When Missouri residents fail to pay their debts as agreed, the creditor can sue them under state law 516-120. The statute of limitations for using the court system to collect most debts is five years, and wage garnishments are allowed. While credit counseling agencies offer debt negotiation services, the bankruptcy process is the safest legal way to eliminate or reduce most types of debt, notes the United States Bankruptcy Court Western District of Missouri.
Credit Counseling
If you opt to use a credit counseling service to settle your debts or prepare for bankruptcy, you should choose one accredited by the federal government, according to the U.S. Trustee Program. As of 2011, credit counseling agencies accredited in Missouri included 4-Sight Counseling, ClearPoint Financial Solutions and Forbes & Newhard Credit Solutions.
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Asset Considerations
When you file bankruptcy, you risk losing some of your assets. But if you lived in Missouri for at least two years prior to filing personal bankruptcy, you can keep some of your property under state asset exemption laws, according to Bankruptcy Action. As of 2011, you can keep up to $15,000 of homestead equity, a mobile home worth no more than $5,000 and $3,000 of motor vehicle equity. You can also retain $500 in jewelry, a wedding ring worth no more than $1,500 and an unlimited amount of professional health aids.
Types of Bankruptcy
Most people file for debt relief under Chapter 7 or partial debt repayment in Chapter 13, according to the United States Bankruptcy Court Western District of Missouri. Chapter 7 eliminates many debts, but harms credit ratings for 10 years from the date of case filing. Chapter 13 plans take three to five years to complete; the case itself harms credit ratings for seven years from the date of filing. As of 2011, it cost $274 to file Chapter 13 and $299 to declare Chapter 7. In some cases, installment payment plans or Chapter 7 fee waivers are available.
Chapter 7 vs. Chapter 13 Qualification
To file Chapter 7, you must either earn less than Missouri's annual median income level or prove to a judge that you cannot reasonably enter a Chapter 13 plan and support your family's basic needs. As of 2011, the annual median income level for a single Missouri resident was $39,332, while the figure for a couple was $51,120, according to the U.S. Trustee Program. A Missouri family of four could earn up to $69,832 annually and still qualify for Chapter 7 bankruptcy.
Ineligible Debts
If you owe Missouri state, local or federal taxes incurred less than three years ago, you must work out a repayment plan with the taxation agency itself, warns the book "How to File for Chapter 7 Bankruptcy." You also must directly deal with the family court to handle any child support or alimony obligations. Unless you are severely disabled, a Missouri bankruptcy judge is unlikely to forgive your federally backed student loans.
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