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How Chapter 20 Happens with Bankruptcy Code in Redwood Falls, MN

The two main types of individual consumer bankruptcy are Chapters 7 and 13. Chapter 7 is a liquidation process that liquidates your non-exempt assets in exchange for the discharge of your debts. You are allowed to claim exemptions to protect certain properties, such as your home and car and other property.  In fact, in most chapter 7 cases, people only lose their debts and they don’t lose any property.  Chapter 13 is a reorganization bankruptcy that restructures your debts into a manageable repayment plan suited to your monthly income and your reasonable and necessary living expenses which lasts three to five years. Your unsecured debts, like credit card bills and medical expenses, will be discharged 0-100%, but your secured debt could be included in your chapter 13 plan for payment under adjusted terms that are more favorable to you. At Behm Law Group Ltd., our attorneys help you navigate the process of filing for Chapter 7 or 13 bankruptcy. Another filing that can occur is informally referred to as Chapter 20 bankruptcy. Let’s talk about what this actually means for the bankruptcy code in Redwood Falls, MN.  To be clear, Chapter 20 is not a separate and distinct chapter of the bankruptcy code like Chapter 7 and Chapter 13.  Rather the informal term “Chapter 20” simply refers to a situation where a person first files for Chapter 7 bankruptcy relief and then files for Chapter 13 bankruptcy relief after the Chapter 7 bankruptcy case has ended.

Bankruptcy Code

Chapter 7 bankruptcy has strict eligibility requirements that were written into the U.S. bankruptcy code through the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). In addition to several other changes, the BAPCPA established the Means Test requirement, which measures your debt-to-income ratio.

To qualify for Chapter 7, your household income needs to be at or lower than the state median or average income for a similar sized household. If your income is higher than that median, there may be a basis for you to still file for Chapter 7 but it is more likely that you would have to file for Chapter 13 bankruptcy relief instead.

Chapter 20 bankruptcy happens when individuals file for Chapter 7, discharge all their unsecured debts, like credit cards, medical debts, etc., end their case, and then immediately file for Chapter 13 bankruptcy to cure or pay back a delinquency on the mortgage for their house.   The Chapter 20 bankruptcy can have several benefits, but sometimes the bankruptcy court will not approve these cases if it determines that people are using them to game or take advantage of the bankruptcy system.

Benefits of Chapter 20 Bankruptcy

Chapter 20 can help you work through the repayment of priority debts, such as tax debts and child support debts, that were not discharged in your chapter 7 bankruptcy case.  So, presume that you had $20,000 of tax debt that was not discharged in your chapter 7 bankruptcy case.  After your chapter 7 case ended, you could file a chapter 13 case and pay that tax debt through a chapter 13 plan over 36 to 60 months.  The filing of a chapter 13 case after a chapter 7 case has concluded, can have benefits for your secured debts such as vehicle loans or mortgage debts.  For instance, presume that there is a vehicle loan of $10,000 and that there is an interest rate of 15%.  If you retained that debt by reaffirming it in your chapter 7 case, you could conceivably file a subsequent chapter 13 bankruptcy case and payoff the $10,000 at a lower interest rate over 36 to 60 months.  If you’ve filed for Chapter 7 relief to discharge unsecured debts before filing a chapter 13 bankruptcy, all your monthly payments in the chapter 13 case would be dedicated to paying only secured and priority debts.

The potential disadvantages of a Chapter 20 bankruptcy is that it could lead to accusations of bad faith and it does not allow you to use lien stripping to strip off wholly unsecured mortgages from your homestead.

To learn more about Chapter 20 as well as about the bankruptcy code in Redwood Falls, MN, contact Behm Law Group Ltd. by calling (507) 387-7200 or emailing stephen@mankatobankruptcy.com.

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Bankruptcy vs. Forbearance: Mortgage and Debt Work-Out in St. Peter, MN

After the COVID-19 shutdowns and the peak of the pandemic, many individuals and small businesses faced financial difficulties. If you have debts you know you can’t repay, you’re not alone. There are many ways to work out that debt, from settlement to bankruptcy. For households with high unsecured debts, like credit card bills and medical expenses, in addition to common secured debts, like a mortgage and car loan, filing for bankruptcy will most likely be the best solution for long-term debt relief and financial stability. If you’re considering filing for bankruptcy for debt work-out in St. Peter, MN and the surrounding areas, Behm Law Group, Ltd. offers legal protection, guidance, and support throughout your case.

Debt Relief

We provide legal services for individual consumer cases through Chapter 7, 12, and 13, as well as small business Chapter 7 and Chapter 13 cases. Filing for bankruptcy can help resolve multiple debts, including your mortgage. About 45% of consumers in the U.S. have mortgage debt. Mortgages, along with credit card debt and student loans, are one of the most common types of debt included in bankruptcy.

Debt Work-out

If you use bankruptcy for debt work-out, your mortgage and home could be handled one of three ways:

  1. Any pre-bankruptcy filing delinquency you have on your mortgage could be included in the reorganization of your debts into a three- to five-year repayment plan through Chapter 13. You will keep your home and end up repaying your reorganized mortgage in full after the repayment plan ends.
  2. If you want, your mortgage debt may be discharged and the mortgage lender could foreclose on your home in a Chapter 7 bankruptcy. After your case concludes, you may have to eventually vacate the home, but you will no longer be responsible for the mortgage debt.
  3. Your mortgage may be retained in Chapter 7 and you can keep your home from the chapter 7 trustee and from liquidation by protecting the equity (value that exceeds the amount of debt you owe) you have in the home with the Homestead Exemption. In Minnesota, this exemption applies to homes with equity or net value of $420,000 or less for houses in urban areas and $1,050,000 less for homesteads used primarily for agricultural purposes.  You could sell your house, payoff the underlying mortgages and retain any remaining sale proceeds.  This is somewhat common in Chapter 7 cases.

Forbearance

If the only debt you can’t meet monthly payments for is your mortgage, you might want to consider a forbearance (example) with your mortgage lender rather than a bankruptcy. A forbearance allows you to pause payments or make lower payments temporarily. This can be beneficial for a short time and prevents foreclosure, but you will still have to pay property taxes, make up the additional amounts later, pay a forbearance fee, and the interest amounts due may increase.

If you have debts in addition to your mortgage, filing for bankruptcy will resolve them together. To learn more about bankruptcy debt work-out in St. Peter, MN, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.

 

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Reaffirmation Agreements and Chapter 7 Bankruptcy in Jackson, MN for Individuals

At Behm Law Group, Ltd., we’ve worked with clients in all kinds of situations filing for Chapter 7, 12, and 13 bankruptcies. The process of Chapter 7 is called “liquidation bankruptcy”.  Essentially, people who file for chapter 7 bankruptcy relief have their non-exempt properties sold and the value is distributed to their creditors. The debts tied to or secured by vehicles and houses and other assets are discharged.  However, in such cases, the properties tied to or secured by those debts are generally not retained by the person filing for bankruptcy relief.   Unsecured debts (credit card debt and medical bills, for example) are also discharged. Filers can also use bankruptcy exemptions to protect the properties they want to keep from liquidation. If you are considering filing for Chapter 7 bankruptcy in Jackson, MN or the surrounding areas, Behm attorneys can protect and guide you throughout the process.

Chapter 7 Bankruptcy

In addition to its impact on the filer’s credit, one of the main reasons people balk at filing a bankruptcy case to resolve their debt is the fear of losing property. The truth is that most filers lose very little property if they qualify for a Chapter 7 bankruptcy in the first place.  Losing property in chapter 7 bankruptcy is generally not something that happens in every case.  In fact, in most cases, all people lose are their debts.  The bankruptcy exemptions that people can claim to protect their important assets such as homes, cars, appliances, and tools of their trade, and other things are quite generous.

Exemptions

It is important to note, however, that bankruptcy exemptions only protect equity that someone has in an asset or property.  Bankruptcy exemptions do not eliminate secured mortgages or validly perfected vehicle liens.  There may be an asset that you have that is secured by or subject to a mortgage or lien that you want to continue working with the creditor to retain.  You may have equity or value in that asset that exceeds the debt against it.  In chapter 7 bankruptcy, people retain such debts by signing a reaffirmation agreement.  A reaffirmation agreement is a legal document that you and the subject creditor sign that recites and memorializes the terms and conditions of the original mortgage loan or vehicle loan that you negotiated with the subject creditor.  It is entirely voluntary on your part and on the creditor’s part.  No one can force you to do a reaffirmation agreement.

Presume, for instance, that you own a house that is worth $300,000.  Presume further that you owe your mortgage lender $200,000 and that you, therefore, have $100,000 worth of equity or value in the house.  You would protect the $100,000 equity or value with your homestead exemption.   The exemption you claim, however, does not make the $200,000 mortgage go away.  If you want to retain the house and the $100,000 equity or value that you have in the house, you must still pay the underlying mortgage.  To do this, you and your attorney would sign a reaffirmation agreement concerning the $200,000 mortgage with the subject creditor.  After your bankruptcy concluded, that mortgage debt would survive and your relationship with the creditor would essentially be the same as it was before you filed bankruptcy.  As long as you made your mortgage payments after the conclusion of your case, the creditor would continue sending you monthly billing statements and it would continue allowing you online account privileges.  The creditor also would continue reporting your timely mortgage payments to the three big credit reporting agencies:  Equifax, Experian and Transunion.  This would help rehabilitate and restore your credit profile.

 Court Approval

Once you’ve negotiated the reaffirmation with your creditor, the bankruptcy court must approve it.  To approve a reaffirmation agreement the court looks at various factors such as whether the terms are fair to all involved parties. The court also looks at the value of your property, your income, changes to your expenses, the monthly debt payment requirement, your on-time payment history, and whether you’re current with your mortgage payments. In most cases, the bankruptcy court will approve a reaffirmation agreement unless the terms are obviously unfair to one of the parties involved.

While most reaffirmation agreements are approved by the bankruptcy court the reaffirmation process is not routine and it can become complicated, both during creditor negotiations and with respect to the review by the court. It is essential that you have an experienced lawyer assist you with a reaffirmation agreement in your Chapter 7 bankruptcy in Jackson, MN or the neighboring regions. Contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com to get started with expert guidance in your case.

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Review of the Recent Changes to the Bankruptcy Code in New Ulm, MN

In the past few years, a lot has changed for bankruptcy law. Even before the coronavirus pandemic rocked the world, Congress had put some significant changes in bankruptcy law into effect. In response to COVID-19, more changes had to be quickly put into place. Since the worst of the pandemic is hopefully behind us, there may be even more interesting additions and adjustments to how the bankruptcy code in New Ulm, MN and the rest of the country is handled. For those considering filing a petition now, Behm Law Group, Ltd. attorneys can guide and protect you from start to finish in a Chapter 7, 13, or 12 case. We work primarily with individuals filing for liquidation or reorganization bankruptcy, but we’ve also helped small businesses file for liquidation and reorganization bankruptcy in the local region. There are many benefits to hiring a bankruptcy lawyer to work on your case, including the prevention of dismissals, potential audits, appeals, delays, statutes of limitations, creditor violations, judgments, navigating the ever-changing bankruptcy laws, and much more.

Bankruptcy Code

Since 2019, there have been some significant adjustments to the bankruptcy code. Some were put into place to improve our system, while others were in direct response to the COVID-19 pandemic and the subsequent lockdowns. The two most significant changes that have been enacted include:

SBRA

  1. SBRA in 2019: The Small Business Reorganization Act was signed into law in February of 2019. This law lowered the debt amount required to file Chapter 11 business reorganization bankruptcy. Unless a small business is owned as a sole proprietorship or partnership, Chapter 11 is the only option for bankruptcy reorganization. By lowering the debt requirements, many smaller businesses could reorganize instead of having to possibly shut down by having to file a Chapter 7 liquidation bankruptcy. This law created a subchapter of Chapter 11 allowing businesses with under $2,725,625 in debt to file a faster and easier reorganization case.

CARES

  1. CARES in 2020: In response to the economic shutdown of coronavirus, the Coronavirus Aid, Relief, and Economic Security Act was enacted in March of 2020. With regard to the bankruptcy code, the CARES Act expanded the faster and easier subchapter of the SBRA Chapter 11 bankruptcy debt limit to $7,500,000 for one year (this expired in March of 2021). It also allowed some Chapter 13 repayment plans to extend up to 7 years (rather than the usual 3-5 years). All stimulus income from the other provisions of the CARES Act is exempt from bankruptcy liquidation.

In addition to the changes made when these laws were put into place, there are potential adjustments in the code that have been introduced and others that might be on the horizon. For example, the Student Borrower Bankruptcy Relief Act (SBBRA) might allow student loans to be discharged more easily in bankruptcy. Changes to Chapter 12 bankruptcy might be coming too.

To learn more about changes to the bankruptcy code in New Ulm, MN contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.

 

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Debt Work-Out in Worthington, MN: Bankruptcy is Not a Last Resort

A recent 2021 study revealed that American household debts reached $14.6 trillion. With over 80% of the country holding debt of some kind, you might feel less alone if you hold debt of your own. This doesn’t make dealing with the stress of debt any easier, though. While money can’t buy happiness, it’s undeniable that financial stability relieves a household from significant stress. For thousands of U.S. citizens annually, bankruptcy is a source of permanent debt relief from many kinds of creditors. Despite this, bankruptcy is still often regarded as a last-resort option. In reality, bankruptcy is an effective tool that’s unjustly stigmatized because of perceived social implications and its impact on filers’ credit. At Behm Law Group, Ltd., we’ve worked with clients in all different kinds of financial circumstances using bankruptcy as a permanent debt work-out in Worthington, MN and the surrounding area.

Debt Work-Out

The best way to use bankruptcy as a debt work-out tool is to stop looking at it as a last-resort option. Viewing bankruptcy as a last hope prevents you from seeing how much the benefits of filing outweigh the impact that it could have on your credit score. While it’s true that your credit will be affected and you likely won’t qualify for certain loans for a period of time after your case is concluded, bankruptcy has many other benefits and it resolves debt quickly and permanently.  To most creditors, a bankruptcy represents a point in time.  Before the filing date, one’s financial life is chaotic and disorganized.  After a bankruptcy has concluded, one’s financial life is much more stable, better organized and simplified.  After a bankruptcy has concluded, you are a very attractive credit risk to creditors irrespective of the fact that a bankruptcy filing is on your credit profile.  Creditors know that your financial circumstances are simplified and they know that they won’t have to compete with so many other creditors to get paid.  They also know that you won’t be able to file bankruptcy again for many years.  They figure that if you don’t pay them they will have a very long time to garnish your wages or levy on your bank accounts and there won’t be a thing that you will be able to do about it.

Bankruptcy

There are three main reasons why viewing bankruptcy as a last resort might do more harm than good:

  1. Bankruptcy is often a better debt resolution system than other options. Because bankruptcy is stigmatized socially and creditors sometimes want their borrowers to avoid the process so they won’t lose money, other debt relief alternatives are pushed more frequently. Debt resolution options like settlement, consolidation, adjustment, and relief programs market themselves as a way to avoid bankruptcy and fix your debt. However, people always end up spending more money and more time with such programs and they almost never get their debts permanently resolved.  Even with attorney fees, bankruptcy is always cheaper and faster than other non-bankruptcy options.
  2. You could lose years of income. With high interest rates, credit cards and other loans can suck away years of your income while you spend time repaying a debt. If you’re not able to pay off or materially reduce a debt in a timely fashion, the odds are that you will never fully repay that debt. Using bankruptcy sooner to discharge unsecured loans like credit cards and medical bills will save you significant time, money, and stress.
  3. Bankruptcy is almost always not the filer’s fault. Bad things happen to good people. Bankruptcy is a way to permanently resolve those bad things. Most filers had debts that were out of their control. This often includes unexpected medical expenses, divorce, job loss, car accidents, and other unfortunate life events.

If you stop seeing bankruptcy as a last resort option, you can see how it will benefit you to use it as a debt work-out in Worthington, MN. For more information about filing, contact us today at (507) 387-7200 or stephen@mankatobankruptcy.com.

 

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Why You Should Rely on a Bankruptcy Lawyer in Mankato, MN for a Skeletal or Emergency Bankruptcy

If you’re facing debt you know you can’t repay and it’s so severe it significantly damages your standard of living, you might find permanent relief with a bankruptcy filing. When you file for any type of individual consumer bankruptcy, your creditors will have the automatic stay preventing them from collecting on your debts.  For the time that your bankruptcy case is pending, the automatic stay is maintained. This means that bankruptcy can be one of the most effective ways to prevent foreclosures, utility shut-offs, wage garnishments, evictions, and other consequences of having delinquent debts. For individual consumer bankruptcy, the timeline can be as short as a few months or as long as five years. It all depends on what chapter you file for and your own financial situation. With the help of a Behm Law Group, Ltd. bankruptcy lawyer in Mankato, MN and the surrounding areas, you can build a strong case for your bankruptcy and find long-term debt relief.

Stop Creditor Collection

If you’re in a situation where you need to stop creditor collection or foreclosure activities immediately and you can’t wait through the typical time it takes to prepare a complete bankruptcy petition, you can file something called a “skeletal” or emergency bankruptcy. This kind of filing goes through the online court system just like a normal bankruptcy filing and it often only takes a few minutes. An online skeletal petition will immediately prevent your creditors from taking further collection actions because the automatic stay injunctive mandates of 11 U.S.C. § 362 will be immediately imposed against them.

Emergency Bankruptcy

A skeletal or emergency bankruptcy petition is not a different kind of bankruptcy.  Rather it is only the very first part of the bankruptcy pleadings you must file and it is incomplete.    A skeletal or emergency bankruptcy petition consists of the basic bankruptcy petition (which includes personal identity information, the chapter you’re filing, and general information), the names, addresses, and contact information for all your creditors, a certificate of your completion of credit counseling, and your B121 form.  A skeletal bankruptcy will also require payment of the bankruptcy fee or the request of a waiver.

Time Limits

After your skeletal or emergency petition is filed, the bankruptcy court will issue an order giving you fourteen (14) days to file the remaining fifty-plus pages of your bankruptcy petition paperwork.  If the remaining paperwork is not filed within fourteen (14) days, your bankruptcy case will be dismissed.  The automatic stay will also be terminated and your creditors will be able to resume collection activities against you.  However, the bankruptcy court will grant an extension of the fourteen (14) day period upon your timely request.

Bankruptcy Lawyer

Filing any case without the help of a bankruptcy lawyer can be difficult due to the nuances and complexities of the bankruptcy code and the rigorous paperwork requirements. Because the process of filing a skeletal or emergency bankruptcy is subject to strict timelines, it can be even more challenging to file without professional assistance.

When you work with a Behm Law Group, Ltd. bankruptcy lawyer in Mankato, MN and the neighboring areas for your skeletal/emergency or regular case, you can count on our guidance and protection to take you from start to finish of your bankruptcy. Contact us today at (507) 387-7200 or stephen@mankatobankruptcy.com to learn more.