American Apparel® Files for “Chapter 22” and Why Small Businesses File for Bankruptcy in Mankato, MN

For the second time in its 27 years as a U.S. free-trade fashion retailer, American Apparel® has filed for Chapter 11 bankruptcy—unofficially named “Chapter 22.” The company originally filed in 2015, struggled through its plans for financial recovery, and reentered U.S. bankruptcy courts in early November of 2016. American Apparel caters to the global market, but the company’s situation still serves as an advisory tale to smaller businesses in Minnesota. Behm Law Group, Ltd. is dedicated to assisting residents and business owners during the process of bankruptcy in Mankato, MN.

Since American Apparel left bankruptcy court in early 2016, they’ve struggled with several factors that affected the performance of their company.

 

Financial Issues for American Apparel

Despite attempting to recover from their first bout of bankruptcy, American Apparel faced poor market conditions that affected retailers across the country. The company has also been consistently set back by certain internal affairs and several unwise marketing choices (i.e. advertising swim suits off-season and neglecting to increase online sales). Since its debts of $497 million forced American Apparel to file in 2015, the lack of turnaround has left the company with $215 million in debt this year alone.

American Apparel filed for bankruptcy this year because of several factors, many of which affect small businesses in Mankato very similarly.

 

Financing and Funds

The majority of small businesses that file for bankruptcy gather debts based on their lack of financing and funding, both internally and externally. Loans can only help a business in the long run if they are able to gain back significant revenue to continue making loan repayments. Many startups are unable to reconcile expenses and debts with their cash flow.

 

Market Status

Just as American Apparel struggled with the market conditions over the past year, small businesses are affected by the economy as well. Overarching depression in the market harm revenue for small businesses, but fluctuations within specific markets also affect local companies. The revenue of any business is based on the demand of its product, and market shifts can be subtle and sudden, leaving bankruptcy in a company’s path.

 

Economic Choices

While it’s true that business owners making wise economic choices can still have revenue affected negatively in ways outside of their control, the choices any company makes will impact its ability to cash flow. Poor economic choices, such as some of American Apparel’s marketing decisions, will push a business further into debt and closer to bankruptcy.

 

If you own a small business and have recently struggled with debts, bankruptcy may actually be the right choice for you. Contact Behm Law Group, Ltd. at (507) 387-7200 for more information about filing for bankruptcy in Mankato, MN.

Understanding Reaffirmation Agreements when Filing for Chapter 7 Bankruptcy in Mankato, MN

Like most individuals and business owners, many of our clients are new to the bankruptcy process.  Many people view the bankruptcy process as being a perpetual black mark on their credit and an indictment of their personal character. This couldn’t be further from the truth. In fact, bankruptcy is a legal process specifically designed to help those who have struggled financially for any reason. As you embark on the journey of filing for bankruptcy in Mankato, MN—especially with the legal advice and assistance of the attorneys at Behm Law Group, Ltd.—you will find that bankruptcy is a helpful, rehabilitative and, possibly, cathartic experience.

Chapter 7 (or liquidation) bankruptcy is the most common form of bankruptcy for individuals and small businesses. One aspect of filing for bankruptcy that allows you to alter the “black and white” situations occurring frequently in Chapter 7 bankruptcy is the subject of reaffirmation agreements.

 

What is a reaffirmation agreement?

A reaffirmation agreement is something that is unique to Chapter 7 bankruptcy.  A bankruptcy filing nullifies one’s legal, contractual obligations to pay one’s debts.  This applies to all debts, except those debts that may be exempted from discharge under 11 U.S.C. §523 such as child support debts, student loans, criminal fines and certain tax debts.  This means that one is no longer required to pay one’s credit card debts, medical debts, vehicle loans or home mortgage loans. However, one may wish to retain certain debts such as vehicle loans or home mortgage loans.  One does this by completing a reaffirmation agreement.  A reaffirmation agreement is an entirely voluntary agreement between a debtor and a creditor that recites the terms and conditions of the original loan or mortgage.  By signing a reaffirmation agreement a debtor and an impacted creditor agree that the terms and conditions of the original loan or mortgage will be exempted out of the bankruptcy process and will continue after the bankruptcy process has been completed.  They essentially agree that a debtor will continue to be personally liable for the loan or mortgage after the bankruptcy has concluded.  Reaffirmation agreements, in most cases, must be approved by a bankruptcy court.

 

Why are they beneficial?

Reaffirmation agreements allow you to work with creditors to keep some debts in place, letting you maintain that property or asset.  They allow one to retain debts on assets, such as a house or a vehicle, which may be essential for one’s financial rehabilitation going forward.  Reaffirmation agreements can have positive and rehabilitative credit rating implications because creditors will continue to report one’s ongoing payments to the three big credit reporting agencies – Experian, Transunion, and Equifax.  Positive and consistent reporting by creditors after a bankruptcy has concluded can cause one’s credit rating to rise.

 

How can they be dangerous?

Because you must sign a reaffirmation agreement before your debts are discharged, you have to be 100% sure that you can continue meeting payments for any debt you want to reaffirm. In fact, we often advise against signing reaffirmation agreements unless it’s certain you will meet regular payments without hardship after the bankruptcy process is complete. If you aren’t sure, you could add to your financial struggles even after other debts are discharged.  The signing of a reaffirmation agreement means that one will be personally responsible for a debt after a bankruptcy has concluded.  If one were to sign a reaffirmation agreement on a vehicle loan, for instance, and if one were not able to continue making payments on the debt, the creditor could repossess the vehicle and sell it.  If there was any remaining deficiency balance (i.e. the sale price of the vehicle was not sufficient to retire the entire debt), one would be fully liable on such debt and the creditor could pursue collection remedies against the person.

 

If you’re unsure whether choosing Chapter 7 or entering into a reaffirmation agreement is right for you, contact Behm Law Group, Ltd. at (507) 387-7200 for more information about bankruptcy in Mankato, MN.

The Truth About Credit Counseling and Why Help From a Bankruptcy Attorney in Mankato, MN, is Still Important

Before you file for bankruptcy in Minnesota, you are required to undergo a credit counseling course through a course provided that has been approved by the Office of United States Trustee. This is a government mandate that is designed to help American citizens who have had financial struggles severe enough to force them to choose filing for bankruptcy. Despite the benefits that credit counseling can provide, it’s also important to contact a firm that can help you during the bankruptcy process. Behm Law Group can provide expert legal advice and assistance as bankruptcy attorneys in Mankato, MN.

 

In many cases, approved credit counselors provide advice that helps a person or business about to file for bankruptcy feel capable enough to get back on their feet after the bankruptcy process is complete. However, some credit counselors may actually work to your disadvantage.

 

Requirements to File

Whether you own a small business that has had trouble meeting loan, mortgage, and expense payments, or if you’re simply an individual struggling with the financial difficulties of everyday life, you must go through the same requirement of credit counseling to file for bankruptcy. If you don’t undergo credit counseling course, your bankruptcy case could be dismissed with no refund of the standard fee you must pay to file a bankruptcy petition.

 

What’s Wrong With Credit Counselors?

Though a credit counseling course is mandatory, there are several things you should be aware of before you enter the counseling process. In many cases, credit counselors might not be trying to help you as much as you think. In fact, there are a great number of credit counselors paid or managed by credit card companies. These are different than the credit counseling agencies approved by the Office of the United States Trustee through which you must take a credit counseling course. These counselors may charge hidden fees and increase your debts, damaging your credit further and providing you with illegitimate credit counseling. These tricks—even scams—that some credit counselors use can easily be avoided by making the right choice in counseling service.

 

So how can we help? As bankruptcy attorneys, it’s our job to be well-versed in the signs of a bad credit counselor and to know the bankruptcy process. We can help you find a counselor right for you and continue helping you throughout the entire process of filing for bankruptcy.

 

If you’re unsure whether you will need a bankruptcy attorney in Mankato, MN, just remember that we can help you far beyond the abilities of any credit counselor. Contact Behm Law Group at (507) 387-7200 for a consultation today.

Foreclosure Proceedings with Chapter 7 and Chapter 13 Bankruptcy in Mankato, MN

In the majority of cases, filing for bankruptcy puts Minnesota residents and businesses back on their feet by erasing or significantly lessening much of their financial burden. In terms of mortgage debts and foreclosure, filing for bankruptcy will almost always alter the conditions of your mortgage debts to some degree. At Behm Law Group, Ltd., our attorneys are dedicated to assisting you in all aspects of bankruptcy in Mankato, MN, including fighting foreclosure and liquidating or apportioning your mortgage debt.

 

The two common types of bankruptcy, Chapter 7 and Chapter 13, are designed to handle cases of mortgage debt. In both cases, an automatic stay will be in place preventing creditors from collecting debts or harassing you during the filing process. An automatic stay is in place for a limited time period, however, and completing the bankruptcy process is vital to stopping foreclosure and alleviating your mortgage debts. Each type of bankruptcy filing treats the issue of foreclosure in different ways.

 

Chapter 7:

Chapter 7, or Liquidation Bankruptcy, is a process that will discharge all debts that qualify. This means your mortgage and all other debts that are not considered non-dischargeable under 11 U.S.C. §523 from the process will be eliminated. If you are behind on your home mortgage payments and you want to keep your home, filing for a Chapter 7 bankruptcy is probably not your best choice because there is no mechanism allowing you to “cure” or pay back your mortgage delinquency over a period of time.  A chapter 7 bankruptcy proceeding will delay a foreclosure by only about 90 to 120 days while the automatic stay injunctive provisions of 11 U.S.C. §362 are in effect.   While the automatic stay will prevent or stop a foreclosure, the relief is only temporary.  Generally speaking, after the chapter 7 case is concluded in 90 to 120 days the automatic stay terminates and a creditor can restart or initiate foreclosure proceedings at that time.

 

 

Chapter 13:

A Chapter 13 simple bankruptcy is labeled “reorganization bankruptcy” but it really is more aptly referred to as “partial re-payment bankruptcy”.  In a chapter 13, you draft a chapter 13 plan of reorganization in which you specify a particular payment that fits your income and expenses which you pay for a set period of time – usually 36 to 60 months.  In a chapter 13 bankruptcy, you can “cure” or pay back your mortgage delinquency over the 36 to 60 months.  After your case is filed, you must still make the regular monthly mortgage payments going forward but the delinquency itself would be paid out of the payments you make through the chapter 13 plan.  For instance, assume your regular mortgage payment is $1,000.00 a month and that you are $10,000.00 delinquent.  Further assume that your monthly chapter 13 plan payment is $500.00.  After you file for bankruptcy relief, you would still need to pay your $1,000.00 regular mortgage payment.  However, the $10,000.00 delinquency would be spread over the 36 to 60 month time of your chapter 13 plan.  If your plan was a 36 month plan, roughly $277.77 of the aforementioned $500.00 chapter 13 plan payment would go towards the payoff of the $10,000.00 pre-bankruptcy mortgage delinquency ($10,000.00 / 36 months = $277.77).  If your chapter 13 plan was a 60 month plan, roughly $166.66 of the aforementioned $500.00 chapter 13 plan payment would go towards the payoff of the $10,000.00 pre-bankruptcy mortgage delinquency ($10,000.00 / 60 months = $166.66).  You must be able to meet this repayment plan to keep your home and stop the foreclosure process.   When the plan is completed, your mortgage debt will be fully cured.

 

There are many legitimate reasons why Minnesota residents fall into debt and find foreclosure looming over them. Call Behm Law Group, Ltd. at (507) 387-7200 today and find out how we can help you stop foreclosure with bankruptcy in Mankato, MN.

Liens, Automatic Stays, and Set-Offs: Understanding Terminology Involved with Bankruptcy in Mankato, MN

For many in precarious financial situations, the option of filing for bankruptcy seems to be only found down a long and complicated road of legal red tape and confusing fine print. At Behm Law Group, Ltd., we understand that it’s entirely normal for people and small businesses without a dedicated legal department to be unfamiliar with the intricacies and terminology involved in the process of bankruptcy in the U.S. If you’re considering filing for bankruptcy in Mankato, MN, the attorneys at Behm Law Group, Ltd. are dedicated to providing information and legal assistance throughout the process.

 

If you’ve been wondering whether bankruptcy is the answer to your situation, you may have found yourself skimming online information about bankruptcy and encountered some terms that are unfamiliar to the jargon of everyday life. Some common terms used when discussing bankruptcy proceedings include:

 

Liens

Creditors can hold a lien over your property before and during your bankruptcy process. Essentially, a lien is a type of interest that secures your repayment of the debt you owe. Liens are most often used when speaking about mortgage debts and, in some cases, allow the lien holder to seize and sell your mortgaged property in the event of your inability to meet debt payments. During the bankruptcy process, there are options that allow you to forestall property seizure even if your creditors have a lien on your home or business.

 

Automatic Stay

During the filing process, U.S. Bankruptcy Courts can enforce an automatic stay on your creditors. In the event that an automatic stay is enacted, your creditors will be legally bound to halt their collection actions against you. When you petition for bankruptcy, your creditors are immediately put under automatic stay, protecting you against judicial proceedings, property seizure, lien enforcement, and the potential of a debt set-off.

 

Set-Off

In some bankruptcy cases, the debtor and the creditor owe money respectively to each other.  With a checking account, for instance, a bank owes you the money in your checking account and must pay it to you on demand.  Perhaps in you owe a debt to that same bank on a vehicle loan.  If you are late paying your vehicle loan with that bank, the bank can offset what it owes you in your checking account against what you owe it on the vehicle loan.  Instead of paying you what is in your checking account, the bank can offset what is in your checking account against what you owe it on the vehicle loan.

 

The many legal terms used in bankruptcy lingo are foreign to most people. We are here to help when it comes filing for bankruptcy in Mankato, MN. For more information, contact Behm Law Group, Ltd. at (507) 387-7200.

Home Equity, Homestead Exemptions, and Keeping Your Home When Filing for Chapter 7 Bankruptcy in Mankato, MN

In the U.S., there is often a negative shadow cast across the idea of going bankrupt. While the fear of struggling with extreme financial difficulties and being unable to pay back various debts is quite justified, bankruptcy is still stigmatized as the worst possible outcome. In reality, much of the anxiety about how bankruptcy will affect one’s life is either over-exaggeration or myth. Behm Law Group, Ltd. will help you by revealing the distinctions between reality and fallacy during the process of filing for bankruptcy in Mankato, MN.

 

One common misconception around the bankruptcy process is that the individual filer will lose everything, including their home. In fact, even under Chapter 7 liquidation bankruptcy, there are conditions that allow the filer to keep their home.

 

Home Equity

Your home or property can only be liquidated during the Chapter 7 bankruptcy process if it has equity. Home equity essentially means that the value of your property is higher than the value of your mortgage on that property. If you have a home valued at $300,000, and your mortgage is $200,000, you have $100,000 in equity, and a bankruptcy trustee could, theoretically, sell the home to pay off the mortgage debt you owe.

 

If you have no equity (your mortgage value is greater than your property value), your trustee will abandon the property and it will not be liquidated to pay debts.

 

Homestead Exemption

Even if you have home equity, there is still a way to keep your home with the Minnesota homestead exemption. If your homestead exemption can cover the value of your home equity (Minnesota allows exemptions up to $390,000 for homes in cities), you may protect the equity in your home and keep your home in the liquidation bankruptcy process.

 

Continued Payments

Although your mortgage creditor cannot target you as an individual during the bankruptcy process, payments must still be made to repay the debt on your mortgage. If you are able to continue payments on your mortgage during and after a Chapter 7 filing, your mortgage creditor will not take your home from you and the equity in your home will be preserved and protected for your benefit.

 

If you are balking at filing for bankruptcy because you fear you may lose your home, know that you will be able to protect the equity in your home with the Minnesota homestead exemption. For more information about filing for bankruptcy in Mankato, MN, contact Behm Law Group, Ltd. at (507) 387-7200.