedule. Unfortunately, even the Chapter 7 debt elimination bankruptcy program won’t actually liquidate every one of the Kansas consumer’s financial burdens. Unpaid child support and alimony obligations, most back taxes, student loans (including, under current regulations, even those educational loans borrowed from private lenders), cash advances from credit cards over eight hundred and twenty five dollars that were conducted less than two months the bankruptcy petition was filed in the Kansas courts, luxury purchases totaling over five hundred and fifty dollars that were made within three months of declaration, monetary penalties assessed by the Kansas or American government, and, of course, any consumer debt judged to be fraudulent will all remain the liability of the borrower. Kansan borrowers that happen to be liable for the wrong sort of debt won’t find salvation through governmental protection. Worse yet, by attempting to close out debts through Chapter 7 bankruptcy, Kansan households open themselves up to the potential loss of their possessions.
Essentially, by attempting to file Chapter 7 debt elimination bankruptcy, borrowers cede ownership of all assets not expressly preserved from various statutes to the whims of the court. The trustee will send court officers to seize all applicable property, put everything to auction, and then utilize the proceeds to pay the administrative costs for the government and at least partially remunerate creditors according to formal prioritization (with those lenders that had secured loans at the top of the list). The exemptions provided Kansas borrowers are, by some degree, far more compassionate than the restrictions built into the national bankruptcy code. Borrowers should have complete knowledge of all of the various regulations, or, more effectively, they should employ the services of a bankruptcy law firm headquartered in Kansas whose attorneys specialize in the myriad local statutes. The homestead exemption, for instance, confuses many newcomers to the contradictions surrounding bankruptcy protection. Technically, Kansas home owners can keep their primary residence even after filing for Chapter 7 debt elimination bankruptcy provided that the home has been purchased within the last four years and that the land will be surveyed as less than one hundred and sixty acres of farmable property or less than one acre within the limits of a recognized municipality. Furthermore, following the BAPCA legislation, Kansan homesteads with more than a hundred and twenty five thousand dollars in equity may also be subject to forfeiture.
Chapter 7 bankruptcies, of course, have always been fraught with a certain amount of risk, but the protection from creditors didn’t use to be nearly so punitive. Formerly, the great majority of Chapter 7 cases throughout Kansas were considered “no asset” bankruptcies: in other words, the household declaring bankruptcy would not be thought to have any property of sufficient value that would demand their forfeiture. However, following BAPCA, the borrowers’ possessions are at far greater risk because the petition now demands that consumers list all property value according to replacement value rather than resale. As said, Kansan residents are granted special privileges that the rest of the nation would be happy to enjoy. Furniture, clothing and all accepted home furnishings shall be protected as well as household supplies (fuel, food, and the like) that would reasonably be considered to last the filers as well as their families twelve months. Automobiles are protected up to values of twenty thousand dollars, jewelry’s protected to value of a thousand dollars, and tools of trade – which can expand to everything from agricultural stock to farm equipment to a professional library – are protected up to seventy five hundred dollars of replacement value. Any money specifically saved for funeral costs under previously arranged conditions and burial plots are similarly exempted for Kansan borrowers. Workman’s comp, pension funds, retirement accounts, and all public assistance benefits shouldn’t be worried over, and Kansans filing for Chapter 7 bankruptcy can count on keeping three quarters of their future earnings after the deduction of all household expenses. The security of life insurance benefits or the accompanying interest will be protected so long as the policy was issued more than one year prior to the bankruptcy declaration.
As should seem plain from the preceding paragraph, borrowers could hardly be expected to thoroughly grasp all of the many exemptions Kansas law allows. There are so many particular loopholes toward personal property and household assets – from National Guard uniforms to financial reparations awarded from court trials – that attorneys thoroughly trained in the local bankruptcy statutes have become an essential part of the process. There are certainly enough advertisements for bankruptcy attorneys filling Kansas newspapers, and the initial consultation with the lawyer will not take a great deal of time. At the least, compared to the amount of money a reputable Kansas law firm shall charge borrowers, the time spent talking to the lawyer that the potential bankruptcy filer seeks out certainly won’t seem long at all. Nevertheless, with the multifaceted federal regulations growing ever more difficult for ordinary borrowers to comprehend and the unprecedented importance that local statutes (particularly the property exemptions to Chapter 7 debt elimination bankruptcy that Kansas allows) now serve for most every Kansas consumer attempting to declare bankruptcy, experienced attorneys and their accompanying fees are simply part of the process nowadays. Still, should borrowers maintain an interest in bankruptcy protection and feel that they can absorb the cost of legal counsel – bankruptcy attorneys do not, as a rule, accept credit – they would do well to learn as much as they can about the process before they have to pay by the hour for an education.
During the borrowers’ first visit with their potential legal representatives, most of the discussion – presuming the borrowers, as the grand majority will, are primarily interested in the Chapter 7 alternative – will likely revolve around the client’s chances of eligibility for the hypothetical bankruptcy solution. To a certain extent, considering how fitfully most average borrowers understand the different elements of consumer bankruptcy protection, the discourse will purely focus upon the distinction between the Chapter 7 and Chapter 13 programs. Once again, the qualifications for Kansas borrowers to claim Chapter 7 bankruptcy debt liquidation have grown so murky through the varying state and federal legislative tangle that borrowers without dedicated financial training may honestly have no idea whether or not they could sneak through some hidden loophole if their income seems too high or be otherwise denied a deserving petition because of mishandled paperwork. Every Kansas borrower will initiate their bankruptcy proceedings by filing all necessary paperwork (the increasingly involved formal petition alongside a statement of financial affairs and creditor matrix – an inventory of the various secured and unsecured lenders, the specific type of their claim, the funds owed, the monthly obligations, and the payments due dates) with the Kansas courts alongside a money order for three hundred dollars. Since 2005, Kansas borrowers must also take and pass a series of debt relief courses at their own expense before they would even be allowed to turn in their initial bankruptcy petition, and, with the new laws in place, every borrower will have to send in past due tax returns before they file for Chapter 7 or Chapter 13 bankruptcy.
Once the bankruptcy petition has been submitted to a Kansas court, all of the lenders will be stopped from attempting to enforce the debt liabilities through the automatic stay protection. This aspect of bankruptcy was implemented to ensure that the borrowers’ assets and safeguard them from legal action brought by the lenders. All of the borrowers’ creditors, in order to enforce collection following bankruptcy declaration, will be made to demonstrate that there’s some proven cause – generally, the depreciation of real estate or vehicles clearly shown to be the result of the owner’s malfeasance – but this is still a very rare instance within Kansas considering the costs of litigation. Around one month following official bankruptcy declaration, the Kansas court trustee shall call the borrower (or, in the case of married couples, borrowers) together with representatives of the various lenders for the 341 meeting. For ordinary consumers, this won’t be much more than a perfunctory exchange between filer and judge – the creditors rarely attend these meeting – about the accuracy of their documents. For reasons that should seem clear, borrowers seeking bankruptcy protection must cooperate fully with the court officials and answer every question honestly without leaving any bit of information out. The creditors will have another two months following the 341 meeting to insist that the borrowers’ claims to bankruptcy protection are in some way mistaken, but, once again, they don’t generally take the time or the money involved to try and change the minds of the court trustees provided the initial bankruptcy petition was deemed valid.
Every Kansas borrower will have to decide for themselves whether or not bankruptcy proceedings as currently constructed will suit their particular requirements and properly liquidate or forestall their larger financial burden so significantly that they would dare challenge the essential dangers that modern bankruptcy protection represents. Your authors cannot act as if there’s one idealized equation to determine Kansas consumers’ suitability for the Chapter 7 or Chapter 13 bankruptcy approach, but, provided the borrowers are running short on household funds and unable to meet minimum payments of credit card bills, the aggrieved residents may have no choice but to learn more about the bankruptcy program. For a minority of Kansas borrowers, bankruptcy may even work out well over the long run. Folks who’ve maintained a steady but solidly lower blue collar income that could still afford the attorney fees and administrative expenses and various other costs bankruptcy currently involves. In particular, borrowers who find themselves in this position solely because of medical emergencies that led to hospitalization should at least consider the bankruptcy alternative. However, Kansan consumers truly concerned with their household’s financial security should also consider the alternatives to bankruptcy now available.
The Consumer Credit Counseling approach, of course, has been widely propagated through an advertising barrage across all sectors of Kansas media, but this method of debt management has been largely discredited. It turns out that the Consumer Credit Counseling industry achieved such fame on the backs of more than healthy payments requested from not only the borrowers themselves but also the credit card companies they were working against. Consumer Credit Counseling programs may lower interest rates and monthly payments, but they don’t actually touch the balances that were owed. Indeed, Consumer Credit Counseling may even be worse than Chapter 7 bankruptcies for the credit ratings of the Kansas borrowers who are led toward this supposed solution. Debt consolidation through secured loans won’t trouble FICO scores, but, considering the drop in property values around every area of Kansas in the last year (with the economic fall-out from the collapse of the mortgage companies ironically contributing to the plunge), we would not recommend that any Kansan risk the equity of their primary residence. Though they’re relatively unknown to ordinary consumers around Kansas, debt settlement firms have proven to be the most effective alternative to bankruptcy. The debt settlement method utilizes the lenders’ lingering fears of Chapter 7 debt elimination bankruptcy to force representatives of the credit card companies and all of the various lenders to agree to reduce their clients’ debt balances by as much as fifty or sixty percent. Settlement negotiation won’t help all borrowers, many won’t even be admitted to the program because they have the wrong sort of debts, but, with Chapter 7 bankruptcy guidelines so changed, any Kansas consumer should be well advised to take a look at debt settlement before attempting governmental protection that no longer really exists.
The decision to reach out for help with your debt is not one that's easy to make. You were raised to "do the right thing", but now it’s nearly unbearable. You struggle along while your creditors are turning up the heat. And now you’re at the point where the late fees, penalties and interest expense make it impossible to keep your head above water.
Ask yourself this. If you could eliminate your debt without permanently damaging your credit, why wouldn't you?
