Picking the Best Time to File a Chapter 7 Liquidation Bankruptcy in Jackson, MN

There are several ways in our economic system to find permanent relief from debts that are significantly compromising your quality of life. These solutions range from working out an agreement with your creditors to filing for court-administered bankruptcy relief. If you have the right kinds of debt and your income isn’t meeting your expenses, bankruptcy might be the most effective and fastest way to permanently rid yourself of several burdensome financial obligations that you will never be able to repay. For anyone considering filing a liquidation Chapter 7 bankruptcy in Jackson, MN or the surrounding areas, Behm Law Group, Ltd. can help. Our attorneys will work with you every step of the way, from the filing of your petition to the issuance of your discharge order by the bankruptcy court.

Liquidation Bankruptcy

Liquidation bankruptcy is also known as Chapter 7 bankruptcy. This chapter works to discharge your debts in exchange for the sale, or liquidation, of your non-exempt assets. However, it is rare that you lose property in a Chapter 7 case because most filers are able to protect important belongings like their home, primary vehicle, appliances, and furniture, from liquidation by asserting the available bankruptcy exemptions. Each state offers a different selection of exemptions in varying amounts. In Minnesota, filers can choose between federal exemptions propounded under the bankruptcy code or exemptions propounded under Minnesota state law.  They cannot mix and match between the two.

Learn more about qualifying for Chapter 7.

Generally speaking, if some or all of the following are true, it’s a good time for you to file for bankruptcy relief:

  • Your dischargeable debt is $10,000 or more
  • Your credit score is 600 or below
  • Your property doesn’t have much value
  • Your house is about to be foreclosed on
  • Creditors are threatening wage garnishment, or threatening a levy on your bank accounts or threatening starting a lawsuit against you
  • You would pass the Means Test with your income-to-debt ratio
  • You wouldn’t be able to make your monthly debt payments and materially reduce your debt within the next year
  • Your vehicle is about to be repossessed
  • Your electricity is about to be shut off

Liquidation in Chapter 7 Bankruptcy

While a Chapter 7 case might be highly beneficial for finding debt relief, if these conditions describe your situation, there might be circumstances that make it best to wait to file your case. If the following is true, you may want to hold off on filing a case for the time being:

  • Your income recently increased. The court will examine your last six (6) months of employment and income.  If your income is high, you may not qualify for chapter 7 bankruptcy relief.  However, if you have had high income and you were recently laid off, you may be able to qualify for chapter 7 bankruptcy relief by simply waiting a few months.  If you have low income during most of the six (6) month look-back period, you will be more likely to qualify for chapter 7 bankruptcy relief.
  • You can’t protect assets with the bankruptcy exemptions.  Depending on the exemption format you need to use, there may not be an exemption for an asset that you have.   For instance, presume you recently received either an inheritance of $10,000.00 or a tax refund of $10,000.00 and you need to use the Minnesota state exemptions.  Generally, one is not able to fully protect such assets with the Minnesota state exemptions.  Sometimes, it is necessary for you to spend down such assets on food, furniture, vehicle repairs, home repairs, medical costs or other necessities before you file for Chapter 7 bankruptcy relief. In such a case, you absolutely need to keep receipts for how you deploy or use the money.  The trustee administering your bankruptcy case will ask you about how you used the money and you will want to have supporting documentation.   You must not repay debts to friends or relatives or buy things for friends or relatives or transfer assets out of your name.
  • You predict you’ll have more debt in the near future. If you know you’ll have to take out another pay day loan or incur more utility debt or have significant medical expenses that you won’t be able to pay in the near future, you may want to wait to file for Chapter 7 bankruptcy relief.  You can only qualify for Chapter 7 bankruptcy relief once every eight (8) years.  It would be counter-productive for you to file for bankruptcy relief and discharge the debts you presently have and then, after your case concluded, incur new debts and be burdened with those debts for a full eight (8) years until you are able to qualify for Chapter 7 bankruptcy relief again.


If you’re wondering when the best time would be to file for liquidation Chapter 7 bankruptcy in Jackson, MN, Behm Law Group, Ltd. can help you prepare. Contact us today at (507) 387-7200 or stephen@mankatobankruptcy.com.