Bankruptcy is becoming an all-too-common occurrence in this country, and while Kansas has among the lowest rates of foreclosure, those rates have increased markedly in recent years. Those considering bankruptcy should research the process and be aware of the recent revisions in the bankruptcy system. Determining if a debtor is eligible for bankruptcy is a vital first step, along with deciding if it is the best one for them.
Finding a Bankruptcy Attorney
Especially with the reforms of 2005, bankruptcy is a process that should not be entered into lightly. Bankruptcy attorneys are often the best source of advice. They cannot only take care of the legal steps; they understand how they relate to each individual’s financial circumstances. The local or state bar association can recommend qualified bankruptcy lawyers, but the debtor should do their own research and interviews to ensure they find a skilled representative appropriate for them.
Bankruptcy Options
The new reforms also make it more difficult for someone to file for Chapter 7 bankruptcy. While this is the most common type, with 70% of all Kansas filers choosing this option, some who seek Chapter 7 find that they are not eligible and must convert to Chapter 13. However, these types are appropriate for most filers:
- Chapter 7 is most helpful for those with little or no monthly income to repay debt and generally few assets. They have little for the trustee to liquidate to pay creditors before much of the remainder of their consumer debt is discharged, or erased.
- Chapter 13 works well for those with enough monthly income to continue making regular, but smaller, monthly payments under a reorganized repayment plan. They can keep all their property and expect to be debt-free in three to five years.
Kansas Exemptions
Those who are eligible for Chapter 7 bankruptcy can also claim certain property exempt from liquidation under state or federal laws. In Kansas, the law allows only state exemptions, which can include:
| Homestead | Unlimited |
| Personal Property | Motor vehicles up to $20,000; clothing for 1 year; household equipment and furnishings; fuel and food for 1 year; burial plot |
| Wages | Either 30 times the federal hourly minimum wage/wk or minimum of 75% of disposable weekly wages |
| Pensions | Tax exempt retirement accounts; Traditional and Roth IRAs up to $1,095,000/person; police and firefighters; elected and appointed officials; ERISA-qualified benefits; pension payments; state school employees; state highway patrol officers |
| Public Benefits | General assistance; veteran’s benefits; Social Security; unemployment; worker’s comp; crime victim’s compensation |
| Tools of the Trade | Arms and equipment for National Guard members; equipment, furniture, books, documents, breeding stock, seed, and grain up to $7,500 |
| Insurance | Some types of life insurance proceeds; disability and illness benefits; fraternal benefits |
Filing the Petition
Once all their options are considered, choices are made, and credit counselling is completed, filing the petition for bankruptcy is often a smooth process. The court places a temporary stay on debt collections and the bankruptcy trustee takes charge of the process, leaving the debtor and their lawyer responsible to answer questions and provide information as requested. After a required 341 meeting with creditors to explain the plan and the distribution of assets, the debtor can often start fresh rebuilding their credit score and financial future.
