Long-term Credit Repair after Bankruptcy in Fairmont, MN

If you’ve been thinking about credit repair and resolving your debts with a bankruptcy case, you might be aware of the potential damage it could do to your credit. While it’s true that a bankruptcy case will likely lower your credit score and temporarily prevent you from qualifying for mortgages and some other loans for a few years after your case is completed, those things are far out-weighed by the benefits of filing.

Credit Repair

Despite the immediate impact on your credit score, the effects of a bankruptcy case will be a steady process of credit repair, budget simplification and long-term financial stability/rehabilitation. Behm Law Group Ltd. attorneys work with clients filing for Chapter 7, 13, or 12 bankruptcy from start to finish. With our professional guidance, you can find permanent debt relief through bankruptcy and begin your own process of credit repair and financial rehabilitation in Fairmont, MN, and the surrounding areas.

While a bankruptcy case will definitely have an impact on your credit score, the extent of that effect varies greatly. How much your score might drop almost entirely depends on the condition of your credit before filing.

Impacts on Credit

  1. Good–Excellent (690–850): If your score is in the good-excellent range, you’ll take the biggest hit when you file for bankruptcy. Most scores will drop into the fair–bad range, typically by around 200 points.
  2. Fair (630–689): Even with a fair credit score, you’ll probably still take a hit. Those with a fair score will drop into the bad range, but usually not by more than 150 points.
  3. Bad (300–629): Those with bad credit will see the smallest change in credit points after filing for bankruptcy. If your score is very poor, it might not drop at all with the filing of your case, and if it’s on the higher end of the range, you’ll likely see small changes, usually by under 100 points.

The other aspect of a bankruptcy case that will determine how much your credit score drops is the type of chapter you file. Chapter 7 liquidation bankruptcy will generally cause greater drops in credit because it may “look worse” to lenders. This is because your creditors in a Chapter 7 bankruptcy case almost always receive far less than what they’re owed.  In most Chapter 7 cases, most creditors receive nothing.

Chapter 13 bankruptcy, on the other hand, can result in the full repayment, under adjusted terms, of secured debts and the partial repayment of unsecured debts. Through your repayment plan, most creditors are repaid at least some of what they’re owed, making it “look better” to potential lenders. Consequently, a Chapter 13 case may have a lower impact on your credit.

Even considering these details, bankruptcy is still a highly effective option for credit repair and financial rehabilitation for many filers. Bankruptcy permanently relieves debts and opens the door for filers to begin comprehensive work to repair their credit and stabilize their finances.

To learn more about bankruptcy and credit repair in Fairmont, MN, contact Behm Law Group Ltd. by calling (507) 387-7200 or emailing stephen@mankatobankruptcy.com.

Planning Your Case and Getting Bankruptcy Assistance in Redwood Falls, MN

If you are facing debt you know you won’t be able to repay, filing for bankruptcy could be the most effective option for permanently resolving your financial issues. While filing for bankruptcy might seem scary, it’s actually a government-administered process that provides long-term, effective debt relief for thousands of households and businesses each year. There are several types of bankruptcy that handle debt in different ways. Chapter 7 liquidation bankruptcy is the most common format for an individual consumer case. In this process, the filer’s non-exempt assets are liquidated in exchange for the discharge of several kinds of secured and unsecured debts. For filers who don’t qualify for liquidation bankruptcy because their debt-to-income ratio is too high, Chapter 13 reorganization bankruptcy is another option for debt resolution. This process restructures debts into a three- to five-year repayment plan suited to the filer’s income. The adjusted payment terms are much more favorable than outside of bankruptcy.  No matter what kind of chapter you file, Behm Law Group, Ltd. can provide legal guidance and complete bankruptcy assistance in Redwood Falls, MN and the surrounding areas.

Behm attorneys can help you determine if bankruptcy will be the best choice for resolving your financial situation. If it’s the best course of action, we can help you start the planning process for your petition with expert bankruptcy assistance.

Before you file your petition, keep in mind several financial practices you can implement to get the most out of your case and to protect yourself from the consequences of fraud:

Financial Practices

  • Upcoming bills: Depending on the case details, bankruptcy will most likely eliminate any utility debts.  However, any utility debt you incur after your bankruptcy case is filed will be considered “new debt” that will not be included for discharge in the bankruptcy process. This is also true with several other debts including medical and credit card debt.
  • Fund transfers: When you file for bankruptcy, your financial transactions will be examined by your bankruptcy attorney and by the trustee assigned to administer your bankruptcy case. All your income, debts, assets, and accounts are examined, particularly your financial transactions for the six months prior to your bankruptcy filing.  Before you file your petition, avoid any unnecessary transfers between credit cards. That is, do not pay off one credit card with another credit card that may have a slightly lower interest rate.  If you engage in such a transaction, make sure that it’s reported in your petition. Also, transfers of any assets to other people can appear as fraudulent conduct if it seems like you’re moving assets to prevent the trustee from possibly liquidating them.
  • Reasonable spending: Other actions that may look like attempts at bankruptcy fraud are certain spending patterns. If you charge excessively on a credit card right before filing a petition, such as taking a trip to Europe, it might look like you’re abusing the bankruptcy process to purposefully have that debt discharged. The same is true for purchasing luxury items and engaging in any other extravagant spending. Instead, be as frugal as you can while still trying to meet your living expenses.

Bankruptcy Assistance

To learn more about planning before filing your petition and getting the permanent bankruptcy assistance in Redwood Falls, MN you need, please contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.

Is Debt Consolidation an Effective Option for Debt Work-Out in St. Peter, MN?

In the U.S., there are several ways that individuals can resolve debts. Debt settlement through a third-party program is often aggressively advertised as the “best” way to work out debts, but that route comes with many caveats, including significant additional fees. Other debt work-out systems include debt management plans through a credit counselor, debt consolidation, and, of course, bankruptcy. While a bankruptcy case might not be the right choice for resolving everyone’s debts, making the decision to file a petition can be one of the most effective, fastest, and longest-lasting ways to find debt relief. If you’re looking for the best kind of debt work-out in St. Peter, MN and the local regions, Behm Law Group, Ltd. can help. Our attorneys will work with you to determine if bankruptcy will be an effective option and which type of bankruptcy chapter to file. We provide guidance, support, and legal protection for all our clients from the start of their cases to the end.

Debt Work-Out

Debt work-out systems outside of bankruptcy have their uses, but they’re also heavily restricted in the debts they address, the individuals that qualify, and the debt amounts that are resolved. For example, when it comes to debt consolidation, debtors can only qualify if they meet rather strict credit score requirements.

How Consolidation Works

Debt consolidation processes take your debts and combine them into a single account. That account is then paid off slowly with your own monthly payments, or you may have the option to receive a consolidation loan. A consolidation loan is provided through a bank, credit union, or online lender. Those loans usually range between $1,000 and $100,000 and carry interest rates as high as 36%. That loan amount is used to repay your consolidated debts, and you begin to payoff that lender in single monthly payments. The amount of your consolidation loan depends on your credit. If your credit is too low, you may not be eligible for a consolidation loan at all.

Consolidation Problems

Using consolidation for debt work-out is usually only a good option for people with high credit (usually 650 or better) and specific debts (like credit card debts, mortgages, and medical bills). Debt consolidation systems are very complicated. They frequently incorporate nuanced methods of debt treatment like balance transfer cards, conversion of unsecured debts to secured debts, and other “loop-hole” processes. These methods can carry significant hidden fees and often have unexplained and unintended consequences. In addition to using complex systems with inaccessible fine print, debt consolidation programs will impact your credit in varying ways depending on the amount of debt owed, credit history, and the various types of your credit accounts.  In addition, debt consolidation programs are often funded and sponsored by various credit card companies.  Credit card companies don’t want you to file for bankruptcy relief and they often want to squeeze as much money as possible from you through debt consolidation programs.

Overall, debt consolidation is a tricky process that might leave you with more fees and headaches than the filing of a bankruptcy petition.

To learn more about using bankruptcy for debt work-out in St. Peter, MN and why it might be better than debt consolidation, please contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.

Debt Relief in Jackson, MN Through Bankruptcy While Unemployed

Due to the pandemic, the past year has been difficult for many people. During the first shutdowns in the U.S. for the spring of 2020, the unemployment rate spiked from just above 4% to a staggering 15%. Over the following year, that number slowly decreased to around 6%. While that’s much better than 15%, things are still not back to normal. If you’re among that 6% of unemployed people, you might be finding it increasingly difficult to make debt payments on time. For those struggling financially, Behm Law Group, Ltd. can provide legal advice and guidance to file for bankruptcy and permanent debt relief in Jackson, MN. Even for unemployed individuals, bankruptcy can still be a viable option for debt resolution.

The bankruptcy code does not require bankruptcy filers to be employed, even for cases that are typically considered “wage earner” bankruptcy, like Chapter 13 reorganization. However, both your past and present income will affect your eligibility for certain chapters, and there are fees involved in bankruptcy that still need to be paid even though you’re only source of income is unemployment income.

That said, it’s still completely possible for unemployed individuals to find long-term debt relief through bankruptcy. In fact, many Chapter 7 filers are unemployed or are only employed part-time.

How Unemployment Affects Bankruptcy

The main aspect of unemployment and employment that affects bankruptcy is the question of income. To qualify for Chapter 7 bankruptcy, your debt-to-income ratio needs to be lower than the state median or average income of a similarly sized household. This ratio is determined through the Means Test, which examines your income from the past six months. That means if you recently became unemployed, you might not satisfy or pass the means test and be eligible for Chapter 7, even if your income has taken a nosedive.   However, even if you don’t pass the means test you might still be able to file for Chapter 7 bankruptcy relief if your recent job loss and loss of income is sufficiently explained in your bankruptcy paperwork.

If you don’t qualify for Chapter 7 with unemployment income, you can potentially file for Chapter 13 bankruptcy relief instead. Like with Chapter 7, much in Chapter 13 bankruptcy is dependent on your income. If you’ve been unemployed for a while, your Chapter 13 plan payments may be as low as $100.00 initially.  If you get another job and your income increases, your chapter 13 plan payments could increase.

Eligibility for either chapter all depends on the length of your unemployment relative to the past six months of your income.

Affording Bankruptcy While Unemployed

Bankruptcy court filing fees and the costs of an attorney might make it seem difficult to afford to file for bankruptcy on unemployment income. For those who can’t meet those costs, remember you can always apply to have some court filing fees waived, and there are many attorneys who offer sliding-scale prices for clients who are struggling financially.

Debt Relief

To learn more about finding permanent debt relief in Jackson, MN while unemployed, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.

How Debt Settlement in Mankato, MN Works

Anyone who has faced difficulties with their finances or finds they have debts they can’t repay understands the stress and complications of that situation. The wish to resolve those issues as quickly and as effectively as possible is a natural reaction to preserve one’s quality of life. There are several options for finding debt relief available to individuals and businesses alike. While each debt resolution method has its pros and cons, some are more effective than others. Overall, bankruptcy is the fastest, most cost-effective, and the only permanent way to finding debt relief. Behm Law Group, Ltd. can help you file a strong bankruptcy case for long-term relief and financial stability. In particular, we want those in debt to understand how programs for debt settlement in Mankato, MN and the surrounding areas work and why they might not be beneficial.

Debt Settlement Process

Debt relief/debt adjustment/debt settlement programs are third-party negotiators who supposedly work with your creditors to resolve a debt for a lower amount than what you actually owe. In such programs, you’re typically required to pay the settled amount in a lump sum payment right away. Other arrangements may provide for the monthly payment of lower amounts over a number of years.

The settlement party is paid with a flat fee or on a percentage of your overall debt that they resolve. They are also sometimes paid with a percentage of the settlement amount that you pay. This means that even though you’re receiving some form of debt relief, significant additional fees can be involved to pay the debt settlement company in addition to the creditors.

While the settlement is negotiated, you’ll start to make monthly payments to the third-party program.  The settlement company will place those funds in an account. When a settlement is finalized, the creditor is paid a lump sum out of the account.

Problems With Debt Settlement Companies

The main problem with working through a third-party settlement program is the significant additional costs that are involved. The fees paid to the debt settlement company average from 15% to 35% of the original or negotiated debt. These fees are usually first paid in full before any work is done for you.  This can add up quickly, and the amount of the settlement fees is always much higher than the cost of a bankruptcy attorney and bankruptcy court filing fees.

Another major issue is that settlement providers may require you to stop making payments to creditors while a debt is negotiated. This causes your credit standing to drop with each missed payment.

Settlement programs also take four to six years to resolve a debt negotiation (versus the three to four months of a liquidation bankruptcy case), and programs only handle specific debts. Bankruptcy addresses a much broader range of debts.

Another major problem is that you are taxed on any debts that are settled for you by the debt settlement company.  For instance, if you owe Discover Card $10,000.00 and the debt settlement company settles the debt for $3,000.00, the $7,000.00 that is not paid is taxed against you as ordinary income.

Another significant negative is that a creditor with whom a debt settlement company settles a debt will sell the portion of the debt that was not paid to a third-party debt purchaser.  Thus, the term “settlement” lavishly employed by debt settlement companies is a half-truth at best and an outright lie at worst.  For instance, if you owe Discover Card $10,000.00 and the debt settlement company “settles” the debt for $3,000.00, Discover Card will sell the remaining $7,000.00 to a third-party debt purchaser for 10% to 20%.  The third-party debt purchaser will then start collection activities against you for the remaining $7,000.00.

To learn more about the benefits of bankruptcy and the problems with debt settlement in Mankato, MN, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.