Why Small Businesses Aren’t Filing for Bankruptcy Now

Since the end of March and the height of the coronavirus shutdowns, small businesses and beyond have struggled to stay afloat. The benefits of stimulus packages and federal loans have helped many individuals and businesses keep their heads above water and even make a profit during months of decreased income. Unfortunately, most of the effects of the stimulus bills came to an end, and small businesses now need to decide what steps to take to protect themselves given current economic conditions. If you own a sole proprietorship or partnership business, you can use Chapter 13 bankruptcy to resolve debts without losing your business. With the help of Behm Law Group Ltd., you can work through that type of reorganization bankruptcy in New Ulm, MN, and the surrounding areas to file a successful case that will resolve your debts without liquidating your business operations.

Although sole proprietorship and partnership businesses can file for bankruptcy by rolling business debt into the owner’s personal debts, many other small businesses are not able to file because they would be restricted to Chapter 11 reorganization as they may have large amounts of debt and assets with significant values.

Both Chapter 13 and Chapter 11 function similarly to reorganize debts into a repayment plan. Filers will slowly repay debts included in the plan over several years. Many debts will be paid in full but under different terms as denoted in the plan. Other debts will receive payment for a finite period of time and only be partially paid. The remaining balances of those debts at the conclusion of the bankruptcy case would be discharged. While those businesses that qualify for Chapter 13 bankruptcy are more likely to file during this time, if it’s the correct choice given their current finances, businesses that only qualify for Chapter 11 bankruptcy still might not be able to file.

The situation for small businesses right now is complicated. Big business bankruptcy cases have increased by almost 120% in the past 8 months, largely due to the effects of COVID-19, but many smaller businesses have been left unable to file for bankruptcy simply because the costs of filing can be significant. These smaller businesses are operating on shoestring budgets, and once stimulus aid comes to a full stop, they will likely be left with little to no resources.

Because small businesses will be (or already have been) operating on such low incomes, they will literally not be able to afford to file for Chapter 11 bankruptcy. The cost of an attorney and the filing fees involved in a Chapter 11 bankruptcy case are often upward of $10,000 for many small to medium businesses. Most struggling to meet debt payments will just keep operations running until a third party intervenes rather than put time and money into Chapter 11 bankruptcy reorganization plans.

With PPP (payroll protection) loans and stimulus support still helping some small businesses and other businesses with incomes too low to cover bankruptcy fees and costs, small business bankruptcies are down by about 14% from last year.

If you are able to fund a Chapter 13 bankruptcy in New Ulm, MN, or the local area, Behm Law Group Ltd. can help you build a repayment plan for long-term debt relief. Contact us at (507) 387-7200 or stephen@mankatobankruptcy.com today.

Filing for Chapter 13 Bankruptcy with a Business Partner in Worthington, MN

For individuals in the position to file for bankruptcy, there are two common options available: Chapter 7 or Chapter 13 bankruptcy. Chapter 7 works to liquidate your non-exempt assets in exchange for the discharge of your debts. This process is most common for filers without a steady income and the loss of non-exempt property does not occur in most Chapter 7 cases. However, for those with income who want to keep properties that could otherwise be liquidated in Chapter 7, Chapter 13 is a better option. Chapter 13 bankruptcy works to restructure your debts into a manageable three-to-five-year repayment plan that is based upon your monthly “net” income and your monthly reasonable and necessary living expenses.

While Chapter 7 is a bankruptcy process available to individuals and businesses in Worthington, MN, alike, Chapter 13 is mostly filed by individuals. If you own a sole proprietorship or partnership business, you may be able to combine business and personal debts and use Chapter 13 bankruptcy to resolve all debts at once.

If you’re in the position to file for Chapter 13 bankruptcy in Worthington, MN and the surrounding area, Behm Law Group, Ltd. can help you build a strong case and get your reasonable repayment plan put into place.

For Chapter 13 filers with a sole proprietorship, combining business and personal debts is relatively simple because there’s only one party filing for bankruptcy. For partnership businesses, however, that process can get a little more complicated. These complications often create situations where filing for Chapter 13 bankruptcy is less than ideal for a partnership.

What to consider:

  • Your business contract: Many partnership businesses build clauses into their contracts that will dissolve the business as soon as one partner files for Chapter 13 bankruptcy. This is largely because of the potential negative results in a bankruptcy case that could befall a non-bankruptcy filing partner.
  • Potential case results: If the non-filing partner is able to repay the debts with their personal income, a creditor could request to have the case switched to a Chapter 7 on those grounds. The creditor could possibly receive more money in this case by targeting your partner’s assets, and your business would be forced to close down operations.
  • Who has to pay: If your partner files for bankruptcy, they’ll wipe out their responsibility for that business debt. This may leave you fully responsible for the debt. Additionally, if either of you guaranteed the debt, a bankruptcy case may trigger a clause that will require an immediate full payment of a loan.
  • Who will own the business: When your partner files for bankruptcy, they give up their share in the business to the bankruptcy trustee. Their ownership interest in the business becomes property of their bankruptcy estate. Technically, this will make a bankruptcy trustee your new business partner. If a trustee chooses to liquidate that asset, you could lose half of your business (or however much your partner owned). However, if the business has no “net” value in excess of the debts it owes, the trustee will likely conclude that it has no value to the bankruptcy estate. In that case, the partner filing for bankruptcy relief would likely be allowed to continue operating the business with the non-bankruptcy filing partner, as was the case before the bankruptcy was filed.

Don’t Try to Navigate Chapter 13 Bankruptcy Alone

If you or your partner plan to file for Chapter 13 bankruptcy in Worthington, MN or the surrounding area, Behm Law Group, Ltd. can help you decide whether or not it’s a good idea. Contact us at (507) 387-7200 or stephen@mankatobankruptcy.com today.

Finding a Home and Rebuilding after Bankruptcy

If you are struggling financially, there are many options available to you for debt relief. While some households might benefit from negotiating wiggle room with their creditors, it’s more likely that people with debts they can’t pay will find long-term, permanent debt relief in bankruptcy. Depending on your financial circumstances, you can file for liquidation or reorganization bankruptcy. If you are unable to make monthly debt payments, Behm Law Group Ltd. can help you file for bankruptcy from start to finish. Our skilled attorneys can also help you understand the process of rebuilding your credit after filing a bankruptcy in Mankato, MN.

Many people fear that filing a Chapter 7 bankruptcy means losing their property, including their house. While filing a chapter 7 bankruptcy can be scary and while there are many misconceptions about it, there are ways to find a new home while you start your financial life over again after your debts have been discharged. In addition to a potential home loss, even those who file for bankruptcy and don’t lose their house (like those that file for Chapter 13 bankruptcy or those renting a residence) will have to face the question of whether or not they can buy a house in the near future. There are several options to consider when trying to find a home after bankruptcy.

Renting: If you just lost your home in a Chapter 7 bankruptcy case, you’re probably not in a position to buy another residence right away. In addition to various limitations to your financial situation, there are laws dictating how long you have to wait after a bankruptcy filing until you can be approved or qualify for some mortgages. Typically, this waiting period is 2-4 years. However, there are many opportunities for you to rent post-bankruptcy. Plenty of renters offer sliding scale leases and will also rent to individuals who are rebuilding their credit.

Buying: For those who have the means to buy a home in the next few years after a bankruptcy, they simply have to get through the waiting period and focus on re-building their credit. The waiting times for different mortgages are as follows:

  1. Conventional loan:
    1. 4 years after a Chapter 7 discharge or dismissal
    2. 4 years after a Chapter 13 dismissal
    3. 2 years after a Chapter 13 discharge (or 4 years from the date you filed)
  2. USDA loan:
    1. 3 years after a Chapter 7 discharge or dismissal
    2. 1 year after a Chapter 13 discharge or dismissal
  3. FHA and VA loans:
    1. 2 years after a Chapter 7 discharge or dismissal
    2. any time after the court dismisses or discharges your Chapter 13 case

Any bankruptcy will be reflected on your credit report for up to seven to ten years. However, many lenders will be very incentivized to work with you because they will know that all of your previous debts have been discharged and that they will not have to compete with those discharged creditors to get paid by you. They will also know that you will not be able to file for bankruptcy relief and qualify for a bankruptcy discharge again for several years. In short, you will be able to rebuild your credit by incurring new debt during the 2-4 year waiting period. If you’re rebuilding after bankruptcy in Mankato, MN, or the surrounding area, work on your credit and stick to the waiting period rules, and you’ll be eligible to apply for the same home mortgage loans as any other applicant. To learn more about filing for bankruptcy, contact Behm Law Group Ltd. at (507) 387-7200 or email stephen@mankatobankruptcy.com

Understanding the Elements of a Chapter 13 Bankruptcy Repayment Plan

If you are in a difficult financial situation that will benefit greatly from a bankruptcy case, you have two primary potential options as an individual consumer. Depending on your financial circumstances, you can either file for Chapter 7 or Chapter 13 bankruptcy. For those with a debt-to-income ratios higher than the state median or average income of a similar household, Chapter 7 bankruptcy is not an option. If you don’t qualify for Chapter 7 based on your income, you may find your situation is better suited to filing for Chapter 13 bankruptcy. Those considering filing for Chapter 13 bankruptcy in Owatonna, MN, can put together a strong case with the legal protection and guidance of a Behm Law Group Ltd. attorney.

 

Chapter 13 bankruptcy works to restructure your debts into a repayment plan with monthly payments suited to your current income. This plan will last three to five years, depending on your income level. During this time, any material changes in your monthly income and monthly living expenses will be reflected by slight adjustments to your repayment plan. Because the filer and filer’s attorney must work together to create a repayment plan proposal to submit to the trustee, you should make a point of understanding the basic components of a typical Chapter 13 repayment plan.

 

Included in your plan:

  1. Bankruptcy and administrative fees, including your filing fee, trustee’s fee of 3%-10% of each monthly payment, and attorney fees. You will pay 100% of these fees in your plan.
  2. Priority debts, including child support, most tax debts, criminal fines and penalties, alimony, wages owed to people you may have employed, and others. You will pay 100% of these debts in your plan but these debts will not be paid interest.
  3. Secured debts, including mortgages, car loans, and any other debts tied to real estate and items of personal property. You will pay most of these debts in your plan under different/adjusted terms that are more compatible with your regular monthly income and your regular reasonable and necessary monthly living expenses.
  4. Unsecured debts, including credit card debts, medical bills, and any other debts not tied to a property or protected with a lien. You will pay only a percentage of these debts.  Generally, these debts will not be paid in full and they will not be paid interest.  The amount you’ll repay depends on your disposable income (remaining monthly income after your reasonable and necessary monthly living expenses are paid) that will be paid monthly in the repayment plan and on how many months your plan will last.

 

You now are aware of the basic components of a typical Chapter 13 bankruptcy repayment plan. With the help of a skilled bankruptcy attorney, you can easily craft a reasonable repayment plan proposal that fits your current monthly income and other financial circumstances and restrictions.

 

To learn about other, more complex components of a chapter 13 repayment plan or to file for Chapter 13 bankruptcy in Owatonna, MN, contact Behm Law Group Ltd. at (507) 387-7200 or stephen@mankatobankruptcy.com.

 

 

 

COVID-19 Medical Expenses and Chapter 7 Bankruptcy

Even for those with excellent health insurance, mounting medical bills can put a serious strain on finances. During this time especially, with the threat of COVID-19, many U.S. citizens fear a serious medical bill might cause a loss of financial stability. In fact, a recent survey showed that about half of Americans felt a serious medical cost would force them to file for bankruptcy relief.

 

Because of the coronavirus pandemic, this belief has increased by around 5% since 2019. While the threat of poor health and financial downturn is a scary possibility to keep at the forefront of your day-to-day, it’s important to remember that if you do have to file a bankruptcy case, those medical debts and many others will be quickly resolved. With the guidance and support of a Behm Law Group, Ltd. attorney, you can file a successful case for Chapter 7 bankruptcy in Owatonna, MN and receive long-term, effective debt relief.

 

Chapter 7 bankruptcy is a liquidation bankruptcy process. Essentially, this means your non-exempt assets will be sold (liquidated) and that non-exempt value will be paid to your creditors. The liquidation/sale of non-exempt assets is the exception rather than the rule of how things usually transpire in a chapter 7 bankruptcy case, however. Typically, all that people lose in a chapter 7 bankruptcy case are their unwanted debts.  Because the bankruptcy system is in place to help debtors who cannot repay their debts reorganize and rehabilitate their financial affairs, you will have the opportunity to assert bankruptcy exemptions that protect your property from the liquidation process. This typically includes protecting your house with the homestead exemption and protecting your car with a vehicle exemption. This means filers aren’t left completely destitute while fairness to creditors is still taken into account.

 

There are three main types of debt broken down in a Chapter 7 bankruptcy case:

 

  1. Priority debt, including child support, alimony, some tax debts, and others, all of which will be generally excepted from discharge in any bankruptcy process.
  2. Secured debt, such as a mortgage or car loan, you’ll pay in full if you want to retain the property securing (serving as collateral for) the debt. If you don’t want to retain the property, you’ll have that debt fully discharged.
  3. Unsecured debt, including medical bills and credit card debt, is discharged in a Chapter 7 bankruptcy case. If you’re struggling from severe medical debt from a COVID-19 case or any other treatment cost, a Chapter 7 bankruptcy might be the most effective debt relief option for you.

 

If the majority of your debts are unsecured and you know you can protect your home or other important property with exemptions, Chapter 7 will likely be a very effective way of obtaining long-term financial reorganization and rehabilitation.

 

To learn more about Chapter 7 bankruptcy in Owatonna, MN or the surrounding area, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.

 

COVID-19 Stimulus and Bankruptcy

As the future of potential stimulus bills is still undecided, households across the United States are keeping a close eye on their finances. For some, a stimulus check may mean the difference between making a rent payment or being evicted. Not only do proposed stimulus bills offer a second check, they also extend several aspects that protect debtors from backlash if they are unable to meet monthly payments. If you are one of those debtors who faces unstable finances for any reason, this may be the ideal time to take action for long-term debt relief. Filing for bankruptcy may be the best option for your circumstances. With the help of Behm Law Group Ltd., you can determine if filing for bankruptcy in Luverne, MN, and the surrounding area is right for you.

 

When the CARES (Coronavirus Aid, Relief, and Economic Security) Act was established in March 2020, $2.2 trillion was used for various support systems for individuals and businesses across the United States. Anyone who filed for bankruptcy after the CARES Act passed knows that the stimulus checks and other aspects of the bill were protected assets in their bankruptcy cases. They could not be seized by the trustees administering their bankruptcy cases.  If you are worried about losing that vital stimulus support after the next bill passes, fear not. Any income from COVID-19 stimulus will be exempt from liquidation in Chapter 7 bankruptcy or a repayment plan in Chapter 13 bankruptcy. Additionally, the boost in income from the stimulus won’t prevent you from qualifying for bankruptcy.

 

While we wait for the next stimulus bill to pass, we can compare the CARES Act to what might be coming. Nearly all of us experienced the benefits of the CARES Act, so if we look at the differences between the proposed HEROES (Health and Economic Recovery Omnibus Emergency

Solutions) and HEALS (Help End Abusive Living Situations) Acts, we can predict how each might affect us.

 

Total cost of each packages

  • CARES: $2.2 trillion
  • HEROES: $3 trillion
  • HEALS: $1 trillion

 

Stimulus check amounts

  • CARES: $1,200 for each individual earning under $75,000, $2,400 for joint earners making under $125,000 with a reduction of $5 from every $100 for earners making more than income maximums
  • HEROES: same as CARES
  • HEALS: same as CARES

 

Stimulus check additions for dependents

  • CARES: $500 per dependent 16 and younger, which eliminated college students from receiving either a stimulus check or dependent additions
  • HEROES: maximum of three additions of $1,200 per dependent
  • HEALS: $500 per dependent with no age limit

 

Unemployment benefit additions

  • CARES: additional $600 per unemployment check, plus the usual state benefits
  • HEROES: same as CARES
  • HEALS: starting additional $200 per unemployment check, which will increase to an additional $500 per unemployment check to match 70% of lost wages subtracted against the state unemployment check

 

Many parts of the CARES Act expired at the end of July, but eviction moratoriums and other protections are still in place for those unable to meet rent and debt payments. Because of these protections, it is still viable to file for bankruptcy during this time. To get started on your bankruptcy in Luverne, MN, today, contact Behm Law Group Ltd. at (507) 387-7200 or stephen@mankatobankruptcy.com.

COVID-19 Federal Aid for Farms and Chapter 12 Bankruptcy News

For many reasons, farmers across the United States frequently struggle financially. Not only is it difficult, especially given our country’s current economic difficulties, to generate a profit from a family-owned farm, but also American farms often incur much debt from the purchase of equipment and the payment of property taxes. Fortunately, the government is aware of the difficulties that many farmers across the nation face, and it works to provide support systems in many ways. Most recently, the CARES Act stimulus support has helped many farmers weather the economic shutdown as a result of COVID-19. When the stimulus support ends, however, family farmers and fishers will still have options for resolving their debts and stabilizing their finances. One debt relief option for farmers and fishers is filing for Chapter 12 reorganization bankruptcy. With the help of Behm Law Group Ltd., you can file a successful case for Chapter 12 reorganization bankruptcy in Pipestone, MN.

 

Chapter 12 bankruptcy is a reorganization type of bankruptcy designed specifically for farmers and fishers who derive at least 50% of their gross income from farming or commercial fishing operations. The Chapter 12 process works to restructure 100% of secured and priority debts and 0%-100% of unsecured debts into a manageable repayment plan. Chapter 12 has some special rules for the circumstances of farmers and fishers, differentiating it from Chapter 13, the other primary form of reorganization  bankruptcy relief for individuals.

 

Right now, the number of Chapter 12 bankruptcy cases that will be filed during the next year is difficult to predict, largely due to the added support of the CARES stimulus act. With the stimulus support, Chapter 12 bankruptcy cases decreased from 509 in the first half of 2019 to 284 in the first half of 2020. Additionally, many bankruptcy courts were closed and online filing was the only option up until as late as June. This closure and limitation to virtual-only filings contributed significantly to reduced Chapter 12 cases.

 

As the country moves forward with much less support from the stimulus act and with bankruptcy courts re-opening, most people expect to see a dramatic increase in the filing of Chapter 12 reorganization bankruptcy cases. Farms will struggle with the continuing COVID-19 restrictions and lowered sales without the unemployment and stimulus support. Potential acts that may be put into place for more COVID-19 stimulus relief are not guaranteed, but farmers and fishers will have the option to file Chapter 12 bankruptcy.

 

Because the majority of U.S. Chapter 12 bankruptcy cases are in the Midwest, Minnesota farmers are among the most at risk for financial difficulties. Taking positive action for debt relief by filing for Chapter 12 bankruptcy might be the best option farmers and fishers have for protecting their homes and businesses in the long run.

 

To learn more about the rates of Chapter 12 bankruptcy in Pipestone, MN, and the surrounding area, or to start your own Chapter 12 case, contact Behm Law Group Ltd. at (507) 387-7200 or stephen@mankatobankruptcy.com.

Income-to-Debt Ratio and What It Means for Liquidation Bankruptcy

Many people have been struggling financially during 2020 because of the countless destructive economic impacts of the coronavirus pandemic. Even those with a stable income may be finding it difficult to meet debt payments each month.

 

If your finances are out of balance, no matter the cause, you always have the option to file for bankruptcy and receive long-term debt relief. At Behm Law Group, Ltd. we help clients work through reorganization chapter 13 or liquidation chapter 7 bankruptcy in Windom, MN, offering legal protection and guidance from start to finish.

 

One of the aspects of your finances that’s considered for any type of bankruptcy, but especially for liquidation bankruptcy (Chapter 7), is your income-to-debt ratio. This ratio measures your net surplus income after all debts are paid, and the ratio is a percentage of that value. For example, if your income is $35,000 before taxes and other deductions are removed and your total annual debt amount is $14,000, your income-to-debt ratio is 40%. When mortgage lenders or landlords take a look at your finances to see if you are eligible for a contract or loan, they typically measure your income-to-debt ratio on a monthly basis. For most lenders, a minimum income-to-debt ratio allowance is 43%.

 

When it comes to Chapter 7 liquidation bankruptcy, the income-to-debt ratio determines if a filer is eligible for that process. Chapter 7 bankruptcy works to discharge debts in exchange for the liquidation or sale of non-exempt assets.  In most cases, the bankruptcy code exemptions allowing one to protect one’s property are more than adequate to protect all of a person’s property from liquidation, however.  To prevent abuse of this system, filers are required to pass a legal mathematical threshold called the Means Test.

 

The Means Test asks a series of questions and requests the submission of some financial documents. It essentially determines your income-to-debt ratio and decides whether that ratio is below or above the state median or average income for a household of a similar size. If your income-to-debt ratio is lower than the state median or average, you qualify for chapter 7 bankruptcy.

 

The reason your income-to-debt ratio is considered rather than just your gross monthly income is because the debt load of each household can vary so greatly. You might have a low income but very little debt, and that combination could be a deterrence for filing Chapter 7. Likewise, a very high-income household might also have very high debt that renders an income-debt-ratio that is appropriate for the filing of a chapter 7 bankruptcy.

 

Income-to-debt ratio is also used to calculate certain aspects of your repayment plan in a Chapter 13 case if you’re ineligible for Chapter 7 or if you simply don’t wish to file chapter 7. Mainly, this ratio helps determine how much you will pay to the trustee every month for distribution among your creditors during your Chapter 13 repayment plan period.

 

If you are considering filing for bankruptcy or would like to learn more about chapter 7 bankruptcy in Windom, MN, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.

 

Why Chapter 7 Bankruptcy Is Essential

Because the United States is currently in a financial crisis due to the economic shutdowns taking place during the coronavirus pandemic, many people are now struggling to meet monthly debt payments. If you are among the many individuals fighting against debt and unstable finances, you may need to take positive action for debt relief. One debt relief option that is available to all individuals and businesses is the process of filing for bankruptcy. At Behm Law Group Ltd., we work with clients to support and guide them through filing for Chapter 13, Chapter 12 and Chapter 7 bankruptcy in Mankato, MN.

 

Bankruptcy is often incorrectly viewed negatively or as some kind of bail-out tool for big businesses. The truth is that bankruptcy is a highly important legal process that protects the economy from failure in many ways. Chapter 7 bankruptcy, in particular, is an essential process for sustaining and invigorating the U.S. economy.

 

Especially during these financially challenging times, Chapter 7 bankruptcy is important to both individuals and businesses.

 

  1. Individual consumers: Chapter 7 bankruptcy is a powerful debt resolution tool for individuals. This type of bankruptcy works to liquidate filers’ non-exempt assets in exchange for the discharge of certain debts. In most cases, however, the bankruptcy exemption laws are more than adequate to protect all property and all people lose are their debts.  With the help of Chapter 7, filers are rid of debts that they would never be able to repay, such as high credit card debt and medical bills. Creditors are also protected in this process as they are paid in part from the value gained in the possible liquidation/sale of non-exempt assets. The ability to help both debtors and creditors is key in preventing economic impediments. Chapter 7 bankruptcy allows both parties to re-enter the economy and continue participating in that system more efficiently.
  2. Businesses: Chapter 7 bankruptcy is also important for business debt relief. When businesses file for Chapter 7, the process is similar to when individuals file. Business assets are liquidated in exchange for the discharge of all business debts. The major differences between business and individual Chapter 7 bankruptcies is that businesses usually close operations when they file and businesses do not have bankruptcy exemptions with which to protect assets/property. The closures of businesses that file for bankruptcy relief serve to eliminate continually failing companies from the economic network. The fact that businesses only file for Chapter 7 when they have absolutely no other options shows that it’s critical to have that bankruptcy process available when no other solution works. If a business cannot be revived, it is best for the economy to have it closed and have creditors paid as much as possible.

 

Chapter 7 bankruptcy is a powerful and essential tool that many people have used to receive relief from severe financial burdens. If you are finding it impossible to meet individual or business debt payments, consider whether filing bankruptcy might be right for you. Contact Behm Law Group Ltd. at (507) 387-7200 or stephen@mankatobankruptcy.com to learn more about filing for Chapter 7 bankruptcy in Mankato, MN.

 

 

Understanding What “Judgment Proof” Means and Debt Relief through Bankruptcy

Thousands of U.S. citizens struggle to make debt payments each month, and with the added impact of coronavirus shutdowns, many more will continue to lose financial stability. If you are among those finding it difficult to keep your budget balanced, you may want to consider taking positive action for debt relief. One of the most effective ways to resolve the majority of common debts in the United States is through the process of bankruptcy. While some creditors can force debtors into involuntary bankruptcy, depending on the situation, most cases are voluntarily filed under whatever chapter best fits the circumstances. At Behm Law Group Ltd., we provide guidance and support to help our clients file a successful bankruptcy case and receive much needed debt relief in Waseca, MN, and the surrounding communities.

Filing for bankruptcy may seem like a drastic action, but it is actually one of the most common ways people in severe debt can resolve those financial struggles and find long-term financial stability. For individuals, two options are typically available for bankruptcy processes.

First, there is the option to file for Chapter 7 liquidation bankruptcy. This process works to discharge debts in exchange for the liquidation of non-exempt assets. This type of bankruptcy is most suitable for individuals with low income and high dischargeable debts such as credit card debts and medical bills.  In the majority of cases, people don’t lose assets and all that they lose are their debts.

Second, filers can choose to use Chapter 13 to restructure their debts into a manageable repayment plan where there are no late fees, no penalties and no interest. This process involves the discharge of unsecured debts, the reorganization of secured debts such as motor vehicle loans and mortgage delinquencies, and the payment of tax debts, child support/alimony debts and other priority unsecured debts on more generous terms. The final results of this process depend on the filer’s own situation and the income/debts involved.

For those who may not be able to file for bankruptcy right away but still cannot pay certain debts, they can sometimes protect themselves from lawsuits and other collection activities if they are “judgment proof”. Even with debt, you can live in a way that makes it harder for creditors to sue you for not paying debts. To be judgment proof, you generally need to receive income from sources that are not subject to garnishment or attachment, such as Social Security income, unemployment income, child support income and state or county welfare income/benefits and other such income.  If you can show that you have a very low income or are unemployed, have minimal assets in the form of money in a bank account or real estate, and have your income sources exempt from seizure (e.g., unemployment benefits), then you are generally “judgment proof” and it will be more difficult, though not impossible, for creditors to initiate and maintain collection activities against you.

Even if you are presently judgment proof, your financial circumstances could improve or you could inherit property unexpectedly.  In other words, your circumstances could change quickly and your creditors would then be in a better position to pursue collection activities against you.   You must be aware that creditors are extremely vigilant and doggedly persistent.  They typically will review and investigate your economic/employment/financial situation at least once a month for any changes.

If you believe you are judgment proof, but want to learn more about what that term means, or if you want to start the process of filing for bankruptcy, Behm Law Group Ltd. can help. Contact us at (507) 387-7200 or stephen@mankatobankruptcy.com for more information about debt relief in Waseca, MN.