Posted on

Using Bankruptcy for Debt Relief after a Layoff in Fairmont, MN

Since the start of the coronavirus pandemic in the United States, thousands of individuals have been laid off when government shutdowns required businesses to close. While many have returned to work, there is a large population still suffering the effects of job loss and the debts accrued during that time. If you are struggling to meet debt payments each month due to a layoff, filing for bankruptcy will likely help you find much needed permanent debt relief and long-term financial stability. Behm Law Group Ltd. is one of the only law firms specializing exclusively in bankruptcy cases in southern Minnesota. Our attorneys provide legal services for those filing for Chapter 7, 12, or 13 bankruptcy. With our help, you can file a strong case and permanently resolve your financial issues for effective debt relief in Fairmont, MN, and the surrounding area.

 

The most important factor to consider after a layoff is how to distribute your funds. If you plan on filing for bankruptcy, use your income for essential items like food, gas, and utilities and mortgage and vehicle loan payments. The debts that accrue with your credit card bills, medical debts, past due utility bills and other such debts can be addressed and fully discharged when you eventually file for bankruptcy.

 

You will not be penalized for prioritizing and paying certain debts for essential things, such as your homestead mortgage payment, over other debts that are not essential. Generally speaking, you should not spend money on items like gambling or fancy vacations to foreign countries.  You should also not be paying friends or relatives on debts that you owe to them.  The bankruptcy trustee administering your bankruptcy case will review your bank account statements and other financial documentation.  The trustee could sue any friends or relatives you may have paid and recover the money you paid them for the benefit of your creditors.

 

Most people who have been laid off and had a lack of sufficient income for that time period choose to file for Chapter 7 liquidation bankruptcy. This chapter provides significant debt discharge in many cases, but only those with incomes below the state median or average income for a similarly-sized household will qualify. When you file your petition, the past six months of your earnings are analyzed to determine if you qualify for Chapter 7 bankruptcy. If you were recently laid off from a well-paying job, you may not be able to qualify for Chapter 7, but you can instead opt to file Chapter 13.  However, sometimes you can still qualify for a chapter 7 bankruptcy even though you’ve had a high paying job, you’ve been laid off from that high paying job and your income has been higher than the state average income for a household of similar size.  For instance, if you’re receiving unemployment compensation or your re-employment prospects are not encouraging you may still be able to qualify for a chapter 7 even though your income level was previously quite high.

 

Chapter 13 restructures debts into a three- to five-year repayment plan that is suited to your income. Whatever balances of your unsecured debts remain at the conclusion of your chapter 13 plan will be discharged.  If you had debts with the Internal Revenue Service (IRS) or the Minnesota Department of Revenue (MDR), the principal of those debts would be paid in full.  If you have just been laid off and your last six months of income prevent you from qualifying for Chapter 7, thus pushing you to file for Chapter 13, you may find that down the line a continued decreased income or ongoing diminishment of income will change your ability to meet your repayment plan requirements. Chapter 13 Trustees allow chapter 13 plans to be altered or modified when income changes are experienced during the three- to five-year plan repayment period to accommodate this reality.

 

To learn more about filing for bankruptcy and getting debt relief after a layoff in Fairmont, MN, and the surrounding region, contact Behm Law Group Ltd. by calling (507) 387-7200 or emailing stephen@mankatobankruptcy.com today.

Posted on

Retirement Plans and Bankruptcy in Redwood Falls, MN

Filing for bankruptcy is a big life decision. It has the power to permanently resolve debts and provide lasting financial stability, but can come with some risks if your circumstances aren’t ideal for the bankruptcy process and you aren’t completely forthcoming with your bankruptcy lawyer. When it comes to large financial choices like filing for bankruptcy, people tend to look at the big picture. Most of the time, this includes questions about what will happen to retirement plans and how contributions can continue. The answers to these questions can vary from case to case, but for the most part, filing for bankruptcy won’t impact retirement funds negatively. With the guidance and support of a Behm Law Group, Ltd. attorney you can file a strong and successful case for bankruptcy in Redwood Falls, MN and the surrounding areas.

 

Bankruptcy can be a complex and nuanced legal process. The various chapters handle debts and incomes differently, and debts themselves are handled based on whether they are priority, secured, or unsecured debts. Retirement funds can be sources of income in the bankruptcy process, depending on what kind of retirement funds you have.

 

In Chapter 7 bankruptcy, your debts are discharged in exchange for the liquidation of your non-exempt assets. While some of your non-exempt assets may be liquidated, you can protect most of your property with the bankruptcy exemptions provided under either the bankruptcy code or Minnesota state law. Exemptions like the Homestead Exemption and the Vehicle Exemption will allow you to protect the equity or value in your house and your car depending on how much debt you owe against them. Learn more about Chapter 7 exemptions.  Generally speaking, the bankruptcy exemptions are very generous and, in most cases, all someone loses is debt.

 

Although your retirement fund is considered an asset, many may not even be considered as part of your bankruptcy estate. 401(k)s, 403(b)s, Keoghs, and many other retirement plans are fully exempt from bankruptcy liquidation. Roth IRAs and traditional IRAs are also not subject to liquidation, but they have an exemption limitation up to $1,362,800 per person. This amount is adjusted as cost-of-living changes. The most recent adjustment was in 2019 and the next is projected for 2022.

 

In Chapter 13 bankruptcy, your debts are reorganized into a manageable three- to five-year repayment plan. During that time, all your disposable income – income that is not needed to cover your reasonable and necessary living expenses – must go to repaying your creditors. However, as long as you have had a history of making contributions to your retirement account, you will still be allowed to do so in chapter 7 and chapter 13 bankruptcy cases.  Learn more about disposable income. In fact, in some cases you will be allowed to make larger contributions to your retirement account if you are close to retirement age.

 

Overall, your retirement plan will not be affected negatively by a bankruptcy, but you may have to adjust your contributions for a three- to five-year period if you file for Chapter 13, depending on your age and how close you are to retiring. To learn more about filing for bankruptcy in Redwood Falls, MN, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.

Posted on

Bad Faith Dismissal and the U.S. Bankruptcy Code

Each year in the United States, thousands of individuals and businesses use bankruptcy as a lawful way to permanently discharge debts they can’t repay. If you’re one of the many people struggling to meet monthly debt payments, bankruptcy might be the best solution. There are two main bankruptcy chapters individual consumers can utilize to permanently resolve debts: Chapter 7 and Chapter 13. Chapter 7 works to completely discharge most debts within 90 to 120 days and Chapter 13 works to reorganize debts into a manageable repayment plan under much more favorable repayment terms which lasts 3 to 5 years. No matter which chapter you file under, however, you will have to meet all the requirements set forth by the bankruptcy code, and above all, prove that your case has been filed in “good faith.”  With the help of Behm Law Group Ltd. expert attorneys, you can build a good faith case and successfully navigate the U.S. bankruptcy code in Jackson, MN, and the surrounding areas.

 

Bad faith cases can be filed with ulterior motives to manipulate the bankruptcy system in abusive ways rather than just simply receiving the intended, lawful benefits of debt discharge or debt reorganization. One example of a current case with allegations of bad faith is the National Rifle Association (NRA) Chapter 11 case. The NRA filed for Chapter 11 bankruptcy in January 2021. Chapter 11 bankruptcy works similarly to Chapter 13 reorganization, but it is designed for very large business entities and for individuals, such as Wayne Newton or 50 Cent, who have a lot of assets and massive debt loads.

 

The NRA stated that it planned to reorganize its debts and then move from New York to Texas, reincorporating in Texas while its debts were repaid through a Chapter 11 plan of reorganization. However, New York Attorney General Letitia James has had an open investigation into the NRA operations since 2019, and she immediately posed questions as to the possible bad faith filing of the NRA’s bankruptcy case.

 

In a press statement, James said, “While we review this filing, we will not allow the NRA to use this or any other tactic to evade accountability and my office’s oversight.”

 

In contrast to a bankruptcy filing, the NRA also announced that it was “in its strongest financial condition in years.”

 

The NRA’s petition also revealed the nonprofit organization’s business dealings to be solvent according to the debt-to-income ratio. After the New York Attorney General filed a lawsuit against the NRA in 2020 for allegedly acting fraudulently to allegedly displace $64 million from charitable work to support the wealthy lifestyles of executives, the NRA filed its own lawsuit against the Attorney General, claiming that her office had violated its rights.

 

By its filing for bankruptcy in 2021, the NRA will likely significantly delay the New York Attorney General’s suit and possibly the entire investigation. If the NRA is reorganized in Texas, the Attorney General would no longer be able to continue her office’s investigations. The revelations from the NRA’s bankruptcy petition and its apparent lack of financial woes have led to questions about whether the case has been filed in good faith.

 

Whether a case involves a business or individual, hints of bad faith will most likely lead to a dismissal. While the NRA case has a way to go until all these details are worked out, the attorneys at Behm Law Group would most certainly ensure that your bankruptcy case would be filed in good faith.

 

To learn more about the bankruptcy code in Jackson, MN, call Behm Law Group Ltd. at (507) 387-7200 or email stephen@mankatobankruptcy.com.

Posted on

Debts Discharged in Chapter 13 Bankruptcy

If your debts are piling up with no end in sight, you’re not alone. People all across the U.S. struggle financially for many different reasons. No matter how you’ve incurred debts like credit card debts, medical expenses, mortgage delinquencies, car loans and debts following vehicle repossession, and many other kinds of secured and unsecured debts, almost all can be treated favorably and discharged completely through bankruptcy. Both Chapter 7 and Chapter 13 bankruptcy are designed to help individual consumers work through a debt relief process overseen by a bankruptcy court that remains fair to all parties involved. Behm Law Group, Ltd. can help you navigate the unfamiliar and nuanced process of bankruptcy from start to finish. Our attorneys work with individuals and businesses filing for Chapter 7 or Chapter 13 bankruptcy in St. Peter, MN and the surrounding region.

 

Chapter 7 bankruptcy is reserved for filers with modest household incomes (incomes below or equal to the state median/average income of a similar sized household) or a debt-to-income ratio that justifies eligibility. Chapter 13 bankruptcy, on the other hand, is a process that wage-earning individuals can qualify for who have more robust and steady incomes. Unlike Chapter 7 where debts are discharged completely within 90 to 120 days, Chapter 13 bankruptcy reorganizes debts into a three- to five-year repayment plan where the repayment terms are adjusted favorably in light of your monthly income and necessary monthly living expenses.

 

Chapter 13 bankruptcy addresses debts in unique ways that are beneficial to your long-term financial rehabilitative consequence.  The purpose of Chapter 13 bankruptcy is for you to propose a plan of reorganization, lasting 3 to 5 years, where you make one monthly payment to a chapter 13 trustee which the chapter 13 trustee divides up among your creditors.  Generally, the repayment terms of the chapter 13 plan are much more favorable to you than what you may experience outside of bankruptcy.    A primary goal is to have as many of your debts, even secured debts like vehicle loans and priority debts like tax debts and child support arrearages, incorporated into your chapter 13 plan for payment by the chapter 13 trustee with the payment you make each month of your plan’s duration.  How a particular debt can be treated in a chapter 13 plan depends on what kind of debt it is.

 

Secured Debts

 Secured debts are debts that are secured by or collateralized by one of your assets.  If you don’t make your monthly payments to a creditor who holds a secured debt, the creditor can take or seize the asset that operates as security or collateral for the loan.  A good example is a vehicle loan.  With vehicle loans, a person can do something known as “cram down” in chapter 13 bankruptcy.  This is where the amount of a particular vehicle loan is reduced or crammed down to the present value of the vehicle.  The interest rate of the vehicle loan can also be crammed down.  For instance, presume you own a vehicle that is presently worth $5,000.00 and you presently owe $15,000.00.  Presume further that the interest rate you pay outside of bankruptcy on the vehicle loan is 15%.  In chapter 13 bankruptcy, rather than paying your vehicle loan payment to the creditor you simply include the loan for payment in your chapter 13 plan.  Your plan could provide for a reduction of the loan from $15,000.00 to the present value of the vehicle – $5,000.00.  In addition, your plan could provide for a cramdown of the interest rate that would be applied to the $5,000.00 from 15% to 5%.

 

Home mortgages arrearages/delinquencies are also secured debts that can be addressed favorably through chapter 13 bankruptcy.  Presume that before filing chapter 13 bankruptcy, your monthly mortgage payment is $1,000.00 and presume further that you are $10,000.00 behind with your mortgage payments.  Your chapter 13 plan can provide for payment of the $10,000.00 mortgage delinquency and the mortgage creditor would not be able to foreclose on your home.  However, going forward throughout your chapter 13 bankruptcy plan, you would be required to continue making your regular, monthly mortgage payments.  The chapter 13 trustee would only pay the pre-bankruptcy mortgage arrearage/delinquency over 3 to 5 years.  If you failed to make your ongoing, regular monthly mortgage payments to your mortgage lender, the mortgage lender could get relief from your bankruptcy case and commence foreclosure proceedings against your home.

 

Tax Debts and Child Support Arrearages

 Tax debts and child support arrearages are priority unsecured debts.  Generally, these debts are not secured by or collateralized by any of your assets.  They are, technically, unsecured debts.  However, due to certain public policy considerations, the drafters of the bankruptcy code wanted to make these debts more difficult to discharge in bankruptcy.   However, they can still be favorably treated in chapter 13 bankruptcy.  The bankruptcy code requires the chapter 13 trustee to pay these debts in full.  The chapter 13 trustee will pay these debts first or at the same time as the trustee pays the secured debts included in the chapter 13 plan.  While the chapter 13 trustee pays these debts first, the debts are usually not paid with interest.

 

General Unsecured Debts

These debts are lowest on the trustee’s payment priority list and they are generally paid last and receive whatever funds are left over after the chapter 13 trustee pays secured debts, tax debts and child support arrearages.  Generally, the chapter 13 trustee does not pay interest on these debts.  When the term of your chapter 13 plan has concluded, whatever is left owed on these debts is completely discharged.  Common unsecured debts that are only fractionally or partially paid in Chapter 13 bankruptcy include the following:

 

  1. Credit card debt: Credit cards are often a significant factor in pushing an individual to file for bankruptcy. Fortunately, they are the most easily discharged.
  2. Medical bills: Like credit card debt, medical bills are also a large piece in many bankruptcies but are also easily discharged. This includes medical bills incurred from uninsured medical treatments.
  3. Some tax debts: While most tax debts are excepted from discharge in bankruptcy, older tax obligations can be discharged, as long as the older tax debt was not incurred through fraud.
  4. Unsecured personal loans: Personal loans that are not secured by some kind of property can be discharged. A good example of an unsecured personal loan is a payday loan.
  5. Some judgment debts: If someone has sued you for breach of contract or negligent conduct and obtained a judgment against you, the debt underlying the judgment can be discharged in Chapter 13 bankruptcy. An exception to this would be debts reduced to judgment where you may have injured someone either while driving under the influence of alcohol or in a fistfight.

 

To learn more about how debts are handled with Chapter 13 bankruptcy in St. Peter, MN, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.

Posted on

Adversary Proceedings vs. Contested Matters for Debt Relief

Each year, thousands of U.S. households struggle with debt, and while a very few will eventually find ways to overcome that debt, most people will not. For those who know they will be unable to repay their debts, filing for bankruptcy is an effective option to resolve their debts permanently and without the threat of wage garnishment, creditor harassment, and foreclosure. Filing bankruptcy to discharge your debts provides a government-sanctioned process that provides permanent debt relief that is enforceable by law. At Behm Law Group Ltd., we help clients work through Chapter 7, Chapter 12 and Chapter 13 bankruptcy filings to find effective, long-lasting debt relief in Mankato, MN, and the surrounding area.

 

No matter what chapter you file, bankruptcy can be a detailed and nuanced process that requires the sharing of your current financial information with a third party. Your petition will need to include all of your debts— even ones that you want to keep—your income sources, your properties, and virtually all other aspects of your financial situation. The bankruptcy petition that you complete with your attorney is something that you sign under oath.  You make the representations in your bankruptcy petition subject to penalty of perjury.  Creditors rely on the accuracy of those representations.  The trustee administering your bankruptcy case relies on the accuracy of those representations. The bankruptcy court itself relies upon the accuracy of those representations.  Bankruptcy is an “on your honor” proceeding.  When you file bankruptcy, no one comes knocking on your door and invading your residence to see what you own.  However, it is vital and incumbent upon you and your attorney to make a good faith and detailed review of your financial circumstances and to make sure that the bankruptcy petition is completed as accurately as possible.  The willful failure to correctly complete your bankruptcy paperwork may result a dismissal of your case, at best.  At worst, the making of an intentionally false statement, concealing property or obtaining money or property by fraud in connection with a bankruptcy case can result in fines up to $250,000.00, or imprisonment for up to 20 years, or both.

 

The reason the court needs such detailed information is to:

  1. determine if you qualify for bankruptcy;
  2. correctly evaluate how to handle your case;
  3. work through each debt with respect to how creditors will be repaid or discharged; and
  4. avoid difficulties like contested matters and adversary proceedings.

 

In your particular case, there may be issues brought to the court from the trustee, bankruptcy judge, or one of the creditors involved. These issues could be presented either as contested matters or as adversary proceedings. Both will extend the duration of your case and both can cost you more money the longer they are left unresolved.

 

Adversary Procedures

These contests are lawsuits within a bankruptcy case typically brought to the court by creditors who want to have a discharge of a particular debt revoked, denied or otherwise objected to, creditors who are hoping to recover money or property from parties other than the bankruptcy filer, or creditors who wish to stop some other court action related to your case. Although it’s related to your case, an adversary proceeding is a separate and distinct matter.

 

Contested Matters

Contested matters are similar to adversary proceedings, but they are not proceedings that are distinct and separate from your case. Creditors or other parties can bring contested matters in a case by filing a motion that requires the court to make a ruling based on a particular matter. Contested matters are often resolved more quickly than the resolution of adversary proceedings, but they will still extend the duration of your case and you still likely will have to pay your lawyer more money to assist you in resolving them.  The court will usually consider lifting the automatic stay, objecting to a creditor’s proof of claim, or objecting to a proposed chapter 13 repayment plan as contested matters.

 

 

To learn more about adversary procedures, contested matters, and how bankruptcy can provide permanent debt relief in Mankato, MN, and the surrounding region, call Behm Law Group Ltd. at (507) 387-7200 or email stephen@mankatobankruptcy.com.

Posted on

The Meaning of Debt Discharge in Chapter 7 Bankruptcy

Common law bankruptcy was established centuries ago to handle debtors that couldn’t repay their debts. In a successful economy, the best way to handle debts that can’t be paid by the borrower is with a bankruptcy system that stabilizes that debt load, returning consumers to the trade of goods and services while remaining fair to creditors with some form of repayment. Today, that foundational system is still in place with modern bankruptcy law. Contemporary bankruptcy systems can be highly complex, and because of this, it is highly recommended bankruptcy filers take advantage of the guidance an attorney can provide. At Behm Law Group, Ltd., our expert attorneys can help you work through a Chapter 13, Chapter 12 or Chapter 7 bankruptcy in New Ulm, MN or the surrounding areas.

 

The U.S. bankruptcy code offers relief for the debtor and, sometimes, provides a return of some payment to creditors in two general ways: liquidation and discharge or reorganization and repayment. Chapter 13 and Chapter 11 were developed for individual and business debtors respectively to offer a restructuring of debts into a repayment plan that fits the filer’s income. Creditors are repaid but under different repayment terms that are more beneficial to the bankruptcy filer.

 

Chapter 7 bankruptcy, on the other hand, is reserved for filers who don’t have disposable income every month – surplus income after necessary living expenses are paid – and wouldn’t be able to work through a chapter 13 repayment plan.  Chapter 7 bankruptcy is also intended for those whose household incomes are below the state median income for a household of their size. Instead, Chapter 7 bankruptcy provides debt discharge by liquidating the filer’s non-exempt assets and providing that value to creditors. Filers will no longer be legally, contractually responsible in any way for a debt once it’s officially discharged by the court.  In the vast majority of chapter 7 bankruptcy cases, however, people are able to retain all of their property and all they lose are their debts.

 

When does discharge happen?

Discharge happens at the end of your Chapter 7 bankruptcy case, but only after you’ve met court requirements including:

 

  1. filing all the necessary paperwork and schedules with your bankruptcy petition
  2. given the court a correct and accurate documentation detailing your finances
  3. paid the bankruptcy court filing fee
  4. attended the meeting of creditors with the trustee
  5. attended court-approved credit counseling and financial management courses

 

When you’ve met these requirements, the court will issue an order of discharge. While this order discharges your legal responsibility to pay your debts, the issuance of the discharge order doesn’t always mean that your case will be closed right away.  Sometimes, a bankruptcy case must remain open to allow the bankruptcy trustee to sell non-exempt assets (assets that you can’t retain) and disburse the resulting sale proceeds among your creditors. Additionally, in the event an adversary proceeding was filed, your case will remain open until the adversary proceeding has concluded.

 

The discharge order discharging your debts will be issued by the bankruptcy court about three to four months after your bankruptcy case is filed. The discharge order won’t list each debt that is discharged, but instead provides general information about the debts that are discharged and the debts that you may still have to pay, such as tax debts, child support debts, debts related to alimony, some student loans, etc.

 

Keep in mind that the court can revoke or deny a discharge if you are untruthful or did not correctly file your paperwork. To get the most out of your debt discharge and file a successful and accurate case for Chapter 7 bankruptcy in New Ulm, MN, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.