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How Government Debts Are Handled in Chapter 7 Bankruptcy

Chapter 7 bankruptcy is the most frequently filed individual consumer case type. This type of bankruptcy discharges your debts in exchange for the liquidation of your non-exempt assets. While the loss of some property in return for the dissolving of certain debts is a possibility, such is not the case for most filers because they can use bankruptcy exemption allotments to protect their assets.

To qualify for Chapter 7 bankruptcy, you must satisfy the Means Test, which measures your income-to-debt ratio. If your income-to-debt ratio is lower than the state median of a similar household, you are eligible to file for Chapter 7. If you are considering filing for Chapter 7 bankruptcy in Jackson, MN, Behm Law Group, Ltd. can provide support, guidance, and legal protection throughout your case.

In Chapter 7, the majority of your unsecured debts will be discharged. This commonly includes credit card debt and medical bills, but may also range into more unusual debts like personal loans and income taxes. There are also various forms of government debts that are unsecured but might be treated as priority debs in your case.

SSA Overpayments: If you were accidentally given overpayments on your social security checks, you may be required to repay that debt if the SSA notices. If you file for Chapter 7 bankruptcy, however, this debt will be treated as an unsecured debt. The SSA may file an objection to the discharge of this type of debt on the grounds that you defrauded the SSA, but more likely, the debt will be discharged.

County/City Fees: Certain fees you owe to your local government may be discharged in part. This typically includes first-time fines, tickets, and other fees. For example, if you were required to pay a government-employed contractor to tear down an illegal structure on your property but could not make the payment, that debt would likely be discharged. If you paid a private contractor to tear it down but were fined for failing to tear it down in a timely manner, that contractor debt will likely be discharged, but the fine may or may not be discharged.

Fines: Strictly speaking, government fines are not discharged. The only exception to this rule is if the debt was gained in reimbursing the government for money that entity spent or lost separately from the fines you were charged. For example, you are billed for the removal of a tree on your property but the government over-estimated the cost of that removal. The over-fine will be discharged in a Chapter 7 case.

If you have government debts, they will most likely be discharged in Chapter 7, but there are a few exceptions. To learn more about how debts are treated in bankruptcy or to get started on filing for Chapter 7 bankruptcy in Jackson, MN, contact Behm Law Group, Ltd. at (507) 387-7200 or stephen@mankatobankruptcy.com today.

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Why Medical Bills May Be the Cause of Chapter 13 Bankruptcy in the United States

Health insurance is expensive in the United States, largely because it is a highly privatized industry being unduly regulated by the federal government, which results in the federal government mandating many types of coverage that many people don’t want and don’t need. Providers of health insurance do their best to create plans that protect their clients’ well-being, but that comes at a great cost for a variety of reasons. If you do not have access to health insurance because the monthly health insurance premiums and the mandatory deductibles are so high, a sudden high medical expense might create severe debt. If you are struggling with medical bills and other debts, Behm Law Group Ltd. can help you navigate the process of filing for Chapter 13 bankruptcy in Worthington, MN.

Much debate has occurred about the percentage of bankruptcy cases caused by medical debt. Finding evidence of whether bankruptcy cases due to medical bills are on the rise is difficult because there are often several factors that lead to a case.

To understand the causes of a Chapter 13 case, it’s important to know exactly how this type of bankruptcy case functions and how it can be applied to certain financial circumstances.

Chapter 13 is a reorganization bankruptcy process. When you file for Chapter 13, you will work with your attorney to create a proposal for your debts to be reorganized into a repayment plan lasting three to five years. If your income is lower than the state median for a similar household, you will have a three-year plan, and if it’s higher than the median income, you’ll have a five-year plan. In your repayment plan, you’ll typically repay secured debts in full (i.e., mortgage or car), your priority debts in full (i.e., most tax debts, criminal fines and any debts technically exempt from bankruptcy), and your unsecured debts in part (i.e., credit card debt and medical bills). The amount you’ll pay of your unsecured debts depends on the amount they would receive from the hypothetical liquidation of your non-exempt assets in the event you had filed for Chapter 7 bankruptcy relief instead.

Put simply, the conditions for a Chapter 13 case to be effective are a steady income on behalf of the filer, debts that will be partially or fully discharged in the case, and the willingness of the filer to make regular payments for the duration of their plan.

Because medical bills are often discharged in full in a Chapter 13 bankruptcy case and because those bills are often so high that they still affect those with steady incomes, the rise in medical debts today may be creating an equal increase in Chapter 13 cases.  Some studies show that up to 65% of bankruptcies yearly may be a result of medical debt. While it is difficult to discern an exact, single cause of a bankruptcy case, many reports show that medical debt is among the driving causes.

/areas-worthington.phpIf you are struggling with medical and other debts, contact Behm Law Group Ltd. at (507) 387-7200 for more information about filing for Chapter 13 bankruptcy in Worthington, MN.

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Handling Social Security Overpayments Through Bankruptcy

If you’re retired or disabled, you’re most likely receiving social security payments from the U.S. Social Security Administration (SSA), and it may also be likely that those checks are your main source of income.

If you’re struggling with debts and on a strict budget, you may need to find debt relief through filing for bankruptcy. If you do choose to file for bankruptcy, you can find guidance and protection with the help of Behm Law Group, Ltd. Our attorneys can help you build a strong case and file a successful bankruptcy in New Ulm, MN.

When you file for bankruptcy relief, all your financial information is pertinent to the trustee assigned to your case. This might even include overpayments made through the social security system.

 

SSA Overpayments

When the SSA issues checks, there are occasions when they make an overpayment to a retired or disabled individual. You may not even be aware of that overpayment, and you may never be unless the SSA requests a repayment of that overpayment or if you file for bankruptcy. In the event you file for bankruptcy, these overpayments are considered debts you owe back to the SSA. While this seems unfair, these debts can still be discharged in the bankruptcy process.

 

Overpayment Debt

If you file for Chapter 7 bankruptcy, your debts will be discharged in exchange for the liquidation of your non-exempt assets. Most government debts, like unpaid taxes or criminal fines are not subject to discharge. However, SSA overpayment debts can be discharged and most likely will be because they are treated as unsecured debts, just like your credit card and medical debt.

If you file for Chapter 13, an overpayment debt will only have to be repaid partially, depending on how large your chapter 13 plan payments are. The amount you’ll have to repay will be included in a three-to-five-year repayment plan along with the rest of your reorganized debts.

 

Discharge Objection

The SSA can object to the discharge of your overpayment debts if they can prove you are abusing the system or committing fraud. For example, if you’ve provided false information on your case documents or SSA applications, your discharge may be rejected.

If you’re unable to make a repayment to the SSA on the grounds of overpayment debt, contact Behm Law Group, Ltd. today for more information about filing for bankruptcy in New Ulm, MN, at (507) 387-7200.

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Filing for Bankruptcy Again: Waiting Periods and Other Important Details

If you’re working through a difficult financial time, you may have begun looking for debt relief options already. Certain debt relief options might be more useful to you than others, depending on your situation. However, keep in mind that any kind of relief is a difficult, complex process. Because of this, it can be extremely helpful to work through a debt relief process like bankruptcy because the debt relief you obtain is certain and permanent and legally enforceable against your creditors. When you choose to file for bankruptcy in Mankato, MN, Behm Law Group Ltd. provides the support and guidance you need to build a strong, successful case with long-term beneficial results.

Many people won’t experience a bankruptcy, but for those who do, they will find that it affects their lives in many ways. If filers finish their case, but later find themselves in a similar financial situation, they have the option of filing for bankruptcy relief again.

Sometimes, people will encounter difficult and unavoidable financial troubles after having already filed for bankruptcy relief.  Repeat bankruptcy filings are allowed by the bankruptcy code. The requirements for debtors to file another bankruptcy case largely include waiting periods between the dates of filing of the respective bankruptcy cases.

Waiting Periods for Individuals

There are two types of bankruptcy that individual, wage-earner consumers typically file:

  • Chapter 7 (liquidation bankruptcy): For debts discharged in exchange for non-exempt asset liquidation during a Chapter 7 case, the waiting period until you can file for a second chapter 7 bankruptcy is eight (8) years. For example, if someone files for Chapter 7 bankruptcy relief on August 8, 2010 that person would have to wait until August 9, 2018 to be able to file another chapter 7 bankruptcy case.
  • Chapter 13 (reorganization/partial-payment bankruptcy): Any debts discharged or repaid in a three- or five-year Chapter 13 repayment plan have a waiting period of two (2) years. This theoretically means you could qualify for a second Chapter 13 case while you are still making payments in your first chapter 13 case.  Theoretically, you, could be in repeat chapter 13 bankruptcy for years.  Most chapter 13 bankruptcy cases last three (3) years.  For instance, if one files for chapter 13 bankruptcy relief on August 8, 2010, one would be done with that case roughly by August 8, 2013.  Immediately thereafter, one could qualify for and file a second chapter 13 bankruptcy case.
  • Chapter 7 (liquidation bankruptcy) After Having Filed a Chapter 13 (reorganization/partial-payment bankruptcy): If someone has filed for chapter 13 bankruptcy relief and has completed their chapter 13 plan and received a discharge, one can subsequently file a chapter 7 bankruptcy case if one needs to do so.  The time period between such filings is six (6) years.  So, if someone files for chapter 13 bankruptcy relief on August 8, 2010, one could file a chapter 7 bankruptcy proceeding August 9, 2016. 
  • Chapter 13 (reorganization/partial-payment bankruptcy) After Having Filed a Chapter 7 (liquidation bankruptcy): If someone has filed for chapter 7 bankruptcy relief and has received a chapter 7 discharge, one can subsequently file a chapter 13 bankruptcy case.  The time period between such filings is four (4) years.  So, if someone files for chapter 7 bankruptcy relief on August 8, 2010, one could file a chapter 13 bankruptcy proceeding August 9, 2014.

While no one actually wants to file for bankruptcy again, sometimes one can encounter life hardships and financial difficulties that are simply out of one’s control.  Many people have to file for bankruptcy relief a second or, even, third time.  Medical emergencies which may not be fully covered by insurance, the death of a spouse resulting in only one (1) household income source where two (2) household incomes are necessary to cover daily living expenses and natural disasters which may destroy homes where insurance coverage is insufficient are just a few examples of how people may have a need to file for bankruptcy relief a second or third time.  

To learn more about filing for bankruptcy in Mankato, MN, contact Behm Law Group Ltd. today at (507) 387-7200.

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Overview of Some Bankruptcy Statistics since 2005

In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) became law in response to the rapid spike in individual consumer bankruptcies. The difficult economy of the early 2000s pushed many people into serious debt, and filing for bankruptcy was the best option available to them for long-term debt relief. However, it also created a situation in which bankruptcy fraud became more prevalent. To counteract this, the BAPCPA was passed, but since then, a lot has changed in the U.S. economy. If you’re considering filing for bankruptcy relief in Marshall, MN, Behm Law Group Ltd. can help you navigate the BAPCPA and other bankruptcy laws to build a strong, successful Chapter 7, Chapter 12, or Chapter 13 case.

 

After the BAPCPA was passed in 2005, the bankruptcy numbers changed dramatically. There was a decline in the number of Chapter 7 cases filed because the act created more strict requirements to qualify for Chapter 7 bankruptcy relief. From 2005 to 2017, 12.8 million consumer bankruptcies were filed, with an average of 68% Chapter 7 cases and 32% Chapter 13 cases. Even with the passage of the BAPCPA, the ratio of Chapter 7 to Chapter 13 is still high.

 

In 2008, the crashed economy sent more people into bankruptcy, and by 2010, the United States saw the highest filing of bankruptcy cases since before the passage of the BAPCPA. The total number of consumer bankruptcies filed in 2010 was 1,538,033 with 1,105,534 Chapter 7 cases and 430,583 Chapter 13 cases. By 2017, as the economy stabilized, the total of consumer bankruptcies was 767,721 with 61.50% Chapter 7 cases and 38.36% Chapter 13 cases. In comparison, the 2005 total of consumer bankruptcies was more than 2 million nationwide.

 

Georgia, Alabama, and Louisiana filed the highest percentage of consumer bankruptcies from 2006 to 2017, likely due in part to the devastation caused by Hurricane Katrina in 2005. Between 2006 and 2017, 92% of the 25 states contributing the most to the total of national consumer bankruptcies were southern states.

 

In 2011, however, California filers made up 17% of the national consumer bankruptcy filings.  In contrast, Alaska had less than 1,000 filings that same year. In 2016, Alabama had as many as 1 in 112 households filing for Chapter 13 bankruptcy.

 

The most common causes of consumer bankruptcy reported in 2005 included medical bills and credit card debt as significant factors. Since then, the causes of bankruptcy have expanded in variety, including job loss, income reduction, unexpected expenses, and divorce. The average filer today is middle-aged, married, and making less than $30,000 a year.

 

The changes in bankruptcy statistics since the establishment of the BAPCPA in 2005 have manifested in many different ways, including rates of bankruptcy, types of bankruptcy, and circumstances of the filer.

 

To learn more about bankruptcy in Marshall, MN, contact Behm Law Group Ltd. at (507) 387-7200 or at stephen@mankatobankruptcy.com today.

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Protection of Disabled Veterans with the Extension of a Bankruptcy Code Bill

The U.S. federal government works in many ways to protect the rights and wellbeing of military veterans, recognizing their work and sacrifice for our country. Despite this, many veterans still struggle in different ways. Unless you’ve served the required minimum of 20 years, it’s likely that you aren’t on a government pension or health care plan that provides the support you need.

 

If you’re a veteran struggling to make ends meet financially, you are not alone. With the help of Behm Law Group, Ltd. you can file a successful bankruptcy case for long-term stability. Thanks to the bankruptcy code, in Owatonna, MN and across the country, veterans have certain rights throughout their bankruptcy filing process.

 

In August of 2019, the HAVEN (Honoring American Veterans in Extreme Need) act was passed, allowing the protection of veteran disability payments as disposable income in bankruptcy cases. Creditors, trustees and debt collectors now cannot seize those funds if a disabled veteran files for bankruptcy. This bankruptcy code legislation means that these funds cannot legally be considered as the disposable income in a Chapter 7 or Chapter 13 case.

 

In a Chapter 13 case, a filer’s debts are reorganized into a manageable repayment plan suited to their income. In this plan, disposable income and discretionary income are treated differently. If the filer’s veteran disability income is no longer considered disposable, the filer can use that money however they want during their repayment plan. In other words, the filer won’t have to use their veteran disability funds to make payments on their bankruptcy repayment plan unless they choose to do so.

 

In a Chapter 7 case, filer’s debts are discharged in exchange for the liquidation of their non-exempt assets. They are also allowed to claim various exemptions depending on their debt amounts to protect their home, car, and other properties. However, to qualify for Chapter 7, filers have to pass the Means Test. To pass this test, their income-to-debt ratio has to be below the state median income for a similar sized household. In the Means Test, the filer’s disposable income plays a part in determining their income-to-debt ratio. If a filer’s veteran disability income cannot be considered as disposable income, it might tip that ratio to qualify them for Chapter 7 when otherwise they would not be eligible.

 

The HAVEN act will protect the funds disabled veterans receive if they file for bankruptcy during the next four years. In 2023, the act will be reconsidered for potential changes, renewal, or termination. Learn more about the details of the 2019 HAVEN bill here. If you are considering filing for bankruptcy and are a disabled veteran receiving funds from the government, you can rest easy with the knowledge that the bankruptcy code in Owatonna, MN will protect that source of income.

 

To learn more about bankruptcy or to get started on your case today, contact Behm Law Group, Ltd. at (507) 387-7200 or via email at stephen@mankatobankruptcy.com today.