Missouri Laws on Bankruptcy and Judgment Liens

Understanding Missouri laws on bankruptcy and judgment liens is crucial for individuals facing financial difficulties or legal judgments. This article delves into these topics, providing insights into how they interact and the implications for debtors.

Bankruptcy in Missouri

Bankruptcy is a legal process that allows individuals or businesses unable to repay their debts to seek relief from some or all of their liabilities. In Missouri, as in other states, there are two primary types of personal bankruptcy: Chapter 7 and Chapter 13.

Chapter 7 bankruptcy, often referred to as liquidation bankruptcy, involves the sale of non-exempt assets to pay creditors. However, many individuals qualify for exemptions that allow them to retain essential property. On the other hand, Chapter 13 bankruptcy allows individuals to create a repayment plan to pay off their debts over a period of three to five years while retaining their assets.

Eligibility for Bankruptcy

In Missouri, individuals must pass a means test to be eligible for Chapter 7 bankruptcy. This test assesses the individual's income, expenses, and family size to determine whether they can afford to repay their debts. If their income falls below the state median, they can proceed with Chapter 7. If it exceeds the median, they may need to consider Chapter 13 bankruptcy.

Judgment Liens in Missouri

A judgment lien is a legal claim against a debtor's property, established when a court grants a creditor a lien to secure payment of a debt. In Missouri, a judgment lien can arise from various legal actions against a debtor, including credit card debts, loans, and other contractual obligations.

Once a judgment is obtained, the creditor can file a judgment lien with the circuit court where the debtor’s property is located. This lien attaches to the debtor's real estate, preventing them from selling or refinancing the property without addressing the lien.

Interaction Between Bankruptcy and Judgment Liens

When an individual files for bankruptcy in Missouri, any existing judgment liens are affected. Under federal bankruptcy law, specific types of debt may be discharged during the bankruptcy process, while others, such as child support or tax obligations, generally cannot be discharged.

If a debtor files for Chapter 7 bankruptcy, the court may discharge the personal liability for the debt, but the judgment lien may still remain attached to the property. This means that even if the debtor no longer owes the debt, the lien may still need to be addressed if the property is sold or refinanced.

However, under certain circumstances, individuals in bankruptcy can seek to remove judgment liens. For example, if the lien impairs the debtor’s homestead exemption, they may be able to file a motion with the bankruptcy court to avoid the lien entirely. This process requires demonstrating that the lien reduces their equity in the primary residence below the allowed exempt amount.

Conclusion

Navigating bankruptcy and judgment liens in Missouri can be complex, involving various rules and exemptions. Those facing financial difficulties should seek advice from a qualified attorney to explore the best options for their specific circumstances, ensuring they understand their rights and responsibilities under Missouri law. With the right guidance, individuals can regain control of their financial futures despite experiencing such challenges.