Increases in Farm Debt Leads to More Chapter 12 Bankruptcy Filings

As we continue to move through recovery from the peak of coronavirus outbreaks, farmers are still facing the same financial troubles they have had since the establishment of the Family Farmer Relief Act of 2019. For family farmers and fishers, this act expanded the eligibility and debt limits for Chapter 12 bankruptcy cases, a chapter specifically designed to resolve debts of farmers or fishers who support their family with at least 50% of their yearly income derived from their farming/fishing businesses. If you are a family farmer or fisher struggling to meet debt payments, you’re not alone. Of the current two million farms operating on U.S. soil since 2019, thousands have debts they can’t repay. For those considering filing for Chapter 12 bankruptcy in St. Peter, MN, or the surrounding area, Behm Law Group Ltd. can provide the legal support and advice to help you build a strong case with an effective and manageable debt repayment plan.

Chapter 12 bankruptcy works to reorganize farming/fishing debts and personal debts together into a manageable repayment plan. This repayment plan lasts three to five years depending on the filer’s disposable income. The process overall works very similarly to Chapter 13 individual bankruptcy, but has some aspects that make it more suited to resolve farmer and fisher debts specifically.

Chapter 12 bankruptcy is typically better suited for the financial conditions of a family farmer or fisher because it moves much more quickly and is much less expensive than a Chapter 11 case. It’s also more effective than Chapter 13 bankruptcy given the much larger debt load that will be addressed.

The newest law regarding Chapter 12 bankruptcy was the 2019 Family Farmer Relief Act, which increased the allowed debt limits from $3,237,000 to $10 million, reflecting the increased land values and costs of farming equipment. Due to the current discrepancy between farm products and the operating costs of small to midsize farms and fishing operations, family farms and fishers are facing severe financial imbalances. With more and more seasonal loans taken out to cover these discrepancies and to keep their operations running, farmers and fishers need Chapter 12 reorganization bankruptcy now more than ever. Moving forward, the larger debt allowances for a Chapter 12 bankruptcy case will greatly improve the chances for financial rehabilitative success of family-owned farms. Projections over the next three to five years indicate that many more people will need to protect their family farms by filing for Chapter 12 bankruptcy relief.

To learn more about the Family Farmer Relief Act and filing for Chapter 12 bankruptcy in St. Peter, MN, and the surrounding region, contact Behm Law Group Ltd. at (507) 387-7200 or email at stephen@mankatobankruptcy.com.

Different Types of Bankruptcy in Redwood Falls, MN

Because the current time is full of uncertainties, any growing financial worries can add a tremendous amount of stress on a household. Whether you’re an individual, a family breadwinner, or a business owner, you can rest assured that when worst comes to worst, you will always have the option to file for bankruptcy if your financial circumstances call for it. Bankruptcy often gets a negative image cast over it, but the truth is that it’s a system designed to protect debtors, creditors, and the economic system overall with fair and just treatment to every party involved. If you are finding it impossible, or even just difficult, to meet debt payments each month, you can join thousands of other U.S. citizens who filed for bankruptcy and received permanent debt relief. With the help of Behm Law Group Ltd., you can build a strong case for Chapter 13 or Chapter 7 or Chapter 12 bankruptcy in Redwood Falls, MN, and start down your own road to a debt-free life.

At Behm Law Group, we work with individuals or joint-filing spouses going through Chapter 7 or Chapter 13 bankruptcies. We also work with Minnesota family farmers and fishers to help them file for Chapter 12 relief. The different chapters/types of bankruptcy outlined in the code include:

  • Chapter 7: This process is for individuals or businesses of any size. It works to liquidate non-exempt assets in exchange for the discharge of debts. With most individual cases, the exemptions provided by the bankruptcy code protect one’s property from liquidation and all one loses are one’s debts.
  • Chapter 13: This bankruptcy is primarily for individuals, but sole proprietorship businesses can file by combining personal and business debts into one case. This process works to reorganize debts into a manageable repayment plan lasting three to five years that is tailored to one’s monthly income and reasonable and necessary monthly living expenses.
  • Chapter 12: This works like Chapter 13, but it is exclusively designed for family farmers and fishers who derive 50% of their yearly income from their farming/fishing operations.
  • Chapter 11: This is another reorganization bankruptcy, but it’s typically available to very large businesses that aren’t sole proprietorships or partnerships and to individuals who have a lot of property and have more than $419,275 of unsecured debts and more than $1,257,850 of secured debts. Chapter 11 typically costs more, takes longer, and involves more debts than the other reorganization bankruptcies.
  • Chapter 9: This bankruptcy process is for cities, towns, and other municipalities. The process protects the filing municipality from its creditors while a debt reorganization plan is drafted.
  • Chapter 15: This chapter applies to bankruptcies that cause cross-border insolvencies and is used when a filer has debts in the United States and in another country.

This is a brief explanation of the general chapters in the U.S. bankruptcy code. To learn more about bankruptcy law or to file for bankruptcy relief in Redwood Falls, MN, today, call Behm Law Group Ltd. at (507) 387-7200 or email at stephen@mankatobankruptcy.com.

Overview of the SBRA and Chapter 11 Bankruptcy for Small Businesses in Jackson, MN

The Small Business Reorganization Act (SBRA) was signed into law on August 23rd, 2019, and went into effect on February 19, 2020. For small businesses struggling with debts, this act could help them file for bankruptcy relief without the loss of their business in liquidation and without having to incur the extreme costs of a typical Chapter 11 reorganization bankruptcy case. The rules of the SBRA make it much less expensive for small businesses to file for Chapter 11 bankruptcy. If you’re considering filing a case as an individual or small business, Behm Law Group, Ltd. can help you file for Chapter 13, Chapter 11 or Chapter 7 bankruptcy relief in Jackson, MN and the surrounding area.

The SBRA provides subchapter rules to Chapter 11 that essentially lower the total cost of filing for businesses with debt loads equal to or less than $2,725,625.00 (excepting debts to affiliated parties or business insiders). Before this act, Chapter 11 business debt reorganization bankruptcy was considered so costly that most small businesses weren’t able to afford it.

Since the enactment of the SBRA, many small businesses now have the ability to file Chapter 11 and keep their company operations running rather than filing for Chapter 7 bankruptcy and having their businesses liquidated.

The first and foremost way the SBRA reduces costs of Chapter 11 for small businesses is by eliminating all fees except the initial filing fee. Other ways that costs are reduced include the following:

  • The court assigns a trustee to the small business case. This trustee acts similarly to a trustee in a Chapter 13 (reorganization bankruptcy for individuals) and helps keep the business on track for repayment throughout the case.
  • There is no appointed committee of creditors, and this eliminates costs of creditors’ legal professionals that the filer could be partially responsible for.
  • The repayment plan confirmation process is streamlined because the court will not require a disclosure statement that provides repayment details to creditors. This prevents possible contested hearings and extensions of the case that could add additional costs.
  • Finally, the SRBA reduces strict confirmation requirements for repayment plans. Plans will be approved as long as they don’t discriminate against specific creditors and the repayment amounts are reasonable with respect to projected monthly business income and projected monthly business expenses and the current debts of the business. This quick confirmation process prevents drawn out, costly back-and-forth interactions between creditors and the business filing for Chapter 11 bankruptcy relief.

This brief overview of the changes made to Chapter 11 bankruptcy through the Small Business Reorganization Act is just a general look into the new law. To learn more on how the SBRA may affect your ability to file, you can view all the details on congress.gov.

For more information about filing for Chapter 13, Chapter 11 or Chapter 7 bankruptcy in Jackson, MN as an individual or as a business, contact Behm Law Group, Ltd. at (507) 387-7200 today or stephen@mankatobankruptcy.com.

Why Small Businesses Aren’t Filing for Bankruptcy Now

Since the end of March and the height of the coronavirus shutdowns, small businesses and beyond have struggled to stay afloat. The benefits of stimulus packages and federal loans have helped many individuals and businesses keep their heads above water and even make a profit during months of decreased income. Unfortunately, most of the effects of the stimulus bills came to an end, and small businesses now need to decide what steps to take to protect themselves given current economic conditions. If you own a sole proprietorship or partnership business, you can use Chapter 13 bankruptcy to resolve debts without losing your business. With the help of Behm Law Group Ltd., you can work through that type of reorganization bankruptcy in New Ulm, MN, and the surrounding areas to file a successful case that will resolve your debts without liquidating your business operations.

Although sole proprietorship and partnership businesses can file for bankruptcy by rolling business debt into the owner’s personal debts, many other small businesses are not able to file because they would be restricted to Chapter 11 reorganization as they may have large amounts of debt and assets with significant values.

Both Chapter 13 and Chapter 11 function similarly to reorganize debts into a repayment plan. Filers will slowly repay debts included in the plan over several years. Many debts will be paid in full but under different terms as denoted in the plan. Other debts will receive payment for a finite period of time and only be partially paid. The remaining balances of those debts at the conclusion of the bankruptcy case would be discharged. While those businesses that qualify for Chapter 13 bankruptcy are more likely to file during this time, if it’s the correct choice given their current finances, businesses that only qualify for Chapter 11 bankruptcy still might not be able to file.

The situation for small businesses right now is complicated. Big business bankruptcy cases have increased by almost 120% in the past 8 months, largely due to the effects of COVID-19, but many smaller businesses have been left unable to file for bankruptcy simply because the costs of filing can be significant. These smaller businesses are operating on shoestring budgets, and once stimulus aid comes to a full stop, they will likely be left with little to no resources.

Because small businesses will be (or already have been) operating on such low incomes, they will literally not be able to afford to file for Chapter 11 bankruptcy. The cost of an attorney and the filing fees involved in a Chapter 11 bankruptcy case are often upward of $10,000 for many small to medium businesses. Most struggling to meet debt payments will just keep operations running until a third party intervenes rather than put time and money into Chapter 11 bankruptcy reorganization plans.

With PPP (payroll protection) loans and stimulus support still helping some small businesses and other businesses with incomes too low to cover bankruptcy fees and costs, small business bankruptcies are down by about 14% from last year.

If you are able to fund a Chapter 13 bankruptcy in New Ulm, MN, or the local area, Behm Law Group Ltd. can help you build a repayment plan for long-term debt relief. Contact us at (507) 387-7200 or stephen@mankatobankruptcy.com today.

Filing for Chapter 13 Bankruptcy with a Business Partner in Worthington, MN

For individuals in the position to file for bankruptcy, there are two common options available: Chapter 7 or Chapter 13 bankruptcy. Chapter 7 works to liquidate your non-exempt assets in exchange for the discharge of your debts. This process is most common for filers without a steady income and the loss of non-exempt property does not occur in most Chapter 7 cases. However, for those with income who want to keep properties that could otherwise be liquidated in Chapter 7, Chapter 13 is a better option. Chapter 13 bankruptcy works to restructure your debts into a manageable three-to-five-year repayment plan that is based upon your monthly “net” income and your monthly reasonable and necessary living expenses.

While Chapter 7 is a bankruptcy process available to individuals and businesses in Worthington, MN, alike, Chapter 13 is mostly filed by individuals. If you own a sole proprietorship or partnership business, you may be able to combine business and personal debts and use Chapter 13 bankruptcy to resolve all debts at once.

If you’re in the position to file for Chapter 13 bankruptcy in Worthington, MN and the surrounding area, Behm Law Group, Ltd. can help you build a strong case and get your reasonable repayment plan put into place.

For Chapter 13 filers with a sole proprietorship, combining business and personal debts is relatively simple because there’s only one party filing for bankruptcy. For partnership businesses, however, that process can get a little more complicated. These complications often create situations where filing for Chapter 13 bankruptcy is less than ideal for a partnership.

What to consider:

  • Your business contract: Many partnership businesses build clauses into their contracts that will dissolve the business as soon as one partner files for Chapter 13 bankruptcy. This is largely because of the potential negative results in a bankruptcy case that could befall a non-bankruptcy filing partner.
  • Potential case results: If the non-filing partner is able to repay the debts with their personal income, a creditor could request to have the case switched to a Chapter 7 on those grounds. The creditor could possibly receive more money in this case by targeting your partner’s assets, and your business would be forced to close down operations.
  • Who has to pay: If your partner files for bankruptcy, they’ll wipe out their responsibility for that business debt. This may leave you fully responsible for the debt. Additionally, if either of you guaranteed the debt, a bankruptcy case may trigger a clause that will require an immediate full payment of a loan.
  • Who will own the business: When your partner files for bankruptcy, they give up their share in the business to the bankruptcy trustee. Their ownership interest in the business becomes property of their bankruptcy estate. Technically, this will make a bankruptcy trustee your new business partner. If a trustee chooses to liquidate that asset, you could lose half of your business (or however much your partner owned). However, if the business has no “net” value in excess of the debts it owes, the trustee will likely conclude that it has no value to the bankruptcy estate. In that case, the partner filing for bankruptcy relief would likely be allowed to continue operating the business with the non-bankruptcy filing partner, as was the case before the bankruptcy was filed.

Don’t Try to Navigate Chapter 13 Bankruptcy Alone

If you or your partner plan to file for Chapter 13 bankruptcy in Worthington, MN or the surrounding area, Behm Law Group, Ltd. can help you decide whether or not it’s a good idea. Contact us at (507) 387-7200 or stephen@mankatobankruptcy.com today.

Finding a Home and Rebuilding after Bankruptcy

If you are struggling financially, there are many options available to you for debt relief. While some households might benefit from negotiating wiggle room with their creditors, it’s more likely that people with debts they can’t pay will find long-term, permanent debt relief in bankruptcy. Depending on your financial circumstances, you can file for liquidation or reorganization bankruptcy. If you are unable to make monthly debt payments, Behm Law Group Ltd. can help you file for bankruptcy from start to finish. Our skilled attorneys can also help you understand the process of rebuilding your credit after filing a bankruptcy in Mankato, MN.

Many people fear that filing a Chapter 7 bankruptcy means losing their property, including their house. While filing a chapter 7 bankruptcy can be scary and while there are many misconceptions about it, there are ways to find a new home while you start your financial life over again after your debts have been discharged. In addition to a potential home loss, even those who file for bankruptcy and don’t lose their house (like those that file for Chapter 13 bankruptcy or those renting a residence) will have to face the question of whether or not they can buy a house in the near future. There are several options to consider when trying to find a home after bankruptcy.

Renting: If you just lost your home in a Chapter 7 bankruptcy case, you’re probably not in a position to buy another residence right away. In addition to various limitations to your financial situation, there are laws dictating how long you have to wait after a bankruptcy filing until you can be approved or qualify for some mortgages. Typically, this waiting period is 2-4 years. However, there are many opportunities for you to rent post-bankruptcy. Plenty of renters offer sliding scale leases and will also rent to individuals who are rebuilding their credit.

Buying: For those who have the means to buy a home in the next few years after a bankruptcy, they simply have to get through the waiting period and focus on re-building their credit. The waiting times for different mortgages are as follows:

  1. Conventional loan:
    1. 4 years after a Chapter 7 discharge or dismissal
    2. 4 years after a Chapter 13 dismissal
    3. 2 years after a Chapter 13 discharge (or 4 years from the date you filed)
  2. USDA loan:
    1. 3 years after a Chapter 7 discharge or dismissal
    2. 1 year after a Chapter 13 discharge or dismissal
  3. FHA and VA loans:
    1. 2 years after a Chapter 7 discharge or dismissal
    2. any time after the court dismisses or discharges your Chapter 13 case

Any bankruptcy will be reflected on your credit report for up to seven to ten years. However, many lenders will be very incentivized to work with you because they will know that all of your previous debts have been discharged and that they will not have to compete with those discharged creditors to get paid by you. They will also know that you will not be able to file for bankruptcy relief and qualify for a bankruptcy discharge again for several years. In short, you will be able to rebuild your credit by incurring new debt during the 2-4 year waiting period. If you’re rebuilding after bankruptcy in Mankato, MN, or the surrounding area, work on your credit and stick to the waiting period rules, and you’ll be eligible to apply for the same home mortgage loans as any other applicant. To learn more about filing for bankruptcy, contact Behm Law Group Ltd. at (507) 387-7200 or email stephen@mankatobankruptcy.com