Basics of Each Different Bankruptcy Chapter

At Behm Law Group, Ltd., we provide comprehensive legal guidance and protection for individual consumers filing for Chapter 7 or Chapter 13 bankruptcy, and for family farmers and fishers filing for Chapter 12 bankruptcy. If you’re considering filing for bankruptcy, our attorneys can help you determine which chapter will be the most effective for handling your current financial circumstances.

 

Each chapter is designed to help individuals in many different situations get out of debt that they wouldn’t have otherwise been able to repay. While we work with only those three chapters (7, 12, and 13) of bankruptcy in Mankato, MN and the surrounding area, there are other types of bankruptcy available to individuals and businesses.

 

The six general bankruptcy chapters in U.S. bankruptcy law include:

 

  • Chapter 7: Available to individuals and businesses alike, Chapter 7 bankruptcy is the most commonly filed chapter. It works to liquidate or sell the filer’s non-exempt assets, distribute the proceeds among the filer’s creditors, and discharge the majority of the filer’s debts. Chapter 7 is also called liquidation or straight bankruptcy. The bankruptcy exemptions under Minnesota state law and the bankruptcy code that are used to protect one’s property are very generous, however.  In the vast majority of cases, no property is liquidated or sold at all and all that one loses are one’s debts.
  • Chapter 9: This bankruptcy chapter is an option only available to municipalities such as cities, school districts, or counties. In 2013, Detroit, MI used Chapter 9 to file the largest municipal bankruptcy case in U.S. history, with debt load estimated at $18 to $20 billion. The process of Chapter 9 bankruptcy works to protect the filer from creditors while the filer restructures their debts to much more favorable repayment terms.
  • Chapter 11: Like Chapter 9, Chapter 11 also protects the filer from creditors as they reorganize their debts. Chapter 11 is a process only offered to businesses that are not sole proprietorships and individuals, such as doctors, lawyers, famous actors, corporate CEOs, etc. who have total debts that exceed the debt limitations of Chapter 12 and Chapter 13 bankruptcy or who have incomes that far exceed the state median/average income for a household of their similar size. The goal of Chapter 11 is to help a business or an individual restructure their debts under more favorable repayment terms in a Chapter 11 repayment plan while they maintain operations. Some of the most recent large Chapter 11 cases include J.C. Penny, Hertz, and Neiman Marcus.
  • Chapter 12: For filers that generate the majority of their annual income from family owned farming or fishing operations, Chapter 12 is a debt restructuring option. The restructured debts are put into a Chapter 12 plan lasting three to five years. This chapter is reserved for family farmers and fishers largely because their income is received seasonally.
  • Chapter 13: The second most common individual consumer chapter filed is Chapter 13. This process works to restructure the filer’s debts into a manageable repayment plan that lasts a three to five-years. Some secured creditors (creditors with collateral or security such as vehicle lenders) are paid in full under more favorable repayment terms and some unsecured creditors (creditors who don’t have security or collateral such as credit card debts, medical debts, etc.) are repaid only partially with no interest and have their claims completely discharged. Chapter 13 is also called reorganization, restructuring, debt repayment, or wage-earner bankruptcy.
  • Chapter 15: Finally, Chapter 15 bankruptcy is relatively rare, but still necessary. Added to the bankruptcy code in 2005, Chapter 15 bankruptcy handles filers with foreign debts and/or foreign assets. Chapter 15 overall works to negotiate a case with foreign courts and foreign bankruptcy/insolvency laws.

 

To learn more about our work with Chapter 7, 12 and 13 bankruptcies in Mankato, MN and the local region, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.

Leniencies with 401(k) and Other Retirement Funds in Chapter 13 Bankruptcy

Everyone wants to save money for the future, whether putting away $10 per paycheck, or contributing thousands of dollars to a 401(k) or other retirement plans. For many, however, those financial goals might be difficult to maintain. If you’re struggling to meet monthly bills and other debt payments, it might be time to consider filing for bankruptcy. The process of bankruptcy has benefited thousands during trying economic times. Despite the misconception that bankruptcy is a choice that will either leave you homeless or with crippling credit, it’s actually a highly effective long-term debt relief solution. At Behm Law Group Ltd., our expert attorneys are here to help. We provide guidance and legal protection for those filing for Chapter 7 or Chapter 12 or Chapter 13 bankruptcy in New Ulm, MN, and the surrounding region.

 

While Chapter 7 bankruptcy is an option for those with household incomes lower than the state median/average income for their household size, Chapter 13 bankruptcy is a process better suited for financial circumstances with steady incomes. Also called “wage-earner bankruptcy,” Chapter 13 bankruptcy reorganizes the filer’s debts into a three-year to five-year manageable repayment plan suited to his or her income. Only portions of unsecured debts (debts without collateral) are paid at no interest and secured debts (debts with collateral such as vehicle loans) are repaid under terms that are more favorable over a three- to five-year period. All disposable income (income not necessary for your reasonable and necessary monthly living expenses) is used to make monthly plan payments, and the filer’s remaining discretionary income is used for living expenses like food, gas, utilities, and home maintenance and many other things.

 

While the chapter 13 bankruptcy trustee is required to review your reasonable and necessary living expenses, there is also considerable flexibility that allows you to contribute some of your income towards certain items such as saving up to travel for the holidays and making monthly contributions to retirement plans.

 

Discretionary Income and Retirement

Strictly speaking, making contributions to retirement funds/plans does not constitute a reasonable and necessary living expense such as purchasing food, making vehicle or mortgage payments, etc.  However, provided someone has made contributions to a 401(k) or some other retirement account before filing for bankruptcy, the bankruptcy code allows one to continue making such contributions.  There is a sound public policy behind this.  Quite simply, the drafters of the bankruptcy code wanted to encourage people to save for themselves and build a financial reserve or “nest egg” that could be relied upon later and which would help prevent the need to file for bankruptcy relief again.  Indeed, for older filers near retirement age, such contributions can be considered necessary because they will soon be living off that income.  If you are currently enrolled in a voluntary or non-voluntary contribution plan through your employer or if you are repaying a retirement account loan, those obligations will be worked into your case and will continue normally.

 

Filing for Chapter 13 bankruptcy in New Ulm, MN, or the surrounding area doesn’t mean that you will lose the ability to save something for yourself during that three- to five-year repayment period. Contact Behm Law Group Ltd. at (507) 387-7200 or stephen@mankatobankruptcy.com to learn more details about Chapter 13 repayment bankruptcy.

Why the Help of a Bankruptcy Attorney is Important for 2021 Bankruptcies

The difficulties of the coronavirus pandemic and a changing economy are still affecting all American citizens, and those effects come with significant financial struggles for many. The initial boost of stimulus checks, federal additions to state unemployment benefits, and room for accommodation on debt payments helped many stay out of bankruptcy throughout much of 2020. Without those benefits, pressure for unemployed households, business owners, and even those with steady incomes is projected to create a surge in bankruptcies in 2021.

 

While it’s possible to file for bankruptcy relief without legal protection and guidance, it’s always beneficial to take advantage of the skills and expertise of a bankruptcy attorney. With Behm Law Group, Ltd., you can expect comprehensive protection and expert advice with a Behm bankruptcy attorney in Worthington, MN and the surrounding areas.

 

Behm Law Group, Ltd. is the only law firm in south central and southwestern Minnesota practicing in bankruptcy cases exclusively. Behm bankruptcy attorneys will work with you from the start to the finish of your case, guiding you through the highly nuanced bankruptcy legal process. We work with individual consumers, business owners, and family farmers filing for Chapter 7, Chapter 13, or Chapter 12 bankruptcy.

 

Filing for bankruptcy, even when there isn’t a global pandemic going on, can be difficult. The bankruptcy code can be complicated and the process of filing is nuanced, requiring filers to meet strict specifications and requirements. If you’re thinking about filing for bankruptcy relief, it’s highly recommended that you seek out the advice of a trained bankruptcy attorney.

 

This coming year, however, might make the bankruptcy process even more difficult and intricate due to added laws regarding COVID-19 and care packages. The question of how different incomes are treated in any bankruptcy will involve additional income sources established in response to the coronavirus, such as potential future stimulus checks and additional state and federal unemployment income.

 

Household conditions directly impacted by the pandemic will also be taken into consideration when a bankruptcy case is filed. This may include how medical debts are treated or whether filers’ health conditions caused by COVID-19 infections could be handled as a disability or as an undue hardship.

 

With 2021 starting a new presidential term as well, it’s difficult to predict how bankruptcy law might change in the near future. The slightest changes could affect how a case is handled and may even prevent a filer from qualifying for bankruptcy relief. At Behm Law Group, Ltd., we expect 2021 to have extremely high bankruptcy rates and we expect that there may be many changes to the bankruptcy code, making it more crucial than ever to seek the help of an experienced bankruptcy attorney.

 

To learn more about our services as a law firm and to locate an experienced bankruptcy attorney in Worthington, MN, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.

Refinancing with Today’s Low Mortgage Rates Might Offer Debt Relief

In the midst of a global pandemic and a rocky political climate, there’s so much negative news that we are exposed to every day. However, one of the positives of the end of 2020 and the beginning of 2021 is that mortgage interest rates are extremely low, and the housing market is booming. If you’re a homeowner, you know how much pressure there is to meet monthly mortgage payments along with all of your other pressing financial obligations. For homeowners struggling to meet mortgage payments or other debt requirements, taking advantage of favorable current mortgage interest rates by refinancing your home mortgage may be the ticket to staying out of bankruptcy. If you are considering filing for bankruptcy relief during this uncertain time, Behm Law Group Ltd. can help you navigate the legal process and receive long-term, effective debt relief in Marshall, MN, and the surrounding area.

 

Those who have steady incomes but are finding it difficult to meet their monthly financial requirements may be considering Chapter 13 bankruptcy to reorganize their debts into a manageable repayment plan.  Homeowners with steady incomes are also most likely to benefit from refinancing their home mortgages. A refinance with current interest rates could save homeowners several hundreds of dollars with each payment. The resulting savings could be significant enough such that the money saved could effectively be put into paying off several other debts that might otherwise force a homeowner into filing for bankruptcy relief.

 

Approximate Mankato mortgage rates as of November 2020 for a $250,000 loan

Loan type Rate Points APR Monthly payment
15-year fixed loan 2.1% 0.56 2.4% $1,300
20-year fixed loan 2.5% 0.84 2.7% $1,060
30-year fixed loan 2.6% 0.75 2.8% $800
5/1 ARM variable loan 2.4% 0.89 2.7% $780
7/1 ARM variable loan 2.5% 0.76 2.7% $790
10/1 ARM variable loan 2.6% 0.76 2.8% $800

 

For a conventional loan, refinancing may cost around $3,000 to $4,000, but that cost would be wrapped into your refinanced mortgage, so it won’t typically impact the amount of cash you have on hand at the time of the refinance. The only common factors that might prevent qualification are a low FICO score due to missed mortgage payments, too many debts, other than your mortgage, with high balances or low self-employment income from this year.

 

While saving $100 to $300 a month on a refinanced mortgage might not seem like a large amount, it’s a significant enough of an amount that many homeowners may use to repay other debts and financial obligations that they might not otherwise be able to pay. Those minor monthly adjustments can be key in preventing the stress and budget shortfalls that can lead one into having to file for Chapter 13 bankruptcy relief.

 

Chapter 13 or Chapter 7 bankruptcy can be highly helpful options for those struggling financially who are unable to refinance their mortgages and are unable to make other helpful budgetary adjustments. To learn more about finding debt relief through bankruptcy in Marshall, MN, and the surrounding region, contact Behm Law Group Ltd. at (507) 387-7200 or email stephen@mankatobankruptcy.com.

 

Part Three: Utility Bills and Debt Relief This Winter

This is the third and final part of a blog series covering frequently asked questions regarding utility bills and bankruptcy. Because the coldest months of the year are just beginning, it’s important to keep gas, water, and other utilities running to protect your household or business from frozen pipes and interrupted hot water sources.

When you’re unable to pay monthly utility bills, you risk service shut off when debts accumulate. Filing for bankruptcy relief can stop service shut offs and discharge utility debts permanently. If you are considering filing for bankruptcy, Behm Law Group, Ltd. can help you through the process and find effective, permanent debt relief in Owatonna, MN and the surrounding area.

These are a few more of the most commonly asked questions about utility bills in bankruptcy.

Is my cable considered a utility? How can I stop it from possibly being shut off?

While cable television is not technically a utility, it’s still a service that will be shut off when you default on your monthly bill payments. Fortunately, cable bill debts can also be included in your bankruptcy and can be permanently discharged. If you list your cable debt amount, the automatic stay injunctive provisions of 11 U.S.C. §362 will apply to your cable provider and to all of your other utility providers, and your cable television debt will be discharged with all of your other unsecured utility debts.

My provider is asking for a large security deposit to reconnect my service. Can the bankruptcy court help me pay it?

One form of adequate assurance (see part two to learn about adequate assurance) your utility provider might require from you in order to continue service is a security deposit amount that is too much for you to pay. If you filed for bankruptcy protection, the bankruptcy court will be able to help. When you cannot come to an agreement with your utility creditor about the security deposit amount, you can request the bankruptcy court to reduce the security deposit to an amount that you can afford to pay.

I’ve paid my bills on time for a year now. Can I get my security deposit back?

If you filed for bankruptcy relief, provided a security deposit as an assurance, and then paid your bills on time for the twelve-month period after your bankruptcy was concluded, you may be eligible for the return of the security deposit. Reach out to your utility provider for more information about the possible return of your security deposit and how that process might work.

To learn more about the treatment of utility debts, unsecured or secured debts, and the process of obtaining permanent debt relief by filing bankruptcy in Owatonna, MN, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.

Part Two: Utility Bills and Debt Relief This Winter

This is the second part of a blog series covering frequently asked questions concerning utility bill debts and bankruptcy. The first part can be found here. Utility debts occur when you miss monthly utility payments for any period of time. As an unsecured debt (a debt that does not have collateral – secured by any property), it is always fully discharged in an individual consumer bankruptcy case. Because of that, bankruptcy is one of the best options for finding relief from utility bill debt and other unsecured debts like credit card balances and medical bills. At Behm Law Group Ltd., our attorneys are dedicated to helping households work through Chapter 7 or Chapter 12 or Chapter 13 bankruptcy cases to receive permanent, effective debt relief in Mankato, MN, and the surrounding communities.

While filing for bankruptcy relief will be denoted on your credit profile for a limited period of time (usually 5 to 7 years), the benefits almost always outweigh the potential negatives because your debts will be fully discharged in bankruptcy. Utility bill debts are debts that are handled in bankruptcy, and if you owe those debts, filing for bankruptcy can also stop your utility services from being shut off and keep creditors from harassing you. These are some of the more frequently asked questions about how utility debts are handled in bankruptcy.

When is filing for bankruptcy not enough to prevent service shut off?

Although the automatic stay injunctive mandates of 11 U.S.C. §362 are immediately imposed upon all creditors when you file your bankruptcy petition, there are still some steps that you must take to stop possible utility service shut off. In your petition paperwork, make sure your utility bill debts are listed in the correct section. Listing those unpaid bills as debts will allow the bankruptcy court to notify your utility providers of your bankruptcy filing and prevent service shut-off. Within 20 days of filing, you must also show your utility provider that you will be able to pay your utility bills that are incurred and come due after the date that your bankruptcy petition is filed. This proof is called “adequate assurance.”

What is “adequate assurance?”

Adequate assurance is a good faith measure of proof to your provider that you will be able to pay your future utility bills. This proof can be offered in several different forms, including letters of credit provided by a lender, security deposits (much like a damage deposit with a landlord if you’re renting an apartment), certificates of deposit, prepayment, surety bonds, or another type agreed on by you and your utility provider.

What happens if my provider doesn’t accept my offer of adequate assurance?

If you and your provider don’t agree on a form of adequate assurance, you can request the bankruptcy court to order your provider to accept that assurance. The bankruptcy judge may also order you to modify the form or amount of the assurance deposit.

Utility bill debts are stressful, especially when service shut-off is a threat during the colder months. If you’re struggling financially, contact Behm Law Group Ltd. at (507) 387-7200 or stephen@mankatobankruptcy.com for more information about bankruptcy and debt relief in Mankato, MN.