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What, When, and Why With the Wildcard Exemption When Filing for Chapter 7 Bankruptcy in Fairmont, MN

When it comes to Chapter 7 bankruptcy, the idea established with the bankruptcy code was to find a balance between the discharging or getting rid of one’s debts and allowing one to retain enough assets to reorganize and not endure further financial hardship.  Indeed, it would not make much sense and it would not be of any public benefit to take all of a one’s assets.  In such a case, the person would only continue to struggle and could not get back one’s feet.  Certain precautions and allowances have been set in place to protect a person against complete destitution after Chapter 7 bankruptcy. Exemptions for qualifying properties are the saving grace for someone who files for bankruptcy relief. At Behm Law Group, Ltd., we can work with you to determine which exemptions would apply to your particular circumstances when filing for bankruptcy in Fairmont, MN.

There are several kinds of exemptions that you can use when filing for bankruptcy relief.  There are exemptions provided by the laws of the State of Minnesota and there are exemptions provided by the bankruptcy code. One exemption that allows you to protect certain assets from liquidation is the wildcard exemption.

What is the wildcard exemption?

When you file for bankruptcy relief, there are several exemptions that apply to specific types of property to prevent liquidation of those assets (e.g. homestead exemption or motor vehicle exemption). The wildcard exemption is a non-specific exemption that you can use to protect one or more assets from among several types of properties.  It is a spill-over or catch-all exemption that allows you to retain miscellaneous property for which there may not be a specific exemption.  In addition, it can allow you to double up on property. For instance if you own 2 vehicles, you could use the motor vehicle exemption to protect the first vehicle and the wildcard exemption to protect the second vehicle.  Alternatively, you could use the wildcard exemption to protect an asset, such as a snowmobile or a boat or a weapon, where there is no specific exemption that can be used to protect it.

When can you use the wildcard exemption?

Because the Minnesota exemption laws do not have a wildcard exemption, a bankruptcy filer can only use the wildcard exemption if one chooses the bankruptcy exemptions provided under the bankruptcy code. The current federal wildcard exemption amount is set at $1,250, but can change based on application. For example, when used in combination with one’s homestead exemption, one may use the federal wildcard exemption amount plus up to $11,850 of one’s unused homestead exemption amount for a total of $13,100.  One can use the wildcard exemption on any one item of property or one can split the amount between multiple items of property.

For example: If one owns a car worth $4,000, and one does not owe anything on the car, one’s equity is $4,000.  In this case, one could use the motor vehicle exemption of 11 U.S.C. §522(d)(2) to protect $3,775 of this amount and then use part of the wildcard exemption of 11 U.S.C. §522(d)(5) to protect the other $225.  Also, if one has a second car worth $5,000, one can use an additional amount of the wildcard exemption of 11 U.S.C. §522(d)(5) to protect it, too.

Why does the wildcard exemption exist?

The bankruptcy exemptions, including the wildcard exemption, were put in place to protect US citizens from irreparable loss and destitution. In the long run, allowing bankrupt individuals to keep assets with which to reorganize will in turn prevent unemployment from growing and keep the economy from falling.

For more information about filing for Chapter 7 bankruptcy in Fairmont, MN, and how exemptions can help you keep your property, contact Behm Law Group, Ltd. at (507) 387-7200.

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Motor Vehicle Exemptions and Keeping Your Vehicle When Filing for Chapter 7 Bankruptcy Relief in Redwood Falls, MN

At Behm Law Group, Ltd., we have often found that our clients considering bankruptcy know they could benefit from filing for Chapter 7 but balk at the idea of possibly losing some of their assets.  However, the concern about losing assets is often exaggerated.  The drafters of the bankruptcy code understood the need for households to hold on to some of their assets to prevent the bankruptcy process from doing more harm than good and to allow people to retain assets with which to reorganize their lives and maintain their financial security.  Thus, the drafters of the bankruptcy code included various exemption laws, which are very generous, that allow people to retain assets in bankruptcy. Behm Law Group, Ltd. can help you work through the process of filing for bankruptcy in Redwood Falls, MN, including identifying which exemptions can be applied to your case.

One major concern of those entering into the process of Chapter 7 bankruptcy is the potential loss of their motor vehicle.  For many families and individuals, the loss of a vehicle means the loss of any means of transportation.  However, 11 U.S.C. § 522(d)(2) of the bankruptcy code allows for the exemption or retention of a motor vehicle. It is more accurate to state that the exemption allows the retention of an equitable interest in a motor vehicle rather than the retention of the vehicle itself.

The exemptible equity in your car is determined by its current market value balanced with the amount of your car loan. For example, if you own a car worth $5,000 and have a loan balance of $2,000, your motor vehicle equity is $3,000.  This $3,000.00 would constitute equitable interest that would be protected by or exempted with the applicable bankruptcy exemption.   It is possible to have $0 in equity if your loan is equal to the value of your car and it is possible to have a negative equity if your loan is greater than the value of your car. For instance, if your car is worth $5,000.00 and there is a $5,000.00 or $6,000.00 loan against it there would be no equity to protect or exempt with the applicable bankruptcy exemption.

Federal Exemption

The Federal motor vehicle exemption of 11 U.S.C. § 522(d)(2), among other federal exemptions, changes every three years according to economic conditions and other factors. The current motor vehicle exemption amount is $3,775.  This means that if you have equity in your car less than the exemption amount, the bankruptcy trustee administering your bankruptcy case would not be able to take your motor vehicle, sell it and use the sale proceeds to pay a dividend your creditors.

Minnesota Exemption

In Minnesota, those filing for Chapter 7 bankruptcy have the option of choosing either the federal exemptions or the Minnesota exemptions. The Minnesota motor vehicle exemption clocks in at a maximum of $4,600 in equity. The amount increases up to $46,000 for vehicles that accommodate physical disabilities and are eligible for handicapped parking spaces (but only if changes made to the vehicle are more than $3,450).

The bankruptcy exemption laws are designed to help you find ways to keep your motor vehicle and other assets, even if you file for Chapter 7 bankruptcy relief. For more information about exemptions you may qualify for and for help with filing for bankruptcy relief in Redwood Falls, MN, contact Behm Law Group, Ltd. at (507) 387-7200 today.

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How Divorce and Filing for Bankruptcy in Mankato, MN, Affect Each Other

Bankruptcy affects individuals of all economic statuses, and the people involved in a bankruptcy case or struggling financially are also often facing many other challenges in their lives. Unfortunately, low income and high debt—according to  statistics—are a leading cause of weakened relationships. At Behm Law Group, Ltd., we’ve found that some of our clients are facing the struggle of divorce alongside the imminent difficulty of filing for bankruptcy in Mankato, MN.

The problem with divorce law, when it comes to bankruptcy proceedings, is that both deal with finances between spouses. It’s virtually impossible to handle the process of divorce at the same time as the process of filing for bankruptcy. The real question isn’t how to combine the two together, rather, which legal process to tackle first.

Bankruptcy before Divorce

Most divorces are not the dramatic affairs portrayed on television. In the real world, spouses are often on good terms. If on good terms, we recommend that bankruptcy proceedings take precedence over divorce. Filing a joint petition as spouses means your debts are consolidated into one bankruptcy case. Combining your debts means you and your spouse could increase your chances of qualifying for Chapter 7 along with your exemptions. It also means you and your spouse can get rid of joint contracts you don’t want and eliminate your unsecured debts before divorce.   Most couples file for chapter 7 bankruptcy relief prior to starting a divorce because a bankruptcy can simplify the divorce process as there is no need for provisions for the assignment of debts in a divorce decree.

Divorce Before Bankruptcy

If your joint income is high enough to prevent you and your spouse from qualifying for Chapter 7 bankruptcy relief and you’re on poor terms and don’t want to be forced into a chapter 13 bankruptcy and handle chapter 13 repayment plan after your divorce, you should consider completing divorce proceedings before filing for bankruptcy. Spouses can separately qualify for Chapter 7 bankruptcy relief after divorce because there are increased living expenses.  After a divorce, each spouse must support his or her own household on his or her own income instead of combining two incomes to support one household while married.  In addition, sometimes it is better to have marital assets divided as between spouses in a divorce proceeding prior to filing a bankruptcy proceeding.  Also, if one spouse winds up owing child support to the other spouse after a divorce the child support obligation can help the spouse who has to pay it qualify for chapter 7 bankruptcy relief when, otherwise, he or she would not be able to qualify.

For more information about how divorce can affect bankruptcy in Mankato, MN, contact Behm Law Group, Ltd. at (507) 387-7200 today.

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Navigating the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 and Qualifying for Bankruptcy With the Help of a Bankruptcy Attorney in Fairmont, MN

Since the mid-80s, the commercial world has changed considerably as digital consumerism streamlined the way we spend money in the US. To address issues with these unprecedented technological advances, the US government had to respond with new laws. When it comes to US bankruptcy, the Bankruptcy Code was amended in 2005 to protect consumers and eliminate several forms of perceived bankruptcy abuse. The skilled bankruptcy attorneys at Behm Law Group, Ltd. have practiced since long before 2005, and with our experience, we can help you navigate the process of filing for bankruptcy in Fairmont, MN.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) considerably changed the process of filing for bankruptcy relief.

BAPCPA and what came with it:

The most notable changes that came with the addition of the BAPCPA were the standards set in place to qualify for Chapter 7 bankruptcy. Prior to the BAPCPA, consumers with any income could qualify for Chapter 7 liquidation bankruptcy. Because of the rapidly fluctuating economy and credit payment systems, a lot of bankruptcy abuse came to light during the 80s, 90s, and early 2000s. In 2005, the BAPCPA established the Means Test, which prevented filers with net disposable incomes higher than the state median income from qualifying for Chapter 7. Other major changes made with the BAPCPA include lengthened waiting periods between bankruptcy petitions and the requirement of a credit counseling course that all people must take in order to qualify for bankruptcy relief. Find out more about the changes made with the BAPCPA here.

How it affects Chapter 7:  

Because the BAPCPA established stricter requirements with the Means Test, waiting periods, and more, it made it much more difficult to qualify for Chapter 7 bankruptcy. If the courts find that a case is abusive to Chapter 7 code, the case will be dismissed or converted into another type of bankruptcy. The BAPCPA also limited the use of the automatic stay provisions of 11 U.S.C. Sec. 362 in most cases, the types of debts discharged, the types of liens a bankruptcy filer could avoid, homestead exemptions, and other exemptions bankruptcy filers could claim.

How it affects Chapter 13:

By making it more difficult to qualify for Chapter 7, the BAPCPA forced more bankruptcy filers to enter the process of filing for Chapter 13 bankruptcy. Expenses for the administration of a repayment plan under Chapter 13 are deducted in the Means Test and credit counseling is also required for Chapter 13 bankruptcy filers under the BAPCPA. The most significant change for debt reorganization was the increase in the amount of debt required to be repaid with Chapter 13.

Overall, the BAPCPA of 2005 significantly changed bankruptcy code. This act and many others have made today’s standards for bankruptcy more difficult to process without the help of a professional. Behm Law Group, Ltd. can help you work through bankruptcy with a skilled, experienced bankruptcy attorney in Fairmont, MN. Contact us at (507) 387-7200 for more information.

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Why the Small British Car Company Zenos Went Bankrupt and Why It Matters for Small Business Bankruptcy in St. Peter, MN

In today’s technology-rich digital age, small businesses have more expenses than ever before. While these expenses all open up incredible marketing and product design outlets for small businesses, the increase in number and variety of expenses also leads to an increase in the potential for going into debt. If you own a small business that’s deep in debt, Behm Law Group, Ltd. can help you file for bankruptcy in St. Peter, MN.

Because the commercial system of today’s world has grown so complex, it’s inevitable that many businesses struggle and fall into debt. For example, the sports car company Zenos—a tiny enterprise by the standards of the auto industry—recently declared bankruptcy. After losing a major investor and having several orders for their new model of the E10 cancelled in the US, Zenos was left with debts racked up from product building and marketing expenses.

Quality Product: Despite the technologically-sound craftsmanship of the Zenos E10 models, cars widely considered to be potential rivals of Alfa Romeo, Mazda, and even Lotus cars of similar caliber, the company continued to lose money after the release of their newest models. Of course, this is just one of hundreds of examples of popular companies with great products falling off the industrial map, proving time and time again that a quality product doesn’t get your business off the ground and running forever. What it really comes down to is money, and a substantial amount of money for small businesses comes from investors.

Investors: In the case of Zenos sports cars, the company gathered a loyal cult following of fans of unique cars who appreciated the well-crafted Zenos products. Unfortunately, while a cult following is often the sign of an innovative product, it also frequently can’t support a company as whole. When the small batch of investors that Zenos largely relied upon could no longer support their investment, the company quickly lost money, and the straw that broke the camel’s back came when U.S. orders were cancelled.

Even small businesses here in Minnesota can recognize the importance of investors going hand in hand with a quality product to support all of the necessary expenses.  

Debt Payment: Zenos is on the market for new investors, and if the company can find one, they will be able to start a debt repayment plan under UK bankruptcy codes. However, without proper cash flow, Zenos—just like any other bankrupt small business—will have to liquidate its assets in order to discharge debts.

If your small business is struggling financially with no possibility of meeting debt payment requirements, Behm Law Group, Ltd. can help you work through filing for bankruptcy in St. Peter, MN. Contact us today at (507) 387-7200 for more information.

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The Top 3 Mistakes Made on the Minnesota Means Test When Filing for Bankruptcy in Jackson, MN

Chapter 7 bankruptcy can be incredibly beneficial for those who are struggling with credit card debt, unmanageable mortgages, and most other forms of accumulated debt. Financially, Chapter 7 discharges the majority of your debt and liquidates your non-exempt assets in order to pay your creditors. While these may seem like drastic measures, Chapter 7 bankruptcy can effectively reset your financial standings, giving you the best restart you could expect. Behm Law Group, Ltd. understands that debt can come from many different sources, and if you need to file for bankruptcy in Jackson, MN, we’re on your side for legal advice and assistance throughout the process.

When you file for bankruptcy as an individual, the most common options you can choose between are Chapter 13 (debt reorganization) and Chapter 7 (debt/discharge/asset liquidation). To those with a low income or with no way of continuing to pay their debts even with a debt reorganization plan in place, Chapter 7 is the most attractive and viable option. To qualify for Chapter 7, however, you must pass the state Means Test with a disposable income lower than the median income of an equivalent Minnesota household.

Without legal support and advice like the help Behm attorneys can provide, the Means Test can prove difficult, nuanced, and complex. Even those with a low income have failed to qualify for Chapter 7 bankruptcy after making these common mistakes on the Means Test:

  1. Many people list child support on their Means Test that they are supposed to receive but do not for one reason or another, and this can completely change the test results. The same goes for those who list child support they are supposed to pay but do not. You should only list what you receive and what you pay.
  2. Household sizes are frequently listed inaccurately on Means Tests, and this can change the recorded outcome of who depends on your disposable income, altering the results of your test overall. Your household size is most frequently determined by who is legally dependent on your disposable income (e.g. minors or disabled dependents).
  3. Often accidentally, Chapter 7 filers list an incorrect income. This in itself can render you ineligible. To even be considered for the outcome of the Means Test, your recorded income MUST match your actual income. Dates, exact numbers, recorded paychecks, and all sources of income should be detailed as exactly as possible.

There are many other mistakes found on Means Test reported across the country, and those who are considering filing for Chapter 7 bankruptcy can gain a lot from professional assistance. Behm Law Group, Ltd. is here to help. Contact us at (507) 387-7200 for more information about filing for bankruptcy in Jackson, MN.