Posted on

Debt Punishment of the Past Compared to Today’s Bankruptcy in St. Peter, MN

For as long as the concept of trade has been around, so has the concept of debt. Today, debtors have a wide range of options to recover from financial difficulties. Filing for bankruptcy is one of the most viable options for debt recovery we have as US citizens. Bankruptcy is designed to handle a filer’s debts in a process that provides fair treatment of creditors’ claims and results in a manageable situation for the filer. At Behm Law Group, Ltd., we have seen the system of bankruptcy in St. Peter, MN, prove its worth time and time again with each successful financial recovery our clients make.

We provide legal support with Chapter 7, 12, and 13 bankruptcies for community members and businesses in Mankato, MN, and the surrounding Southern Minnesota area, and we stand by the value of a successful bankruptcy case in helping our clients recover.

While the system of bankruptcy is a great option today, the debtors of the past didn’t have things so easy. In fact, there has been a wide range of harsh punishments for debtors throughout history.

A few of the most notorious punishments for debtors in history include:

  • Debt Slavery Laws: Up until 326 BCE, “debt slavery” in Rome and Greece was a common practice. Because there was no option for bankruptcy, debtors would instead pledge their labor as a security interest on loans. Creditors could take advantage of this security pledge and keep debtors in a slave-like internment until they could repay their debts. Slave bondage could even be passed from parent to child.
  • Death Penalty: Under the reign of Genghis Khan, debtors were given even fewer choices if they could not repay their loans. While they had the option to declare a form of relief akin to bankruptcy, after the third declaration, they were sentenced to death.
  • Medieval Penalties: Colloquially known as the Dark Ages, the medieval times have a reputation for hard conditions and harsh punishments. Debt punishments were no exception and included anything from flogging and branding to execution.
  • Imprisonment: Today, debts are not often associated with prison. Even fraudulent behavior in a bankruptcy case will most likely result in no harsher penalty than the dismissal of that case or the denial of debt relief. In Victorian England, however, failure to pay debts was punished with prison sentences or with exile to the British Empire’s “prison island” of Australia.

Debtors in today’s legal system can rest easy and know that they have many options to settle financial woes through the system of bankruptcy. Whether you qualify for Chapter 7 liquidation or Chapters 12 and 13 reorganization, the process of bankruptcy can turn the tides of unmanageable debt.

Contact Behm Law Group, Ltd. at (507) 387-7200 for expert support and legal counsel from beginning to end when you choose to file for bankruptcy in St. Peter, MN.

Posted on

Getting Through the Holidays During Chapter 13 Bankruptcy in Redwood Falls, MN

From October to January, national spending on holiday decorations, parties, and gifts increases by an average of $500 to $1,000 per person. This extra spending during the holidays is a luxury that many consumers may take for granted. Families living below the poverty line often struggle to make ends meet during the holiday season more than any other time of year, and households working through Chapter 13 bankruptcy have fairly strict options for spending during the holidays. If you’re considering filing for bankruptcy in Redwood Falls, MN, or if you’re working through a Chapter 13 repayment plan during the holiday season, Behm Law Group, Ltd. can help.

Chapter 13 bankruptcy is designed to restructure your debts into a manageable repayment plan, and it can be a highly effective process for resolving debts without crippling the debtor. When it comes to extra spending, however, the budget of a Chapter 13 plan can make things difficult.

Spending Limits

The problem with a Chapter 13 repayment plan during the holiday season is the limitation on disposable income. When you propose a repayment plan to the U.S. Bankruptcy Court, you disclose all of your debts, expenses, and income.

Your income is broken into categories of discretionary and disposable. The income you would normally spend during the holidays is a part of your disposable income, but during a Chapter 13 repayment period, most of that income must be used to repay your unsecured creditors.

Repayment plans last three to five years, and despite the rise in national spending during the holidays, your budget must be built around the requirements of your plan. Your budget in a chapter 13 case will have some cushion such that you will be able to use some of your disposable income to purchase gifts, etc. during the Holiday Season.  However, during a chapter 13 case there’s naturally going be to less room for spending money on gifts, decorations, or any other holiday luxuries than would be the case if one were not in a bankruptcy proceeding.  Most of your disposable income still must be applied to the benefit of your unsecured creditors.

Ways to Spend

There are some options that make it possible for your household to have holiday spending money during a Chapter 13 plan:

  • You can modify your repayment plan for a month or two and use the excess money on holiday festivities
  • You can borrow certain amounts from your 401(k) and resolve to replace that amount when your repayment plan period ends
  • When you receive your tax refund, your trustee will take most of that income since it’s considered disposable income, but will often leave a decent part of it for you to save or spend. If you plan ahead, this saved money can be used during the holidays

While these options may not be advisable during any other time of the year, it might be worth having holiday cheer to take advantage of these options.

If you’re considering filing for Chapter 13 bankruptcy in Redwood Falls, MN, Behm Law Group, Ltd. can help you throughout the process and offer legal advice and support for spending options during the holidays. Contact us at (507) 387-7200 today for more information.

Posted on

Filing for Bankruptcy in Mankato, MN, with an Income of $100,000

Bankruptcy in the U.S. is designed to help those struggling to meet their financial obligations and debt payments each month. Because bankruptcy is generally linked with extreme financial circumstances, it’s a process that’s often associated with low incomes and financial destitution. There are many cases, however, when an individual has a high income yet still qualifies for bankruptcy. Even if you have a steady, high income, bankruptcy might still be the right option for you. Behm Law Group, Ltd. offers legal advice and counsel to those considering filing for bankruptcy in Mankato, MN.

Many reasons exist why an individual consumer in the American economy might have accumulated debts they are unable to handle. Credit cards, mortgages, car loans, and medical bills are the most common causes of debt that can lead to a bankrupt household, even with a high income supporting that household.

The median income in 2017 was approximately $60,000 a year, but with the financial pressure of debts, bills, and everyday expenses, many households that earn median or higher incomes struggle to make ends meet.

A recent NPR story interviewed several households across the country. Each household in this story had an income higher than the national median, yet each still faced financial difficulties. The balances of the household debts and incomes were close, and many had higher debt-to-income ratios than families who get by just fine on incomes lower than the national median.

Because of this debt-to-income ratio, each of these households could benefit from filing for bankruptcy and receiving debt relief in the form of liquidation (Chapter 7) or debt reorganization (Chapter 13).

Chapter 7 With a High Income

It’s possible for households with an income higher than the state median to qualify for Chapter 7 bankruptcy. Most households that qualify will often have incomes lower than the median, which allows them to automatically pass the Means Test. However, you can still sometimes pass this test if your total monthly household income is less than your total monthly household living expenses.

Chapter 13 With a High Income

If you don’t pass the Means Test, you may still file for Chapter 13 bankruptcy. If you file for Chapter 13 bankruptcy your debts will be restructured, and you’ll only be required to repay a fraction of your overall total debt.

Even if you have a high income, you may still benefit from filing for Chapter 7 or Chapter 13 bankruptcy. Contact Behm Law Group, Ltd. today at (507) 387-7200 for more information about filing for bankruptcy in Mankato, MN.

Posted on

Filing for Bankruptcy in New Ulm, MN, as a Military Personnel or Veteran

All government employees, including military personnel, have the same rights to file for bankruptcy as any other citizen of the U.S. In some cases, members of the military and veterans even have additional benefits and options during the process of filing for bankruptcy than other citizens. Despite government pensions, salaries, benefits, and other financial support systems that military personnel and veterans have access to, sometimes it isn’t enough. Financial problems and debt can accumulate over time or happen suddenly when unforeseen expenses arise. With the help of Behm Law Group, Ltd., filing for bankruptcy in New Ulm, MN, is an effective method of recovery from financial struggles as a military veteran.

While members of the military and veterans follow the same rules and processes of bankruptcy as other citizens for the majority of cases, there are certain circumstances where they have additional benefits.

  1. Active-Duty Military: If you’re on active duty and file for bankruptcy, you’re protected under the Servicemember’s Civil Relief Act (SCRA). This act provides legal protection and may allow the courts to postpone or stay bankruptcy proceedings while you are in service overseas. The effect of automatic stay is also still active in addition to the benefits of the SCRA.
  1. Disabled Veterans: If you’re a disabled veteran, you’re not required to pass the Means Test to qualify for Chapter 7 bankruptcy. As a disabled veteran with debts primarily incurred while you were on active duty or in homeland defense, you’re exempt from taking the Means Test. Government-rated disabilities at 30% or higher, or discharge from duty because of disability will allow you to forgo the Means Test when filing for Chapter 7.
  1. Call to Active Duty: There are other cases that exempt military personnel from taking the Means Test when filing for Chapter 7. If you’re on reserve duty or a member of the National Guard and you’re called to active duty, or were in homeland defense 90 days after the 9/11 attack, you can forgo the Means Test during and 540 days after active duty.

As a U.S. citizen—civilian, military personnel, or veteran—the support system of financial recovery through bankruptcy is designed to be an option for all that qualify. If you’re considering filing for bankruptcy in New Ulm, MN, military personnel or not, Behm Law Group, Ltd. can help. Contact us at (507) 387-7200 today for more information.

Posted on

Cross-Collateralization and Bankruptcy in Jackson, MN

If you are considering filing for bankruptcy, your debts will be categorized as those securing purchased properties (secured debts) and those that do not involve tangible property (unsecured debts). Your creditors will also be categorized similarly, depending on which type of debt you owe to each. In the case of debt owed to a bank or credit union, categorization varies based on “collateral.” Behm Law Group, Ltd. works to determine how collateral may affect you when you file for bankruptcy in Jackson, MN.

Collateral

When you take out a loan through your bank or credit union, you give a security interest to that creditor. In the case that you fail to make payments on your loan, your bank or credit union can seize the property in which it has a security interest and sell it to satisfy the debt owed. In such a situation, such property is called “collateral”.

Collateral and Credit Unions

Banks and credit unions have two marked differences. First, credit unions do not operate for profit as banks do, and second, credit unions offer borrowing services that may include cross-collateralization clauses. Essentially, a cross-collateralization clause states that the security interest and a particular item of collateral may be connected to all your debts through your credit union.

This means that you may be able to take out a loan on a car from your credit union and you may also have credit card debt through your credit union card provider. A cross-collateralization clause may be attached to one of those debts tying the two together. Even if you pay back the full debt on your car loan, that car may still be sold as collateral if you stop making payments on your credit union credit card.

Debt Categorization and Cross-Collateralization

Cross-collateralization through a credit union can change the way your debts are categorized, which will, in turn, change the way those debts are handled in a bankruptcy case. For example, if you take out a loan through your bank to purchase a car, that debt is a secured debt because it is tied to and secured by the car. If you have credit card debt through that same bank, it is considered an unsecured debt because it is not secured by or connected to the car. In a Chapter 7 case, unsecured debts like credit card debts are discharged completely, and in a Chapter 13 case, you will only have to repay portions of those debts. However, if your car loan and credit card debt are taken out through a credit union and the credit union has a cross-collateralization clause, they both are considered secured debts. This means you will be required to repay both debts if you want to keep your car in a Chapter 7 case and to repay both debts in a Chapter 13 case.

If you are considering filing for bankruptcy in Jackson, MN, and have multiple loans through a credit union, you may have a situation where a cross-collateralization clause is involved. Contact Behm Law Group, Ltd. at (507) 387-7200 today for expert advice and legal assistance in your bankruptcy case.

Posted on

Treatment of Your Annuity When You File for Bankruptcy in Mankato, MN

When you file for bankruptcy, every aspect of your financial situation and all of your income and all of your debts are subject to review. Behm Law Group, Ltd. offers legal assistance and counsel in navigating the bankruptcy code for our community’s individuals and small businesses filing for bankruptcy in Mankato, MN.

Changes to the bankruptcy law in 2005 with the Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”) made a big difference in how a bankruptcy filer’s monthly income sources, monthly living expenses, debts and assets are analyzed in both Chapter 7 and Chapter 13 bankruptcy cases. If you are considering filing for bankruptcy, the current law requires that all of these aspects be accurately determined before a case is filed. When it comes to annuities, pensions, and retirement plans, the 2005 BAPCPA changes may help one determine one’s long-term options for one’s financial future after bankruptcy.

Understanding Annuities

Even if you own an annuity, it may not be fully clear how that account works or what type of annuity it is or what taxation rules apply to it. Annuities are investment accounts that regularly pay specified amounts to the owner from the total lump sum of money originally deposited in the account. The installments from an annuity are commonly scheduled to be paid out on a monthly basis, but they can also be paid out on a weekly or yearly basis.

Annuities are designed to help manage large amounts of money, safely containing the sum and providing a fixed income stream to the beneficiary of the annuity account. Common annuity accounts contain retirement funds, proceeds from insurance claims, proceeds from lawsuit settlements, and lottery winnings. The payments of an annuity can be made immediately upon the setup of the account or they can be deferred to start after a set period of time.

Annuity Exemptions in Bankruptcy

If you file for bankruptcy and you own an annuity, the annuity may or may not be protected by the bankruptcy exemptions.  Depending on the type of annuity involved and depending on the rules of taxation that apply to it, the following could apply:

  1. First, your annuity may qualify for exemption from the case. Because an annuity is a source of income, it becomes an asset in a Chapter 7 case. If your annuity is exempt, you may keep that account and protect the value from liquidation to repay creditors. If you file for Chapter 13 and can exempt your annuity, the value of that account may not factor in calculating the amount you will pay back to unsecured creditors in your repayment plan.
  2. Second, your annuity may not qualify for exemption from the case. This means the value of the account will be used to repay creditors in a Chapter 7 case, and in a Chapter 13 case, the account value will play a part in determining how much you will have to pay back to your unsecured creditors in your repayment plan.

Federal exemption laws allow the immediate exemption of tax qualified retirement plans and offer a Wildcard Exemption of potentially up to $13,200.

Whether your annuity qualifies for exemption when you file for bankruptcy in Mankato, MN, depends on a number of factors. To learn more about how your annuity will be handled in bankruptcy, contact Behm Law Group, Ltd. at (507) 387-7200 today.

Posted on

The Role of a “Bankruptcy Estate” When Filing for Bankruptcy in Worthington, MN

In every type of bankruptcy case, whether a Chapter 7 case or Chapter 13 case, a separate, distinct legal entity called the “bankruptcy estate” is created by operation of 11 U.S.C. §541 of the bankruptcy code.  This “bankruptcy estate” is in fact a separate, legal being from the person filing for bankruptcy relief.  When a bankruptcy case is filed, all a filer’s property is thrown into the bankruptcy estate.  In other words, when a person files for bankruptcy relief, all of that person’s property actually belongs to the bankruptcy estate.  However, the drafters of the bankruptcy code did not want a person to emerge out of the bankruptcy process completely destitute and without any property to reorganize. Therefore, the bankruptcy code provides for various value allotments or value limitations called bankruptcy exemptions that allow a filer to reclaim property back out of the bankruptcy estate and retain it.  In most cases, a person’s bankruptcy exemptions will be sufficient to allow one to retain all of one’s property.  If you are thinking about filing for bankruptcy in Worthington, MN, Behm Law Group, Ltd. provides legal advice and assistance throughout the process.

Chapter 7 Estate: If you qualify for Chapter 7, the bankruptcy trustee appointed by the bankruptcy court to administer your bankruptcy case will review all of your property in the bankruptcy estate and analyze whether some of the property will not be able to be protected with your bankruptcy exemptions.  To the extent that some of the property can’t be protected with your bankruptcy exemptions, that property will be labeled “nonexempt”, and the trustee will be able to sell it and distribute the value to your creditors.

Chapter 13 Estate: Chapter 13 bankruptcy is designed to restructure your debts into a manageable payment plan that lasts three to five years. The bankruptcy trustee, you, and your lawyer will work together to draft a repayment plan that the court will approve. A feasible plan is determined by your types of debts, your exemptions, and the value of the property in your bankruptcy estate.

What Makes Up the Bankruptcy Estate?

The property included in a bankruptcy estate is determined by Section 541 of the bankruptcy code. Although each bankruptcy case and each bankruptcy estate is different, the bankruptcy estate can be comprised of the following:

  • Real estate properties
  • Motor vehicles and vehicles of trade
  • Personal property items (clothing, jewelry, appliances, etc.)
  • Financial accounts
  • Security deposits
  • Properties loaned to another party
  • Wages, commissions, tax refunds, and other sources of income to which you are entitled
  • Income from rented properties
  • Asset value appreciation
  • Applicable community property
  • Applicable payments made to creditors before filing for bankruptcy
  • Property acquired within 180 days of filing for bankruptcy

Because these exact properties can vary from case to case, it may be difficult to determine which assets are exempt from your bankruptcy estate and which will not be exempt.

If you are considering filing for bankruptcy in Worthington, MN, contact Behm Law Group, Ltd. at (507) 387-7200 today to learn more about the different chapters of bankruptcy and how your bankruptcy estate may be determined.

Posted on

Number Breakdown: Exemptions When Filing for Bankruptcy in Marshall, MN

Whether you choose to file for Chapter 7 or Chapter 13 bankruptcy, the properties you own and the debts you owe will be subject to the bankruptcy process. In the case of Chapter 7, this means your properties (assets) can be liquidated in order to repay your creditors’ claims unless you use your bankruptcy exemptions to protect your property from liquidation. In a Chapter 13 case, the risk of losing assets to liquidation isn’t as significant like in Chapter 7, but your exemptions come into play to determine the amount you must pay back in a restructured payment plan. Behm Law Group, Ltd. can help you navigate the complicated process of claiming exemptions when you file for bankruptcy in Marshall, MN.

In both Chapter 7 and Chapter 13, the exemptions you can claim are the same. The amount of each exemption you claim regarding a particular asset depends on the amount of debt you owe against that asset. Depending on the value of the asset and the amount of debt against it, you can protect equity (the value of the asset that exceeds the debt against it) in the asset from liquidation in a Chapter 7 case and keep the property involved.  Of course, you must still pay the underlying debt against that asset.  In a Chapter 13 case, you can use exemption amounts to determine the minimum amount you must pay in your repayment plan.

In Minnesota, a filer may choose to use state or federal exemptions in one’s case depending on which is most beneficial. The limits for the most commonly claimed Minnesota exemptions include:

Homestead: Exemptions on standard residences and land up to a maximum of $390,000, and exemptions on agricultural land spanning up to 160 acres up to a maximum of $975,000.

Motor Vehicle: You may exempt a maximum of $4,600 for your motor vehicle or up to $46,000 for a vehicle modified for disabilities.

Insurance: You can claim up to $46,000 on insurance benefits from the death of a spouse or a parent, including another $11,500 for each of your dependents.

Employee Benefits: A maximum of $69,000 of present and future employee payments can be exempted in your bankruptcy case, including wages, stocks, pensions, or IRAs.

Personal Property: You may automatically exempt essential items including clothing, food, utensils, and one watch. You may also exempt up to $10,350 on appliances and furniture, up to $2,817.50 on wedding rings, up to $11,500 on your tools of trade, and up to $13,000 on farm equipment.

Wages: Your wages during a bankruptcy case and full repayment plan period are protected up to 75% or 40 times the federal hourly minimum wage. Whichever of these values is greater is the amount that will be exempt in your bankruptcy case.

The exemptions you can claim in any type of bankruptcy case can impact the outcome for both you and your creditors. If you have questions about how exemptions can work for you or to learn more about the different types of bankruptcy in Marshall, MN, contact Behm Law Group, Ltd. today at (507) 387-7200.

Posted on

Bankruptcy Options for Student Loan Debt Relief in Owatonna, MN

Bankruptcy is an effective course of action for alleviating several types of debt, including credit card debt, mortgages, car loans, and medical bills. The system of bankruptcy is designed to provide debt relief if a filer is struggling with these common financial woes, but it’s not a system necessarily meant to relieve another very common debt: student loans. In fact, at Behm Law Group, Ltd., we often counsel against filing for bankruptcy based on the goal of ridding only student debt. There are situations, however, where you can prove your circumstances demand student loan debt relief in Owatonna, MN.

In the case where you find you may be able to prove your inability to repay student loans, it’s crucial to have the legal assistance of a bankruptcy attorney. In order to obtain debt relief in a bankruptcy case for your student loans, you must be able to prove that you would suffer “undue hardship” if you were forced to repay those loans.

Undue Hardship

Undue hardship describes a situation in which you may be pushed into poverty and have minimal resources available to you for food, rent, clothes, healthcare, and transportation if you’re forced to continue paying a certain debt. In the case of repaying student loans, it’s very difficult to prove to a court that you may experience undue hardship.

You may have no income other than government support and may be able to prove you won’t be able to have a normal working life due to a disability, and yet, a court may still deny your request for student loan discharge. Without the right support during the legal navigation of student loans in bankruptcy (i.e. the help of a bankruptcy attorney,) it’s a long shot that you’ll have an argument that a bankruptcy court will approve.

How bankruptcy courts determine undue hardship for purposes of qualifying for student loan debt relief depends on where you live in the United States.  Some courts will use the Totality of Circumstances Test.  With this standard/test, a bankruptcy court can consider all aspects of your financial situation in determining whether you will be able to repay your student loan debt.  However, some courts in other areas of the United States use other tests. For example, another widely utilized test is the Brunner Test, which tests your situation against measures of poverty, the persistence of your current financial conditions, and your good faith in student loan repayment efforts. Other courts may use a test for Health Education Assistance Loans (HEAL) to determine if your student loans are unreasonably damaging your quality of life.

While you may be able to get student loan debt relief in bankruptcy, undue hardship can be difficult to prove. If you have questions concerning student loan debt relief in Owatonna, MN, contact Behm Law Group, Ltd. at (507) 387-7200 for a consultation today.

Posted on

Why You May Not Qualify for Chapter 7 Bankruptcy in Mankato, MN

If you’re struggling to meet debt payments and financial obligations with your income, you’re most likely eligible for Chapter 7 bankruptcy. The two main types of bankruptcy, reorganization and liquidation, are designed for individuals and businesses with very different financial situations. Reorganization bankruptcy (Chapter 13) is an option for those with higher incomes who want to keep their property in the process of filing. Liquidation bankruptcy (Chapter 7), however, is more suitable for those with lower incomes and debts that can be discharged in the process of filing. At Behm Law Group, Ltd., we can help you understand why you might benefit more from Chapter 7 bankruptcy in Mankato, MN, given your situation.

While the risk of loss of some property is higher in Chapter 7, Chapter 7 is generally your best option for recovering financially and getting a fresh start quickly, even with a low income. The following outlines the several reasons why you might not be eligible for Chapter 7 bankruptcy.

Income: To qualify for Chapter 7 bankruptcy, you must pass the Means Test, which determines your income level based on the median Minnesota income level of a household similar to your own. To pass this test and file for Chapter 7, your income must be lower than the Minnesota median income level for a household of your size.  Your income includes any sources of monetary gain except, generally, income tax refunds and Social Security benefits.  Income from inheritances received and retirement accounts that may have been cashed out also may sometimes be excluded from the calculation because such income sources would not constitute regular sources of income.

Repayment: Under 11 U.S.C. §707(b)(2), if your income is higher than the state median income for your household size, you might still be eligible for Chapter 7 under the condition that your income, as determined by this provision, would pay less than 25 percent of your nonpriority unsecured debts or $6,000.00, whichever is greater, or $10,000.00.

Failure to Meet Requirements: Before you can petition for Chapter 7, you must meet several requirements. First and foremost, you must attend a credit counseling course with an approved credit counseling agency within 180 days prior to filing. You must also complete certain paperwork and pay certain filing fees. Our expert attorneys can guide you through these sometimes-complicated requirements.

Previous Bankruptcy: If you filed for bankruptcy within the last 180 days and your case was dismissed for willful failure to abide by orders of the bankruptcy court, for acts of fraud, abuse, or by your own request or following the filing of a request for relief from the automatic stay by one of your creditors under 11 U.S.C. §362, you will not qualify for Chapter 7 bankruptcy.  Under 11 U.S.C. §109(g), you must wait 180 days after the dismissal of your previous case to qualify for Chapter 7 again.

Previous Discharge: If you filed for bankruptcy relief and received a discharge in Chapter 7 in the past eight years or if you filed Chapter 13 bankruptcy and received a discharge in the past six years, you will not be eligible to receive a discharge in a new case in Chapter 7 bankruptcy.

Fraud: Of course, in any bankruptcy case, your petition will be dismissed, and you will not be eligible for any form of bankruptcy if you’re found to exhibit fraudulent or abusive behavior relevant to your case.

To learn more about your eligibility and how filing for Chapter 7 bankruptcy in Mankato, MN, can give you a fresh start, contact Behm Law Group, Ltd. at (507) 387-7200 today.