Avoiding Dismissal With Prejudice With the Help of a Bankruptcy Attorney in Fairmont, MN

In the wonderful world of the freedom of the United States of America, it’s always optional to take advantage of the help that a trained and experienced lawyer can provide. Since the Gideon v. Wainwright case in 1963, the US courts will appoint a publicly funded attorney in criminal cases to defendants who can’t afford their own. That being said, any person in any type of US legal case can also choose to represent oneself in court.

However, just because one can, doesn’t necessarily mean that one should. Criminal cases aside, there are countless opportunities for those attempting to represent themselves to make a legal a misstep. At Behm Law Group, Ltd., we emphasize the importance of taking advantage of the legal support and counsel that an experienced bankruptcy attorney in Fairmont, MN, can offer throughout your bankruptcy case.

Aside from the difficulty of managing your own bankruptcy petition while working through the day-to-day demands of your personal and financial life, the actual requirements of filing for bankruptcy from start to finish can be nuanced, exacting and rigorous. The help of a bankruptcy attorney can truly change the outcome of your case, whether you intend to liquidate in a Chapter 7 or reorganize in a Chapter 13. One of the dangers you may face if you choose to file without a bankruptcy attorney is the possibility of your case being dismissed with prejudice by the U.S. Bankruptcy Court.

There are several reasons your bankruptcy case may be dismissed with prejudice, and many of them involve fraudulent behaviors—intentional or unintentional.  “Dismissed with prejudice” means that you would be prohibited from filing for bankruptcy relief again for a certain period of time.

  1. Lying and being wrong: One of the most common reasons bankruptcy cases are dismissed with prejudice is that the court finds the filer has lied (or been inaccurate) about some information involving one’s debts or one’s overall financial situation. If you intend to file without a lawyer, you risk case dismissal with prejudice from certain inaccuracies on your bankruptcy forms and schedules, but this is easily avoided with the help of a bankruptcy attorney.
  2. Disobedience: In circumstances where a filer has appeared to willfully disobey a court order, one’s bankruptcy case can be dismissed with prejudice. This can include obstruction or hindrance of your creditors’ rights, which is a situation you may accidentally create.

A bankruptcy case is never black and white. The gray area involved in a case is best navigated with the help of a bankruptcy attorney. The implications of a dismissal with prejudice can affect your legal and personal life in extremely negative ways.

Taking advantage of the professional counsel and legal advice a lawyer can provide is critical if you’re considering filing for bankruptcy. For more information about our expert bankruptcy attorneys in Fairmont, MN, contact Behm Law Group, Ltd. at (507) 387-7200 today.

The Role of a Property Lien in Bankruptcy in St. Peter, MN

If you’re considering filing for bankruptcy, you should understand that you must not only fully disclose all property that you own either entirely or in which you have any partial ownership interest but also provide your attorney sufficient documentation substantiating any such ownership interests/claims.  You must provide your attorney with copies of all titles, deeds, real estate mortgages, life insurance policies, retirement account documentation, homeowner’s insurance policy information, vehicle loan promissory notes, financial statements, tax assessment statements, tax returns, copies of judgments and all other like documentation.  Generally an attorney will require you to provide your financial information for the past 3 years. This means you’ll have to provide all personal records along with your public records. Because gathering your financial information correctly can be difficult without experience and legal knowledge, the help of a bankruptcy attorney is essential. Behm Law Group, Ltd. offers professional legal support and counsel that can help you throughout the process of filing for bankruptcy in St. Peter, MN.

While you gather your personal records for your attorney to consider in relation to your case, you should also consult with the local court administrator’s office, court recorder’s office and county tax assessor’s office to examine any public records you may have against you. Records such as deeds, county tax assessor valuations for any real estate you own, judgment liens and title certificates for vehicles are public records.

Another example of a public record of your financial history is a property lien or mortgage lien.

What is a Property Lien?

Property liens are a matter of public record and they legitimize and provide notice of the claim your creditor has on your property to secure the money you owe to that creditor.  It is used by a creditor to provide public notice to other creditors that it has first secured standing on certain property you own.  In other words, it is announcing to all other creditors that it is first in line to collect its debt against the property.  For example, if there is a mortgage on your home regarding money you owe to a bank, the mortgage will be publicly listed in the county recorder’s office.  Any other bank who may want to lend you money will search the county recorder’s office and see the property lien to the first bank.  Any such bank will understand that it will not be able to utilize your house as collateral for any financing it extends to you to the detriment of the first bank.  If it does elect to extend financing to you and if it does want to use your house as collateral, the property lien to the first bank will provide the second bank notice that it will be second in line to the first bank if you default on your payments and it proceeds to initiate foreclosure proceedings against your house.  Liens work to protect a creditor’s claim on the property if you file for bankruptcy relief. A properly filed property lien is enforceable against any and all parties in a bankruptcy proceeding.

A bankruptcy filing does not extinguish the creditor’s property lien.  If you want to retain your house through a bankruptcy proceeding, you must continue to pay on any outstanding property liens against it.  Any equity or value above the amount of any property liens can be protected from your creditors, however.  For instance, if your house is worth $100,000 and you owe $20,000, you have $80,000 worth of value or equity.  You can protect the $80,000 equity/value against all of your creditors and against the bankruptcy trustee but you must still pay the underlying $20,000 to the bank that holds the property lien.  If you don’t pay the underlying $20,000 property lien, the bank that holds the property lien can still initiate foreclosure proceedings against your house.

With the help of a bankruptcy attorney you can easily access public records concerning your finances to determine if you have any property on which your creditors have claimed property liens. It’s important to be aware of any liens on your property, especially if you’re filing for Chapter 7 bankruptcy.

For more information about property liens and to learn how Behm Law Group, Ltd. can help you file for bankruptcy in St. Peter, MN, contact us at (507) 387-7200 today.

Changes to Your Proposed Plan in Chapter 13 Bankruptcy in Jackson, MN

In Chapter 7 bankruptcy, the Chapter 7 bankruptcy trustee and United States Trustee have more control and authority over the process.  In Chapter 13 bankruptcy, however, the journey can be much more complex and requires more time and effort from you. Because you play such a significant part in determining the results of your Chapter 13 case, working with a legal professional can guide your hand in a way that will give you a plan that you can benefit from as much as possible. Behm Law Group, Ltd. can provide you with expert legal counsel with the filing of a Chapter 13 bankruptcy petition in Jackson, MN.

One of the most important parts of your Chapter 13 case that you’ll play a part in deciding is your repayment plan. In the process of reorganizing your debts in a Chapter 13 repayment plan, you are required to propose a payment plan based on your income, your living expenses and the claims or debts/amounts you owe to your creditors.

Claims

Chapter 13 bankruptcy claims are essentially the amount of debt claimed to be owed by the debtor to the creditor. These claims can be made by a debtor and a creditor alike, and they are used to determine the amount to be repaid to each creditor during the repayment plan term. Debtors can file claims based on their own estimates of what they owe their creditors.  Also, debtors can file claims on behalf of creditors if creditors either forget or refuse to do so.  Creditors can also file claims to denote how much they were owed by the debtor when the bankruptcy case was filed.  The Chapter 13 trustee pays creditors according to their claims.  If creditors do not file claims, they don’t get paid anything by the trustee.  When the claims of debtors and creditors differ, formal claim disputes can arise.

Creditor vs. Debtor

Claims of the creditor and the debtor may be in dispute. If a debtor doesn’t know the correct amount one owes to a creditor and then files a claim based upon only the debtor’s personal estimate, the impacted creditor can dispute that claim and change the outcome of a Chapter 13 repayment plan.  A creditor can file its own claim which could be significantly higher than the debtor’s estimate.  In such a case, that creditor would receive a larger payment every month from the Chapter 13 trustee.  Similarly, a debtor can dispute a claim a creditor makes if a debtor has viable proof of inaccuracy. When disputes are settled, a final plan is established. However, the plan may be further altered if the bankruptcy trustee appointed to administer the case doesn’t agree with the repayment structure.  For instance, the trustee may think that the chapter 13 plan does not pay a sufficient dividend to one’s unsecured creditors. Further, the trustee may disagree with the amounts of the monthly expenses claimed by a debtor.  The trustee may also believe that a debtor’s income has been understated.  The trustee can petition the bankruptcy court to alter the terms of your chapter 13 plan and the trustee could request that the payment amount be increased.  If a debtor and the trustee disagree about the payments or other terms of a debtor’s chapter 13 plan, the matter is submitted to the bankruptcy court for determination via a contested confirmation hearing.

If you plan to file for Chapter 13 bankruptcy, taking advantage of the help of an expert bankruptcy attorney can change the outcome of your repayment plan. For more information about how Chapter 13 works, or for legal advice and assistance with your petition for bankruptcy in Jackson, MN, contact Behm Law Group, Ltd. at (507) 387-7200 today.

Understanding the Feasibility Requirement in Chapter 13 Bankruptcy in New Ulm, MN

Working through a debt reorganization is a complicated process. All aspects of your financial situation, including the details of your income, property, debts, and expenses must be taken into account. Most individuals who choose debt reorganization file for Chapter 13 bankruptcy. The long process of building a repayment plan with Chapter 13 bankruptcy in New Ulm, MN, can be difficult, but Behm Law Group, Ltd. can help you avoid issues that may lead to the dismissal of your case.

To have your debts reorganized into a Chapter 13 repayment plan that fits your financial situation and remains fair to your creditors, you have to pass a number of requirements. One of these stipulations is that you must pass the feasibility requirement in order for your bankruptcy repayment plan to be confirmed or approved by the bankruptcy court. Your trustee will expect you to be able to continue making payments regularly throughout your plan. The trustee will question your ability to pay and will analyze the feasibility of your chapter 13 repayment plan in the event of the following:

  • Meeting the First Payments: Because your plan will be put into effect within 30 days of your filing as a sort of “test” before it’s confirmed, you may be required to make 3-6 payments to your trustee before your plan is actually set in stone. It’s likely you can make these payments if you have worked through the plan with a bankruptcy lawyer, but in some cases, plans are dismissed even before confirmation—often because a filer’s financial circumstances have changed.
  • Balloon Payments: During your repayment plan period, it’s possible your trustee will request a future “balloon payment.” Balloon payments occur at the end of a chapter 13 plan term.  Balloon payments are necessitated where you may have missed a few monthly payments or you may have made only partial payments during some months.  At the end of the chapter 13 plan period, a large balloon payment of the remaining balance of your accumulated payments must be met for your plan to remain feasible.
  • Income Change: Because Chapter 13 plans span 3-5 year periods, it’s possible for the filer’s income to change during that period. If your income increases, you may be required to increase payment amounts each month. If your income decreases, your plan feasibility will come into question, and your trustee will investigate your ability to keep meeting payments.  Your plan payments could also be lowered.
  • Asset Sales: In the event you choose to sell an asset and use the proceeds gained to meet payments in your plan, your trustee may investigate the market values and have input in the selling of asset, especially if the market is poor. If you cannot make a payment without making the asset sale, the feasibility your chapter 13 plan may come into question.

There are several other reasons you may not pass the feasibility requirement for your repayment plan when you file for Chapter 13 bankruptcy in New Ulm, MN, but with the support and counsel of Behm Law Group, Ltd., you can avoid many difficulties of the process. For more information, contact us at (507) 387-7200 today.

Standing Trustees and Their Role in Chapter 13 Bankruptcy in Mankato, MN

If you choose to file for bankruptcy, you will have a trustee appointed by the Executive Office of the United States Trustee to administer and supervise your case. In Chapter 7 bankruptcy, your case will be concluded quickly, usually within ninety to one hundred and twenty days, but in Chapter 13 bankruptcy, your 3-5 year repayment plan will require a longer period of involvement by the chapter 13 trustee. Because a Chapter 13 case is significantly longer than a Chapter 7 case, the help of a bankruptcy attorney can improve your circumstances. Behm Law Group, Ltd. provides the legal assistance you need when filing for Chapter 13 bankruptcy in Mankato, MN.

The length of Chapter 13 cases often requires specialized skills with those administering the case and overseeing repayment plan. To meet this demand most trustees handling Chapter 13 plans are considered standing trustees.

What are Standing Trustees?  

 Standing trustees often work strictly on Chapter 13 cases. While it’s possible for a trustee to work with both Chapter 7 and Chapter 13 cases, the courts prefer standing trustees to administer bankruptcy cases involving debt reorganization. This is because it requires a long-term commitment on the trustee’s part, and often requires legal knowledge specific to the Chapter 13 process.

What do they do?

 Like any other bankruptcy trustee, a standing trustee will examine the information you provide in the bankruptcy forms and schedules and approve the legitimacy and accuracy of that information. The Chapter 13 trustee will also verify your attendance at the meeting of creditors. Any abuse the trustee detects will be reported to the bankruptcy court and to the United States Trustee. In some situations, a standing trustee can recover any assets that you may have transferred before filing for bankruptcy and the trustee can object to certain exemptions you attempt to claim.

When it comes to your repayment plan, a standing trustee will review your income and expenses to determine an appropriate payment for your repayment plan. When a repayment plan is established, the standing trustee confirms that you will dedicate all of your disposable income to continue making payments until the plan is complete. The trustee will also ensure that the plan will repay the creditors at least as much as they would receive in a hypothetical Chapter 7 case.

Once your Chapter 13 repayment plan is confirmed or approved by the bankruptcy court, the standing trustee will continue to collect your payments and distribute the correct amounts to your various creditors. A standing trustee will monitor your ability to make payments and will request an increase in the plan payment amounts corresponding to any increase in your disposable income. The trustee will also keep an eye out for fraudulent conduct.

A standing trustee works to make sure everything is done by the book and that a Chapter 13 case remains fair for creditors and debtors alike. Behm Law Group, Ltd.

can provide you with expert legal counsel and work with your standing trustee if you choose to file for Chapter 13 bankruptcy in Mankato, MN. For more information, call us at (507) 387-7200 today.

Preference Claims and Transfers with Chapter 7 Bankruptcy in Marshall, MN

In most cases, individuals and small businesses fight against filing for bankruptcy until it becomes clear that it is the most sensible option. In many cases, before the decision to file for bankruptcy is made, the filer attempts to meet or repair debts in many ways. Payments or money transfers are common occurrences before bankruptcy petitions are filed, but in some situations, those transactions might be reversed after your case is filed. Behm Law Group, Ltd. offers legal advice and assistance to help you understand how your case will unfold when you file for Chapter 7 bankruptcy in Marshall, MN.

In a Chapter 7 bankruptcy case, the bankruptcy trustee is a fiduciary for creditors and the trustee is obligated by the bankruptcy code to ensure that the person filing for bankruptcy is forthright and honest and that he or she has listed all of his or her creditors and listed all of his or her assets. The trustee is also tasked with making sure that the process is fair for all creditors and making sure that all creditors are treated equally.

One responsibility of a trustee in the trustee’s role of making sure creditors are treated fairly and equally is to identify and recover any preferential transfers in a bankruptcy case.

Preferences 

If you have multiple unsecured creditors (creditors that do not have collateral securing the debts) in your case and, within the ninety days prior to the filing of your case, you have made payments or transfers to any one creditor totaling $600.00 or more, this is considered an avoidable preference.  This means that you have preferred one similarly situated creditor over another creditor who may not have received any payment.   If a trustee finds that you preferred one creditor over another, the trustee will be obligated to avoid the preference by demanding a refund of what you paid from the preferred creditor.  The trustee will then distribute that amount equitably among all of the similarly situated creditors.

Preference claims can either be voluntary payments you made or involuntary garnishments from your pay checks or bank accounts. For creditors labeled “insider creditors”, such as your friends or family, any payments totaling $600.00 or more made within a year of the date that your case is filed will be deemed a preference.  If you pay a friend or relative more than $600.00 within a year before your case is filed, the trustee can and will demand a refund and disburse it among all creditors.  For other creditors, such as credit cards and medical debts, known as “arms-length creditors”, payments of more than $600.00 within ninety days before your case is filed will be deemed preferential.

Strong Arm

To reverse any claims deemed to be preferences, the trustee has the right to use his or her “strong arm” powers under the bankruptcy code and undo the transactions.

If you suspect you may have made a preference payment, or if you have other concerns about your situation, you should not try to undo or reverse it.  Behm Law Group, Ltd. can help you throughout the process of filing for Chapter 7 bankruptcy in Marshall, MN. For more information, please contact us at (507) 387-7200 today.

Bankruptcy in Owatonna, MN, Since 2005

As with all departments of US legislation, bankruptcy is an ever-changing legal process. Because the status of finances and the economy are rapidly transforming with the development of new technology, new energy, and new ways to spend, save, and make money, the laws that govern how debt is handled must change accordingly. Since 2005 the laws, standards, and procedures of bankruptcy have changed significantly. If you’re considering filing for bankruptcy in Owatonna, MN, it’s important to understand how bankruptcy law works today. Behm Law Group, Ltd. provides the legal advice and assistance necessary to successfully navigate bankruptcy.

The most recent changes made to bankruptcy law came in 2005 when Congress amended the bankruptcy code for purposes of determining how consumer households file for Chapter 7 bankruptcy and how Chapter 13 repayment plans are structured. These changes included the following.

Means Test and Income Measurement

 Before the 2005 overhaul, individual filers could choose the type of bankruptcy that worked best with their situation (in their or their lawyer’s opinion). This allowed filers with high incomes to benefit from Chapter 7 bankruptcy in a way that was perceived to be unfair to creditors.  Namely, Congress believed that people with higher incomes could enter into a Chapter 13 repayment plan and pay at least something to their unsecured creditors. Today, all filers are required to take the Means Test to analyze their income for the 6 month period prior to the month in which their bankruptcy petition is filed. The bankruptcy code requires an attorney to add up all of a filer’s gross income for the pre-bankruptcy filing 6 month period and then determine an average.  Then, the bankruptcy code requires an attorney to multiply the average by 12 to determine what a filer’s yearly projected income is and analyze it against the state average income for a household of the filer’s size.  If the filer’s income is in excess of the state average income for a household of the filer’s size, then the person would probably have to file a Chapter 13 instead of a Chapter 7.  For instance, presume a single person needs to file for bankruptcy relief and that he or she earned gross monthly income of $5,000.00.  Presume further that the state average income for a household of 1 in Minnesota is $52,785.00.  The bankruptcy code would require the attorney to add up the $5,000.00 for the preceding 6 months which would be $30,000.00.  Then, the bankruptcy code would require the attorney to determine the monthly average which would be $5,000.00 ($30,000.00 divided by 6).

Next, the bankruptcy code would require the attorney to multiply that average by 12 which would be $60,000.00 to determine the filer’s yearly projected income.  Since the $60,000.00 would exceed the state average income for a household of 1 in Minnesota of $52,785.00, the filer would probably be required to file a Chapter 13 bankruptcy because he or she would not have passed the Means Test.  The monthly income average is measured against some expenses and payments of some debts, so it’s still possible for filers with a high income to qualify for Chapter 7. If a filer doesn’t qualify for Chapter 7 and must instead file for Chapter 13, the expenses of a household are still subtracted in the total of disposable income that must be used to repay creditors through a Chapter 13 repayment plan.

Credit Counseling

Another notable change made with the 2005 bankruptcy overhaul was the requirement of all filers to undergo credit counseling before a petition is filed. The United States Trustee office must also approve the counselors who offer this service. This is necessary requirement irrespective of whether you file for Chapter 7 or Chapter 13 bankruptcy. A counselor may offer an advisable repayment plan in cases of Chapter 13 bankruptcy, but filers are not obligated to follow those plans.

These changes made in 2005 were also accompanied by several other minor details but overall, they were designed to create a situation of fairness for all parties involved in a bankruptcy case. For more information about the changes made or for help with filing for bankruptcy in Owatonna, MN, contact Behm Law Group, Ltd. at (507) 387-7200 today.

How Your Trustee Benefits When You File for Bankruptcy in Luverne, MN

Understanding government and legal positions is a complicated business. The role of an employee and how they are compensated varies widely from position to position and department to department. Bankruptcy trustees are not employed by the United States Department of Justice.  However, they are private attorney’s appointed by the United States Department of Justice and assigned to bankruptcy cases through the United States Trustee Program.  Working with the bankruptcy trustee assigned to a particular bankruptcy case can often be nuanced. Behm Law Group, Ltd. works with both our clients and the bankruptcy trustees to successfully handle bankruptcy cases in Luverne, MN.

The help of a bankruptcy firm and attorneys such as those here at Behm Law Group, Ltd. is often key to meeting the optimal outcome in a bankruptcy case. Your bankruptcy trustee is responsible for administering your bankruptcy estate.  The bankruptcy estate is a legal entity separate and distinct from the person filing for bankruptcy relief.  It consists of any property that you are not able to keep or exempt in your bankruptcy case.  In chapter 7 cases, trustees sell or liquidate any non-exempt assets and use the proceeds to pay something to your various creditors.  Not only do they work to distribute any liquidated assets in a Chapter 7 case to your creditors, they also work with you and your creditors in a Chapter 13 case.  In a Chapter 13 case, you make one monthly payment (a payment that you can afford that is determined with the supervision of the trustee) to the chapter 13 trustee, pursuant to a restructured debt payment plan, every month for 36 to 60 months.   The chapter 13 trustee then splits that payment up among your various creditors each month for 36 to 60 months.

Additional responsibilities of a trustee are numerous, but in short, they work to oversee your case, detect fraudulent behavior with all parties involved, and ensure accuracy.

A trustee’s compensation can depend on several situations within a bankruptcy case.

Chapter 7: In a Chapter 7 case, your bankruptcy trustee takes a $60.00 fee from the $335.00 filing fee you pay to the court. If you have no assets, that’s all your trustee will receive from your case. If you do have assets, your trustee receives percentage from the collected amount after non-exempt assets are liquidated and before anything is paid to your creditors. The amount taken is determined by a sliding scale, under 11 U.S.C. §326. For the first $5,000.00 collected by a trustee, the trustee will take 25%. For the next $45,000 the trustee will take 10%, and for the following $950,000 the trustee will take 5%. For anything collected by the trustee that exceeds $1 million dollars, the trustee would take 3%. Trustees can also recover costs from the bankruptcy estate with court approval.

Chapter 13: In a Chapter 13 case, your repayment plan decides the amount of your trustee’s compensation. In all cases, your trustee cannot take more than 10% of all total payments in your plan. For instance, if your chapter 13 plan payment is $500.00, the trustee would receive $50.00 of every payment you make.  Most trustees handling Chapter 13 cases are also paid a yearly salary through the federal government.

It’s important to understand the function and duties of a trustee.  Having an attorney on your side can help you understand this. If you’re considering filing for bankruptcy in Luverne, MN, contact Behm Law Group, Ltd. at (507) 387-7200 today.

The Difference Between Disposable Income and Discretionary Income During Your Repayment Plan With Chapter 13 Bankruptcy in Windom, MN

A common misconception about bankruptcy is that it’s a financial endgame, halting aspects of your economic and personal life.  With Chapter 7, however, your finances are given a fresh start, free from most debts you faced before filing. With Chapter 13 your options are even broader to keep your life as unaffected as possible throughout the case. When you file for Chapter 13 bankruptcy in Windom, MN, especially with the help of Behm Law Group, Ltd., you can easily integrate your bankruptcy case and repayment plan into your everyday finances.

Chapter 13 bankruptcy is designed to offer you a fresh way to handle your debts while keeping the situation fair to you and your creditors alike. With the system of reorganizing your debts that Chapter 13 provides, you can keep your financial situation manageable and still provide your creditors with the debts they are owed. During the structuring of a Chapter 13 repayment plan, your income is broken down into two basic types: discretionary and disposable.

Disposable Income

With any household, certain amounts of the total income from wages are taken automatically from paychecks and salaries as income taxes. After income tax requirements are met, remaining net income values are considered disposable income. This income can be used for any household necessities and payment obligations such as loan installments and rent.

Discretionary Income

After all household necessities and financial obligations outside of income taxes are met, the remaining income amount is considered discretionary income. This amount can be used to save, spend, or invest based on the household choices.

For example, if you make a salary of $85,000 and you file “Married Joint” on your tax forms, you will have an income tax percentage of 7.85% in the state of Minnesota. That means you will have a disposable income amount of $78,327.50. If you take 75% of that to pay bills, purchase food, fill your gas tank, and meet any other debts and tax requirements, you will have a remaining discretionary income of $19,581.87. You can choose to save, spend, or invest that amount as you wish.

Discretionary vs. Disposable in a Repayment Plan

These described options for disposable incomes and discretionary incomes are viable in a household that is not currently filing for Chapter 13 bankruptcy. How these incomes are treated in a household working through a Chapter 13 repayment plan period are very different. After income taxes and basic household necessities are met, your discretionary income is considered your only disposable income. In a Chapter 13 repayment plan, you must dedicate all your remaining disposable income to paying back your unsecured creditors.

To determine what your disposable income amount may be and to find out more information about the structure of repayment plans with Chapter 13 bankruptcy in Windom, MN, contact Behm Law Group, Ltd. at (507) 387-7200 today.

Understanding Executory Contracts During Chapter 7 Bankruptcy in Pipestone, MN

If you’re considering filing for bankruptcy and your financial obligations outweigh your income, it’s likely you’ll qualify for Chapter 7 bankruptcy. This form of bankruptcy allows you to liquidate your assets to repay creditors and discharge certain crippling debts. The benefits of Chapter 7 bankruptcy can be significant.  Some who need to file for bankruptcy may have certain legally binding contracts in their name, such as a vehicle lease or a lease for the purchase of real estate (i.e. a contract for deed). Behm Law Group, Ltd. can help you determine how these different contracts will be treated during a petition in Chapter 7 bankruptcy in Pipestone, MN.

One kind of legal contract commonly considered during a bankruptcy case is an executory contract.

What is an executory contract?  

A lease or other contract that is active during the filing process and to which parties are still obligated is titled as an executory contract in a bankruptcy case. These contracts are different from other kinds of legal documents under the filer’s name, such as a vehicle loan, mortgage or tax debt, and they are treated differently during a Chapter 7 bankruptcy case.

Some common examples of executory contracts include car leases, apartment leases, long-term rental agreements, business contracts, real estate sale contracts, insurance agreements, timeshares, and docking agreements.

The main difference between an executory contract and other types of contracts during liquidation bankruptcy is that the agreement is current and in effect.

What happens during Chapter 7 bankruptcy?

Because an executory contract is in effect at the time the filer petitioned for Chapter 7 bankruptcy, it must be addressed during the case with a decision that will be beneficial for the filer and for the creditors. This decision can be made by your bankruptcy trustee, if there is equity or value in the executory contract (i.e. if the value of the contract exceeds any debt or other obligations associated with it).  If there is no value for the trustee, she would abandon the executory contract and you would make this decision.  Basically, either the trustee or you can choose one of two options: assume or terminate. If the executory contract is assumed, you or the trustee would be obligated to continue making payments on that contract, unless it is sold to another party. However, because there may often be no equity or value to the executory contract, it’s more often the case that the executory contract will be terminated. If the contract is terminated, the owner will repossess any leased property and you’ll no longer be obligated to make any payments.

If you’re in current binding contracts or leases and would like to know more about how they’ll be treated during a Chapter 7 case, contact Behm Law Group, Ltd. at (507) 387-7200 for information about filing for Chapter 7 bankruptcy in Pipestone, MN.