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Understanding a Hardship Discharge with Chapter 13 Bankruptcy in Luverne, MN

When you file for Chapter 13 bankruptcy, your debts will be restructured into a three to five-year repayment plan that fits your income and financial situation. For those with incomes too high to pass the Means Test or who wish to hold on to most of their nonexempt properties, Chapter 13 is a highly effective way to resolve debts and get a fresh financial start. Organizing your documents, files, forms, and information into a structured repayment plan proposal that the court will accept is a difficult task to manage without the help of a trained bankruptcy professional. Behm Law Group, Ltd. offers the legal support and assistance you need to file a strong case for Chapter 13 bankruptcy in Luverne, MN.

After you propose a Chapter 13 repayment plan that’s accepted by the court, the bankruptcy trustee administering your case will collect monthly payments that may vary based on the disposable income information you provide. The amount you’ll be required to repay in your plan depends on your creditors and your disposable income. For example, you must fully repay your priority unsecured creditors, such as certain tax debts, child support debts, alimony and court fines, while your unsecured creditors only need to be paid much less as determined by several factors. Changes may be made to your plan depending on other claims, income, and financial gains or losses. To prevent your case from being dismissed within your three to five-year repayment period, continued communication with your attorney and the bankruptcy trustee is key.

You may also find yourself facing unforeseen circumstances that make it impossible for you to complete your Chapter 13 repayment plan.

If you find yourself in these circumstances, you may be eligible for the Hardship Discharge. This discharge works similarly to a discharge granted in a Chapter 7 bankruptcy case.  You will no longer have to make a plan payment.  Like in a Chapter 7 case, certain debts, including unsecured debts like medical bills, credit card debts, and more, are discharged. However, priority debts like tax debts, child support debts and alimony are not subject to the Hardship Discharge.

Eligibility: To be eligible for the Hardship Discharge, you have to prove your conditions render you unable to continue with your repayment plan. If you’ve failed to meet repayment requirements for more than a month due to burdens that are out of your control (“for which you should not justly be held accountable”), you have the chance to make your case for a hardship discharge. You improve your chances of the court granting you a Hardship Discharge if you can prove your circumstances are permanent (physical disability, for example) and if you’ve already repaid to your unsecured creditors what they would have received if you’d filed for Chapter 7.

For more information about the Hardship Discharge and filing for Chapter 13 bankruptcy in Luverne, MN, contact Behm Law Group, Ltd. at

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Key Factors that Affect the Repayment Plan Structure of Bankruptcy in Windom, MN

Today, Chapter 7 is the most common form of bankruptcy for both individuals and businesses. Because the Chapter 7 process is only available to those with income-to-debt ratios lower than the Minnesota median, bankruptcy is often associated with unemployment or even financial ruin. However, bankruptcy is an option to people and businesses with a wide range of incomes and debts in the form of debt restructuring—Chapter 13 bankruptcy. Behm Law Group, Ltd. offers legal advice and guidance to help you decide which type of bankruptcy in Windom, MN, would be the most beneficial to your current financial situation.

 

If you have a stable job and your debts weigh heavily enough for you to consider bankruptcy, chances are you’ll gain the most out of a Chapter 13 case. Chapter 13 bankruptcy works to structure your debts into a 3 to 5-year repayment plan that’s suited to your income. The process is designed to give your creditors as much of a return on your debt as possible without crippling your finances or severely damaging your quality of life.

 

In a Chapter 13 repayment plan, your debts are broken down into several categories based on the priority claim those creditors have on repayment. First, secured creditors are generally the creditors with property secured through a promissory note and security agreement such as mortgages, car loans, or any other debt concerning a physical property. These creditors can be repaid in different ways during your Chapter 13 plan period. In some cases, you will continue to pay these creditors directly rather than through your bankruptcy plan.  For instance, if you have a mortgage with Wells Fargo and you are current with the mortgage payments, you would continue to pay that debt directly to Wells Fargo.  However, if you are delinquent with your mortgage payments, you can pay the mortgage delinquency back to Wells Fargo throughout the 36 to 60 months of your chapter 13 plan rather than all at once.  Of course, you would still have to continue making your regular monthly mortgage payments to Wells Fargo but the delinquency owed before your case was filed would be paid back by the chapter 13 trustee with the payments you make through your chapter 13 plan.  Second, priority debts involved in the bankruptcy process (bankruptcy fees, for example) must also be paid in full.

 

You’ll also be required to repay certain debts in full regardless of any type of plan period, income, or bankruptcy you file for. These commonly include child support and alimony, most tax debts, and debts from personal injury or death you caused while operating a vehicle while intoxicated.

 

The rest of your debts will be considered unsecured or nonpriority debts, and these may be paid at a determined portion from 0% to 100%. The amount you’ll be required to repay to unsecured creditors in your Chapter 13 plan varies based on your disposable income, the exemptions you can claim, and the minimum amount those creditors would receive if your assets were liquidated in a Chapter 7 bankruptcy.

 

Overall, the amount you repay all your creditors, including priority, secured, and unsecured, depends on several financial components. Your debts and other claims you owe that factor into a Chapter 13 plan include:

 

  1. Mortgage owed and arrears
  2. Other home loans and arrears
  3. Car loans owed and loan arrears
  4. Personal property loans
  5. Debts on other property loans
  6. Alimony and child support
  7. Priority tax debts
  8. Other priority debts
  9. Death or personal injury claims against you
  10. Administrative bankruptcy fees
  11. Attorney fees

 

Some debts, like medical bills and credit card debt, may even be discharged in a Chapter 13 bankruptcy repayment plan. For more information about creditors, repayment plans, and filing for Chapter 13 bankruptcy in Windom, MN, contact Behm Law Group, Ltd. at (507) 387-7200 today.

 

 

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Choosing Chapter 13 when You Qualify for Chapter 7 Bankruptcy in Mankato, MN

Financial recovery through the federal process of bankruptcy is a public option for all businesses and individuals, but there are eligibility standards for any bankruptcy case. If you want to file for liquidation bankruptcy, for example, you must pass the Means Test to qualify for a Chapter 7 petition. If you’re ineligible for Chapter 7, you can choose to file for debt reorganization (Chapter 13), but even that process has certain prerequisites. With the help of Behm Law Group, Ltd., you can determine which type of bankruptcy in Mankato, MN is best for your financial situation.

The two common types of bankruptcy for individuals are Chapter 13 and Chapter 7. The former reorganizes your debts into a manageable repayment plan for a three to five-year period. The latter liquidates non-exempt assets, distributing the value of those non-exempt assets to creditors and discharging your debts in return. Which type you file for depends on two things: your debt-to-income ratio (passing the Means Test or not) and your choice.

Your Choice

If you pass the Means Test and qualify for Chapter 7 bankruptcy, you’ll have the option to choose between Chapter 7 or Chapter 13. While there are occasionally financial circumstances that force filers to stick with Chapter 7 bankruptcy, it’s likely that you’ll have a choice. Behm attorneys can help you make this choice based on several factors of your situation:

  1. Nonexempt assets: Non-exempt assets are assets that have value in excess of your applicable bankruptcy exemptions or for which there are no bankruptcy exemptions that one can utilize to protect or keep them. These assets will be liquidated in a Chapter 7 case and the sale proceeds will be used to repay something to your creditors. If you want to keep non-exempt property, Chapter 13 is the right choice for you.   As long as you pay the value of those non-exempt assets to your creditors through a 36 to 60 month chapter 13 repayment plan, you can retain non-exempt assets that you would otherwise lose in a chapter 7 liquidation bankruptcy.
  2. Car loan: If you have debt on your motor vehicles, you could have those assets taken back by the creditors who have liens on them in a Chapter 7 bankruptcy. However, choosing a Chapter 13 repayment plan could allow you to repay your car loans over time and in a more manageable way and keep your credit in a more stable position.
  3. Mortgage: Similarly, you can have equity or value in your home protected by the Homestead Exemption in a Chapter 7 case but you may be behind with your mortgage payments. In a chapter 7 case and if you wanted to eventually avoid a foreclosure proceeding, you would likely have to pay back any delinquency in full to the mortgage lender in 30 to 60 days.  However, in a chapter 13 repayment plan, you could break that mortgage delinquency up and repay it over 36 to 60 months, avoid a foreclosure proceeding and retain your home property.  You may also be able to strip off or cram down any second or third mortgages in a Chapter 13 case.
  4. Priority debts: When you file for any type of bankruptcy there are a number of debts that fall into the “priority” category. These debts cannot be discharged in Chapter 7 liquidation, but they can be integrated into a Chapter 13 repayment plan and paid off. If you want to repay debts like child support and tax debt in a structured repayment plan, choose Chapter 13 over Chapter 7.

Both chapters have their own advantages depending on your situation. To find out which type of bankruptcy in Mankato, MN is right for you, contact Behm Law Group, Ltd. at (507) 387-7200 today.

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Breakdown of Payments to Unsecured Creditors for Chapter 13 Bankruptcy in Pipestone, MN

When you file for bankruptcy, the people or organizations you owe money to are broken down into several different types of creditors. Generally, these creditors are considered as priority, secured, and unsecured. Within these categories, there is a simple hierarchy: priority creditors are repaid in full, secured creditors are paid the value of their collateral after exemptions are taken into account or the collateral is surrendered back to them, and unsecured creditors are paid with varying amounts depending on your case. While these creditors are considered similarly in both Chapter 7 or Chapter 13 bankruptcy, the outcomes of their repayments are different. Behm Law Group, Ltd. offers expert counsel and support when you file for Chapter 13 bankruptcy in Pipestone, MN, to help you navigate through your creditors and case.

 

For most Chapter 7 cases, the creditors are treated based upon which debts can be discharged and which exemptions can be claimed. In a Chapter 13 bankruptcy, however, the creditors must be treated differently based on the types of debts and the significance of those agreements.

 

When a Chapter 13 case is filed, the end goal is to restructure the filer’s debts into an appropriate repayment plan. This plan provides for the full repayment of priority debts and the payment of the value of secured debts, but often offers the filer the benefit of partial repayment of unsecured debts. The creditors of unsecured debts are written into the repayment plan in two fundamental ways.

 

  1. The first basic requirement for the treatment of unsecured creditors in a Chapter 13 bankruptcy repayment plan is that they will be paid at least as much as they would if the filer had filed a Chapter 7 bankruptcy.
  2. Secondly, the filer must pay all disposable income – surplus income left over after reasonable and necessary living expenses are paid – to their unsecured creditors throughout the duration of their three to five-year repayment plan. This income amount may fluctuate throughout the plan period, and the chapter 13 plan must be updated to reflect these income changes.

 

The repayment plan period for any Chapter 13 bankruptcy case depends on the filer’s income. If your income is less than the Minnesota median of a household similar to your own, your plan will last three years. If your income is higher than the median, you must file a five-year plan. The amount you repay your unsecured creditors will also depend on how long your plan lasts. For example, if you owe an unsecured creditor $5,000 and your disposable income adds up to $100 a month, you will repay 72% of that debt in a three-year plan or repay 100% of that debt in a five-year plan. In some cases, you will repay 0% of an unsecured debt when you file for Chapter 13 bankruptcy.

 

What you repay your unsecured creditors in Chapter 13 will vary greatly depending on your income and your additional debt payments and expenses. For most filers, these debts will be alleviated at least in part. For more information about your unsecured creditors and filing for Chapter 13 bankruptcy in Pipestone, MN, contact Behm Law Group, Ltd. at (507) 387-7200 today.

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What Happens When Retirees File for Bankruptcy in Redwood Falls, MN

Financial difficulties can occur for any number of reasons at any time in one’s life, but with the accumulation of debt into retirement and a decrease in income, retirees are increasingly becoming more likely to file for bankruptcy. Several studies have shown that in the past twenty years, the percentage of 65 or older bankruptcy filers has increased by more than 5%, and many of these petitions outlined medical debt as the primary financial burden of senior citizens. Debts gathered over a lifetime, a drop-in income after retirement, and the issue of medical bills with increased risks of health problems in advanced age all add up to severe financial struggles for many retirees across the country. Behm Law Group, Ltd. serves to protect you throughout the filing of your bankruptcy petition and help you understand what happens when retirees file for bankruptcy in Redwood Falls, MN.

 

The common concern for retirees and senior citizens who file for bankruptcy is how it will affect their retirement funds. Fortunately, most types of retirement accounts are protected from asset liquidation in Chapter 7 bankruptcy and the amount in your fund will not affect your repayment plan in Chapter 13 bankruptcy. Protected accounts include 401(k), 403(b), 457(b), and Keogh plans. The majority of other profit-sharing or benefit plans are also protected. Funds saved in an IRA, SIMPLE IRA, SEP IRA, or Roth IRA are protected from bankruptcy with a set exemption limit. The amount you can exempt from the bankruptcy process changes as the cost of living changes.

 

Another concern for seniors and retirees filing for bankruptcy is whether their Social Security will be involved in the process or not. Social Security is protected from wage garnishments along with disability income, but when that income is deposited into your bank account, it can sometimes be subject to garnishment. However, banks are required to know if federal benefits are in your account before they can take garnishing action, and even then, a two-month value of your Social Security and other benefits are protected.

 

If you are struggling to make ends meet in retirement and face looming medical bills or other debt, bankruptcy can be a valuable option. The majority of your retirement income is protected by federal law, and your retirement funds will most likely be completely protected in the process. With the help of a Behm Law Group, Ltd. attorney, you can free yourself from medical debt, credit card debt, utility debt, property debt, personal loans and more when you file for bankruptcy.

 

Live your retirement in peace and take full advantage of your freedom free from financial stress. Contact Behm Law Group, Ltd. today at (507) 387-7200 to learn more about whether filing for bankruptcy in Redwood Falls, MN, is right for you and start your petition today.