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Inheriting Money & Bankruptcy in Mankato, MN

Behm Law Group explains what happens to inherited money when you file for bankruptcy.

Sometimes, one unfortunate outcome of the holidays is financial hardship. With an unknown future, you’re not sure whether or not to file bankruptcy. Consult with Behm Law Group, Ltd., to discuss your options. Residents of Mankato, MN: if your final decision is to file bankruptcy, we’ll walk you through the steps you need to take and inform you of what you can expect.

Let’s say that you have no foreseeable income. You file for bankruptcy. Then a relative unfortunately passes away, and you inherit some money. Can you keep that money, Mankato? The bankruptcy attorneys at Behm Law Group, Ltd., want you to be aware of the bankruptcy law regarding the inheritance of money:

Under 11 U.S.C. 341 and 521, if a person files for bankruptcy relief and then inherits money or property or receives a life insurance payment or a payment on a divorce property settlement within 180 days after the bankruptcy filing, any such money or property becomes property of the person’s bankruptcy estate and can be used by the bankruptcy trustee to pay that person’s creditors.

This means that within six months of the bankruptcy filing, that money may not necessarily be yours to keep, depending on the amount of your outstanding debt and the amount of the inheritance. With less than two months to affect any changes in the 2014 taxes you will pay at the end of the year, an inheritance received before 1/1/2015 could potentially change your taxes due. Mankato, the bankruptcy attorneys at Behm Law Group, Ltd., are getting a bit technical with you. We give you this information to provide you food for thought. Of course, there are more details to cover. We’d be more than happy to discuss any particulars on bankruptcy. Bankruptcy is our specialty, and we have many years of experience and expertise.

Receiving an inheritance doesn’t always mean someone has passed away. Suppose you’re named on a trust. The terms of the trust state you will receive money on a specific date. That would also constitute an inheritance for Mankato residents.

As you can see, nuances and other interpretations exist. We don’t expect our fellow Mankato, MN residents to become experts at bankruptcy law. But, we want you to understand some parameters, so you can make an informed decision. We’re the bankruptcy attorneys at Behm Law Group, Ltd., and we’re at your service. Happy Holidays!

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“Cramdown” Under Chapter 13 Bankruptcy in Mankato, MN

Behm Law Group provides bankruptcy assistance for residents of the Mankato area.

When traveling somewhere, many people cram all sorts of necessaries in their suitcases. The idea is to compress space, yet take what you want. Under 11 U.S.C. Sec. 1322 and 1325, when applied to Chapter 13 bankruptcy cases, a cramdown of a vehicle debt conveys a similar meaning.

Let’s consider one example for folks in Mankato, MN. The bankruptcy attorneys at Behm Law Group, Ltd., would like you to imagine you take out a vehicle loan for $20,000.00 at 20% interest, and this loan becomes effective more than 910 days before filing for bankruptcy relief. At the time of the bankruptcy filing the vehicle is only worth $10,000.00. In a Chapter 13 bankruptcy case, you could cramdown the $20,000.00 debt to the present $10,000.00 value of the vehicle. In addition, you could cramdown the interest rate from 20% to 5%. Now, instead of paying the vehicle lender, you pay the Chapter 13 trustee the $10,000.00 at 5% interest. This means that you are no longer paying the vehicle lender directly.  Rather, the chapter 13 trustee pays the vehicle lender with the payments you make to the chapter 13 trustee but pursuant to the modified terms as denoted above.  At the conclusion of the Chapter 13 bankruptcy, you would get the vehicle title. You would have effectively crammed down or decreased the amount of your vehicle debt.

But, wait! Don’t rush out to buy a vehicle using Chapter 13 as a strategic maneuver just so you can decrease the amount of your vehicle payments, Mankato, Minnesota. The bankruptcy attorneys at Behm Law Group, Ltd., recognize there are stipulations for who can file for a Chapter 13 bankruptcy. You may or may not qualify. You would still need a source of income to make payments under Chapter 13.

A cramdown is just one feature of a Chapter 13 bankruptcy. Of course, Chapter 13 isn’t the only type of bankruptcy either. Mankato, MN, feel free to call the bankruptcy attorneys at Behm Law Group, Ltd., if you are experiencing financial difficulties. We’d be more than happy to discuss your options with you.

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Bankruptcy Law Regarding Spousal Debts for Mankato Residents

Behm Law Group helps clients balance bankruptcy and divorce spousal debts.

According to Minnesota bankruptcy law, Chapter 7 bankruptcy differs from Chapter 13 bankruptcy in the handling of spousal debts during a divorce. Chapter 7 bankruptcy is for a liquidation of debt. Chapter 13 bankruptcy is for a reorganization of debt. Therefore, under Chapter 13, debts assigned to spouses in divorces are discharged. Under Chapter 7, that is usually not the case.

For Mankato residents, that means if a husband is ordered in a divorce decree to pay a $10,000.00 Discover Card debt that is in both spouses’ names with the other spouse being held harmless, the hold-harmless obligation to the other spouse cannot be discharged in a Chapter 7, but may be discharged in a Chapter 13. The bankruptcy attorneys at Behm Law Group, Ltd., state that if that same husband files for Chapter 7 bankruptcy, and Discover Card pursues the ex-wife to collect on the debt, and she pays something toward that Discover Card bill, then the husband is liable to the ex-wife for what she had to pay Discover Card. This is because the divorce decree held her harmless in that obligation. Had the husband filed for Chapter 13 bankruptcy, however, he could have gotten that obligation discharged as well.

Generally, debtors use Chapter 13 when they have enough equity in their secured assets to make this path worthwhile. These debtors must have a regular source of income and be able to make payments on any instituted Chapter 13 plan. The Chapter 7 option leads to a clean slate where heavy debt is eliminated, and none of it needs to be repaid.

This is just a snapshot of the decisions Mankato residents contemplating divorce need to make. The bankruptcy attorneys at Behm Law Group, Ltd., can help you navigate the bankruptcy laws affecting your situation. You see, bankruptcy is our specialty.

Divorces are difficult enough without adding confusion over how to handle debt. Make your transition to single life smoother by considering the options with Behm Law Group, Ltd. We can map out a plan together. Mankato, MN bankruptcy may not have been your initial goal, but if it becomes your reality, we have you covered.

The bankruptcy attorneys at Behm Law Group, Ltd. offer personal, practical bankruptcy advice in a non-threatening, compassionate manner. Call for a consultation today.