Posted on

Farmer and Fisher Repayment Plans for Chapter 12 Bankruptcy in Mankato, MN

Many farming or fishing operations face difficulties year-round, often from the financial conditions that have worsened over the last few years. Low farming and fishing commodity prices and volatile weather conditions have become major challenges, especially for family-owned operations. Due to these problems and more, the rate of family farmer and fisher bankruptcies has gradually increased over the years, and in 2020, hit its highest peak since the Great Recession in 2007–2009. While some cases of farmer or fisher bankruptcies are liquidation bankruptcies that effectively end business operations, the majority of family farmer and fisher bankruptcies are reorganization cases that help filers get back on their feet financially and find permanent debt relief. If you are considering filing a Chapter 12 bankruptcy in Mankato, MN, or the surrounding area to resolve debts and stabilize your family’s farming or fishing operations, Behm Law Group Ltd. can provide legal support and guidance.

Chapter 12 Bankruptcy

Chapter 12 bankruptcy is similar to Chapter 13 wage-earner consumer bankruptcy. Both reorganize the filer’s debts into a manageable repayment plan lasting three (3) to five (5) years, both can provide for the repayment of secured loans under adjusted and more favorable terms, and both will provide for at least some minimal payment to unsecured creditors – usually 10% to 25% of what was originally owed to those unsecured creditors. Another factor they have in common is that filers will be required to dedicate all their available disposable income – income left over after reasonable and necessary living and business expenses are paid – to making payments in a chapter 12 or chapter 13 repayment plan.

Differences Between Chapter 12 and Chapter 13

Yet, there are several differences between Chapter 12 and 13, with the main one being repayment plans and the ways filers make payments. Chapter 13 plans require monthly payments to the bankruptcy trustee, but family farmers and fishers often have incomes that fluctuate with the seasons, so a monthly payment plan can be hard to maintain. Therefore, Chapter 12 plans can allow for seasonal payments or bi-annual payments or even one large yearly payment.

Also, Chapter 12 is different from Chapter 13 in that past production expenses and past incomes from previous years can be considered when a chapter 12 repayment plan is drafted and submitted to the bankruptcy court. This gives chapter 12 debtors more control over the repayment terms of their various debts in the repayment plan.

Repayment Period

During their Chapter 12 repayment period, family farmers or fishers can also sell property designated as “farmland or farm equipment” without negatively impacting their repayment plan and without necessitating higher plan payments to the chapter 12 trustee. This helps farmers and fishers in Chapter 12 bankruptcy pay down their debts and clear secured liens faster.

Farmers

For farmers selling assets/property during their repayment period, there are also some tax advantages. Taxes from the capital gains of the sales of equipment or real estate are treated as unsecured debts, like credit card debts or medical debts, in a chapter 12 case.   Presume a farmer purchased a combine for $100,000 and then sold it for $150,000 while in a chapter 12 bankruptcy.  Any income tax debt as to the $50,000 capital gain from the sale would not have to be paid to the Internal Revenue Service (IRS).   Rather, the tax debt from the sale would be treated and paid as an unsecured debt.

Cramdown

Through Chapter 12 bankruptcy, farmers and fishers also get the benefit of “cramdown”, which means they can cram down the amount of debt on a particular secured loan to the present value of the property item that serves as collateral for the loan.  For instance, presume that a farmer purchased a pickup truck two (2) years ago for $50,000.  Presume that the loan for the pickup truck had an interest rate of 15%.  Presume further that the farmer presently owes $45,000 and that the pickup truck is presently worth $30,000.  In a chapter 12 repayment plan, one can cram the $45,000 debt down to the present $30,000 value of the pickup truck and one can also cram down the accompanying interest rate from 15% to 5%.

To learn more about repayment plans and other aspects of Chapter 12 bankruptcy in Mankato, MN, contact Behm Law Group Ltd. by calling (507) 387-7200 or emailing stephen@mankatobankruptcy.com.

Posted on

Replacing Your Bankruptcy Lawyer in Luverne, MN

Individuals working through a bankruptcy case have most likely been introduced to the complexity and nuances of the legal process and court requirements. When you file for bankruptcy, you are required to provide comprehensive details of your income sources, debts, properties, and all other financial information. Not only can this documentation be daunting for most individuals unfamiliar with the process, but other issues may arise in any case that will require additional court hearings, such as creditor objections to the discharge of certain debts, judgment proceedings, and more. The best way to navigate any kind of bankruptcy is to seek the support and guidance of a qualified attorney. If you are looking for an expert bankruptcy lawyer in Luverne, MN or the surrounding areas, Behm Law Group, Ltd. offers complete services to help you work through your case from start to finish.

Bankruptcy Lawyer

We strive to provide professional services for all our clients filing for Chapter 7,12, or 13. If you are working through a case, we are here for you. With a Behm bankruptcy lawyer, you can rely on our expertise for skilled legal services, efficiency, and understanding of how stressful the bankruptcy process can be for any household.

If you’re working through a case and find your current lawyer is unsatisfactory for any reason, you can always terminate their services and seek the help of a different attorney.

Why you might need a new lawyer:

There are many reasons why you might need to replace your current bankruptcy attorney. For example, they may not be maintaining good communication by returning your calls and emails or outlining the process at each step. They could also not have the experience needed to handle your specific case if unusual circumstances arise.

If your attorney doesn’t come to your appointments and court hearings, such as the meeting of creditors, you may find yourself wanting to examine your professional relationship with them. The same is true if they fail to meet filing deadlines or if they file incomplete documentation in your petition.

Lawyer Fees

If for any reason your attorney causes delays in your case, makes more unnecessary work for you, creates additional and unnecessary legal costs, or unexpectedly increases their fees for unexplained reasons, you may want to examine your relationship. When these issues arise, you should make every effort to respectfully engage your attorney first and fully discuss any concerns you may have.  You should always err on the side of caution and not make definitive conclusions and you should always provide your attorney with a good faith chance to redress any concerns you have.  It is important to understand that your attorney may not even be aware that anything is wrong or that you have significant concerns.  It is also important to understand that many attorneys won’t want to take a case where there has been a dispute between someone and one’s previous attorney.  Further, hiring a second/alternate attorney will result in additional legal costs.

Behm Law Group, Ltd. handles only bankruptcy cases. We have extensive experience in Chapter 7 liquidation cases, Chapter 13 reorganization cases, and family farmer and fisher Chapter 12 cases. To learn more about our services or to hire a bankruptcy lawyer in Luverne, MN, contact us at (507) -387-7200 today or stephen@mankatobankruptcy.com.

Posted on

Recent Cases of Significant Student Loan Debt Relief in Pipestone, MN

Under today’s bankruptcy laws, it’s very difficult to receive a discharge of student loan debt. While some lawsuits and proposed laws might signal a change in the way student loans are handled in individual consumer bankruptcy cases in the future, they are currently almost always excepted from discharge. In order to have a student loan debt discharged in your bankruptcy case, you need to be able to prove facts substantiating “undue hardship.” This means you’re facing severe difficulties, both financial and otherwise, that make it impossible or highly impracticable to repay your entire student loan. If you believe you are facing undue hardship or if you plan to use bankruptcy for other kinds of debt relief in Pipestone, MN, Behm Law Group, Ltd. can provide expert attorney legal services to support you every step of the way.

Student Loans

Along with the recent McDaniels v. Navient case and the proposed Covid-19 Student Loan Relief Act of 2020, there have been several recent bankruptcy cases that resulted in large portions of student loan debts being discharged. Over the past two to three years, Mis Loe, Katy Adams, Kevin Rosenberg, and Jamie Mudd all used bankruptcy to effectively discharge significant student loan debts.

Debt Relief

Mis Loe: Californian Mis Loe received a 98% discharge of her student loans that had accrued to over $350,000 in 2021. Loe faced health issues after starting her undergraduate degree in 1992, and her income halted with the 2020 pandemic. Her student loans had accumulated to $356,637.82. With an adversary proceeding in her Chapter 7 case, she was finally able to find debt relief from those loans.

Katy Adams:

Katy Adams of Texas found relief from her $41,509 in student loan debts. Adams worked as a public servant for over 20 years, but personal events forced her to leave that career. With several lower-income jobs making her incapable of making loan payments larger than the monthly minimum payments, Adams filed for Chapter 7 in 2019 to totally resolve the student loan debts.

Kevin Rosenberg:

U.S. Navy veteran, Kevin Rosenberg, owed six figures in student loans for over 15 years. In 2020, the New York Bankruptcy Court granted the discharge of his $221,385.49 worth of student loan debts. Rosenberg was an attorney, but after realizing that a law career wasn’t his calling, he left to become an entrepreneur with relative success. However, the recession and some personal issues caused an irreversible and significant drop in his income, leading to the increase of his student loans.

Jamie Mudd:

Nebraskan Jamie Mudd had almost $90,000 in student loan debt discharged in her bankruptcy case in 2019 with an adversary proceeding. After earning two Associate degrees and working multiple retail jobs, Mudd had also begun caring for her developmentally-challenged grandson. Because of these circumstances, she was unable to materially reduce her student loan debts which had amassed to $89,525.38.

These are just some examples of discharged student loan debts through bankruptcy. To learn more about finding debt relief in Pipestone, MN with bankruptcy, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatel:%20(610)%20431-3553tobankruptcy.com.

Posted on

Divorce Settlements and Chapter 13 Bankruptcy in Windom, MN

It’s very common for a bankruptcy to follow a divorce, and the legal settlements that a divorce establishes can be affected in various ways with a subsequent bankruptcy filing. While domestic support obligations, such as alimony and child support, are typically excepted from discharge in any bankruptcy filing, many other obligations incurred through a divorce can be discharged. Bankruptcy is a nuanced system that helps thousands of individuals and businesses find permanent relief from debts that they would never be able to repay. For those considering filing for Chapter 7 or Chapter 13 bankruptcy in Windom, MN and the surrounding area, Behm Law Group, Ltd. attorneys provide expert legal guidance and protection throughout the entire process. We help you construct your petition, file the necessary paperwork, documents, and forms, and navigate through all the legal requirements and court procedures.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy, or wage-earner bankruptcy, is a reorganization process that restructures your debts into a three- to five-year repayment plan that is suited to your monthly income and monthly necessary living expenses.  If you file for Chapter 13 after entering a divorce settlement, the particulars of that legal arrangement can be impacted in different ways.

Divorce Settlements

Marriage settlement agreements are contracts that divide the assets the couple previously jointly owned among the two divorcing parties.  It can also assign responsibility for certain debts that the parties incurred during the marriage.  Also, it establishes and assigns domestic support requirements like alimony and child support. The domestic support obligations, such as alimony and child support, established through the divorce decree/settlement typically won’t be discharged in a subsequent bankruptcy proceeding.  For various public policy reasons, the drafters of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 wanted to hyper-prioritize obligations related to child support and alimony so that such obligations would be virtually immune to the bankruptcy process.

Divorce and Bankruptcy

However, sometimes divorce settlement agreements will require one spouse to pay certain debts that were jointly incurred during the marriage and hold the other spouse harmless or immune from such debts.  Also, where one spouse receives more hard assets or property than the other spouse, a divorce settlement agreement can require the spouse who is receiving more hard assets/property to pay a lump sum cash amount to the other spouse as an equalizer of sorts.  These sorts of obligations sometimes can be altered or discharged in a Chapter 13 case.

To learn more about why divorce often leads to bankruptcy and how divorce settlement obligations are handled in Chapter 13 bankruptcy in Windom, MN, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.

Posted on

Terms to Know: Bankruptcy Code in Waseca, MN

Bankruptcy can be a highly complex legal process.  However, it can and will help you permanently resolve debts you can’t repay. Understanding the nuances of bankruptcy law typically requires a law degree and extensive experience. While it’s possible to file for bankruptcy without the help of an attorney, it’s certainly not recommended. The bankruptcy court will require you to provide information about all your finances, including income sources, debts, and living expenses. There will also be pre-bankruptcy filing and post-bankruptcy filing documentation requirements in addition to having to provide the bankruptcy fees. Behm Law Group, Ltd. attorneys will support and guide you through the entire process of filing your bankruptcy petition and they will work with you through the rest of the nuances of the bankruptcy code in Waseca, MN.

Bankruptcy Code

There are many terms outlined in the bankruptcy code that might be unfamiliar to someone who has never filed for bankruptcy relief. Some basic bankruptcy terms include:

Trustee:

The bankruptcy trustee is a court appointed official, who is usually an attorney, who oversees and administers your case. The trustee collects and examines your paperwork concerning your bank accounts, tax returns, etc. The trustee is a fiduciary for your creditors, particularly your unsecured creditors.  The Chapter 7 trustee administers your bankruptcy estate and liquidates your non-exempt properties and distributes the resulting value to your creditors.  A Chapter 13 trustee receives your monthly chapter 13 plan payments and divides the monthly payments up among your unsecured creditors.  The Chapter 13 trustee also reviews your chapter 13 plan repayment proposal to ensure that the terms of your chapter 13 plan comply with the requirements of the bankruptcy code and are fair to your creditors.

Credit Counseling:

Credit counseling is a pre-bankruptcy requirement that must be done through a court-approved counseling agency within 180 days before the filing of your bankruptcy petition. The counseling will address the budget issues/problems that you have been experiencing and it will examine the reasons that forced you to file for bankruptcy relief.

341 Hearing:

The 341 hearing, also called the meeting of creditors, is an administrative hearing that is usually conducted thirty (30) days after a bankruptcy petition is filed. At the 341 hearing, you and your attorney meet with the trustee administering your bankruptcy case.  The hearing usually lasts only ten (10) minutes or so and the trustee asks you various questions about your financial situation and about your bankruptcy petition to ensure that you have disclosed all your assets and creditors.  You are sworn under other oath and you must answer the trustee’s questions truthfully.  Your creditors may also attend the hearing and ask you various questions about your assets and liabilities.  In most cases, however, no creditors attend the hearing and it is just you, your attorney and the trustee discussing your financial situation.

Secured Property:

Any debts tied to a property are considered secured. This typically includes home mortgages, car loans, financing on furniture and appliances, and mortgages on other real estate, such as business properties and rental properties.

Unsecured Property

: Debts that are not tied to property are considered unsecured. Most individuals have unsecured debts like credit cards, medical bills, personal loans, tax debts, student loans and more.

Means Test:

The Means Test is a mathematical formula that calculates your income-to-debt ratio. If this ratio is lower than the state median or average income for a similarly sized household, you can qualify for Chapter 7 bankruptcy. If it’s higher, you may have to file for Chapter 13 bankruptcy relief instead.

Automatic Stay:

When you file any type of bankruptcy petition, the automatic stay is immediately in effect. This stays most creditor collection activities while your case is being processed. After you file a bankruptcy case, creditors can’t continue collecting on debts that you owe and they can’t harass you with nasty telephone calls or abusive and threatening letters.

To learn more about bankruptcy terms to help you understand if you need to file for bankruptcy and to obtain more information about the bankruptcy code in Waseca, MN, contact Behm Law Group, Ltd. at (507) 387-7200 today or stephen@mankatobankruptcy.com.

Posted on

Personal Chapter 11 Cases for Wage-Earner Bankruptcy in Fairmont, MN

At Behm Law Group Ltd., we provide legal guidance, support, and protection for individual Chapter 7, 12, and 13 bankruptcy cases as well as Chapter 7 and Chapter 13 business cases. Chapter 7 works to discharge your debts in exchange for the liquidation of your non-exempt assets. Both Chapter 13 and 12 work as reorganization processes in different ways. When you file for reorganization bankruptcy, your debts are restructured into a manageable repayment plan that lasts a predetermined amount of time (usually three to five years). If you have debts you know you can’t repay, even with a steady income, we can help you file for reorganization bankruptcy, AKA wage-earner bankruptcy, in Fairmont, MN, and the local area.

Wage-Earner Bankruptcy

Chapter 13 is the most common type of wage-earner bankruptcy filed. Chapter 12 is limited to family farmers and fishers with specific requirements for eligibility. Aside from Chapters 12 and 13, individuals can file one other type of reorganization bankruptcy: Chapter 11.

Chapter 11

Chapter 11 is usually a bankruptcy reserved for corporations, limited liability companies and other kinds of businesses, but in some circumstances, individuals can use Chapter 11 to resolve their debts. Almost always, an individual Chapter 11 involves real estate investment reorganization or the handling of unsecured debts that are too high for Chapter 13 relief.

Real Estate Investors

Real estate investors filing for Chapter 11 bankruptcy can rewrite mortgages, reduce interest rates, and extend the terms of repayment. For example, a filer could rewrite a mortgage on a property worth $80,000 tied to a mortgage in the amount of $100,000. That $100,000 mortgage could be rewritten or crammed down to the actual $80,000 value of the property. Then the terms of repayment could be extended up to an additional 30 years, making the monthly payment requirement much lower.

Unsecured Debt

If filers have unsecured debts higher than $419,275, they can use Chapter 11 to reorganize those debts and their secured debts into a repayment plan. This reorganization process works similarly to Chapter 13. Chapter 11 repayment plans, lasting a predetermined amount of time, will include terms for the payment of secured debts under more favorable terms to you.  Chapter 11 repayment plans will also provide for only the partial payment of your unsecured debts at 0% to 100% of what you initially owed.

Disposable Income

Filers will have to dedicate all their disposable income to meeting monthly payments. Filers also can reserve discretionary income for household expenses and necessities, such as food, gas, utilities, and more.

Individual consumer Chapter 11 cases are not common. For any Chapter 11 or Chapter 13 cases for wage-earner bankruptcy in Fairmont, MN, and the surrounding area, Behm provides expert attorney services. Contact Behm Law Group Ltd. by calling (507) 387-7200 or emailing stephen@mankatobankruptcy.com today to learn more.

Posted on

The Bankruptcy Code in Mankato, MN: Lawsuits that Cannot Be Halted

Bankruptcy is a debt-resolving process that can help with common unsecured debts, like credit card bills and medical expenses, several secured debts, including mortgages and car loans, and many other miscellaneous debts, like some tax debts. When you file for bankruptcy, you also get the benefits of the automatic stay, which forces your creditors to stop existing collection actions, including the halting of wage garnishments, evictions, foreclosures, and the assessment of late fees.  The automatic stay can also prevent creditors from starting legal action against you for the collection of debts. If you’re considering filing a petition, Behm Law Group Ltd. can help you navigate the complexities of the bankruptcy code in Mankato, MN, and the surrounding areas.

Automatic Stay

If a creditor continues to pursue legal activities against you after you file a bankruptcy case, the creditor can be sued and the bankruptcy court can sanction it quite severely.  While the automatic stay in the U.S. bankruptcy code is a very powerful tool for filers, there are limitations. There are some types of lawsuits and legal activities that the automatic stay will not stop.

For example, the following are some of the most common legal proceedings that are typically not stopped by the automatic stay:

Criminal cases:

The automatic stay will not stop criminal cases from moving forward. Assault, battery, larceny, and even driving on a suspended driver’s license are just some of the common criminal cases that the automatic stay will not stop.

Divorce proceedings and child support cases:

The filing of a bankruptcy case will not stop your spouse from filing a divorce proceeding.  The filing of a bankruptcy case will also not stop a court proceeding to determine whether you owe child support or alimony.  Divorce cases are handled in state family court, and they almost always involve issues concerning child support and/or alimony. Both child support and alimony debts are not discharged in bankruptcy.  However, obligations concerning property division settlements could be addressed and discharged in a Chapter 13 bankruptcy.

Personal injury cases:

If you could receive money from filing a lawsuit for personal injuries caused in a vehicle accident, etc., the legal proceedings could continue even after a bankruptcy has been filed.  However, the trustee administering the bankruptcy case will usually be very involved in such proceedings because there may be some money available from the settlement of such proceedings that the trustee could distribute for the benefit of creditors.

Cases where a motion to lift the automatic stay is granted:

In some cases where creditors could sustain significant losses or damages regarding their collateral, they may file motions with the bankruptcy court to lift the automatic stay.  By filing such motions, the creditors will request permission from the bankruptcy court to collect, secure and store their collateral to prevent the collateral from being damaged.  For example, presume your mortgage creditor has a validly perfected mortgage to your homestead.  Presume further that it is wintertime, that you no longer live in the homestead and that the power has been shut off by the utility company.  In such a case, the mortgage creditor could suffer additional financial losses because the water pipes in your homestead could burst and the house could be entirely flooded.   Accordingly, the creditor would file a motion for relief from the automatic stay and would reinstitute foreclosure proceedings after the bankruptcy court granted its request.  The mortgage creditor would then gain access to the homestead and would be able to secure it to prevent further financial losses.

In addition to these lawsuits, there are some other limitations of the automatic stay, including some tax determination proceedings and criminal sentencing processes.

To learn more about lawsuits and other aspects of the bankruptcy code in Mankato, MN, contact Behm Law Group Ltd. by calling (507) 387-7200 or emailing stephen@mankatobankruptcy.com.

 

 

 

Posted on

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.

Posted on

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.

 

Posted on

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.