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Bankruptcy in Owatonna, MN, Since 2005

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

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

Means Test and Income Measurement

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

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

Credit Counseling

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

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

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

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

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

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

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

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

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

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

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

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

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

Disposable Income

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

Discretionary Income

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

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

Discretionary vs. Disposable in a Repayment Plan

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

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

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Understanding Executory Contracts During Chapter 7 Bankruptcy in Pipestone, MN

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

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

What is an executory contract?  

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

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

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

What happens during Chapter 7 bankruptcy?

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

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

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Judgment Creditors and Your Assets with Chapter 7 Bankruptcy in Mankato, MN

If your debts and financial obligations put you in a position where you may qualify for Chapter 7 bankruptcy, it’s important to consider that option before one or more of your creditors place a judgment against you in court. If you stall in meeting debts payments but refuse to use bankruptcy options to recover from heavy financial obligations, your creditors have options to take matters to court. At Behm Law Group, Ltd., we encourage you to use the system set in place by the United States Congress to your advantage and file for Chapter 7 bankruptcy in Mankato, MN, if you qualify before your debt obligations lead to a more drastic situation.

Bankruptcy is a complex system of laws in place designed to protect debtors from being unable to resurface from drowning debts. However, that system is also designed to protect creditors, and it offers them several ways of regaining debts owed to them from debtors who do not or cannot meet scheduled payments. One of those options is by acting as a judgment creditor to use the courts approval in regaining what is owed to them.

What is a judgment creditor?  

If your creditor files a successful lawsuit against you and receives a money judgment, that creditor becomes a judgment creditor. Creditors cannot place judgment against secured debts, but any unsecured debts and nonpriority debts are susceptible to a judgment creditor. That title allows a creditor to find information about your assets and offers them more collection techniques than a normal creditor. A judgment creditor can forcibly take up to 25% of your net wages, collect from your bank account and other deposits, repossess certain items such as motor vehicles, and place liens against your properties and assets.

How do they gain information about your assets?

If your creditor has kept records of your debt to them over time, it can often be simple for them to find out what assets and properties you hold. Loan applications to your creditor, for example, give information about your name, address, employer, and certain asset information. The DMV can also provide information to judgment creditors about your registered vehicles including boats, cars, and recreational vehicles. Any real estate you own can also be easily searched on public online records.

If you’re struggling with multiple debts, it may be just a matter of time before your creditors file judgments against you. Filing for bankruptcy before then might save time and money and reduce the stress of legal action taken against you. For more information and to find out if you qualify for Chapter 7 bankruptcy in Mankato, MN, contact Behm Law Group, Ltd. at (507) 387-7200 today.

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The Rise of Consumer Bankruptcy in Owatonna, MN, During the Summer

Bankruptcy in the U.S. has a number of seasonal patterns that have existed for years. These patterns show an increase or decrease in the rates of bankruptcy for consumer households and businesses depending on the status of the economy and certain other events—for example, tax season sees an annual increase in bankruptcy cases during April. For the times of year when bankruptcy becomes more likely an option for individuals and businesses, Behm Law group, Ltd. can help. Our experienced bankruptcy attorneys provide legal advice and assistance to those considering filing for bankruptcy in Owatonna, MN.

In comparison with the last few years, bankruptcy rates have shown an unusual increase in filings during June and July of 2017. The numbers in record showed around a 16% increase in bankruptcy cases from the same time the previous year. These additional cases include both consumer and business bankruptcies.

Though there is no exact pinpoint cause of this abnormal increase in bankruptcy rates, there are several economic conditions that have accumulated against individuals and businesses. These circumstances have pushed those considering bankruptcy into deeper and deeper financial struggle.

From dipping storefront stability due to an ever-growing online shopping market affecting businesses, to changing interest rates and debt treatment affecting most consumers, there is a wide range of aspects to take into account when understanding why bankruptcy is growing.

Although it seems dangerous for so many US businesses and households to rely on bankruptcy relief all at once, it remains a viable option for those struggling with debts and difficult financial obligations. With the help of Behm Law Group, Ltd. attorneys, small businesses and individuals can benefit from choosing to file for Chapter 7 liquidation or Chapter 13 reorganization bankruptcy.

Long-Term Benefits of Bankruptcy

  • Debt relief is the main benefit from filing for bankruptcy. If your debts are treated with Chapter 7, there are several debts you will not have to pay back, and if your debts are treated with Chapter 13, you’ll have a chance to restructure your repayments into a manageable plan in which you pay only small parts of your debts.
  • Credit relief is also a viable long-term option for those with completed bankruptcy cases. Although your credit will not reflect positive changes immediately, you can begin to rebuild your credit over time without the negative impact of accumulated debts.
  • An overall fresh start is possible with bankruptcy, and despite the disadvantages that bankruptcy may pose, the immediate and long-term advantages outweigh the economic damages that may affect you.

If you’re considering filing for bankruptcy in Owatonna, MN, this summer, or in the near future, our attorneys can be key in helping you put together a successful case. For more information, contact Behm Law Group, Ltd. at (507) 387-7200 today.

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Benefits of Filing for Chapter 13 Bankruptcy in Marshall, MN, Over Chapter 11 Bankruptcy for Small Businesses

At Behm Law Group, Ltd., we work with individuals and small businesses filing for bankruptcy. Our experienced bankruptcy attorneys specialize in providing legal advice and assistance for Chapter 13, Chapter 7, and Chapter 12 bankruptcy. For small businesses struggling with debts and difficult financial obligations, bankruptcy might be a beneficial option. Behm Law Group, Ltd. can help local small businesses eligible to file for debt reorganization with Chapter 13 in Marshall, MN.

For any small business wrestling with financial problems, bankruptcy offers four options:

  • Chapter 12, which works as a system of debt reorganization but is only applicable to family farmers and fishermen
  • Chapter 7, which works as a system of debt discharge and asset liquidation
  • Chapter 11, which works as a system of debt reorganization and for which most businesses are eligible
  • Chapter 13, which works as a system of debt reorganization as well, but for which most businesses do not qualify

For most small businesses looking to restructure their debts, Chapter 11 is a common and viable option. However, if your small business qualifies for Chapter 13, it may be more effective to file for that form of debt reorganization instead of Chapter 11 for several reasons.

Why Chapter 13?

Chapter 13 works as a bankruptcy plan for individuals with regular income that own and operate their business with sole ownership. If your situation matches the requirements for Chapter 13 business bankruptcy, you can file a petition for yourself. This is beneficial because Chapter 13 acts more quickly than Chapter 11. For small businesses struggling with meeting current debt payments, using Chapter 13 allows them to immediately restructure those debt payments in a new repayment plan. The commitment period for repaying those debts cannot be longer than five years with a Chapter 13 plan. Debts must be restructured to fit in that time period, meaning the amount to be repaid will often be less than the amount in a Chapter 11 plan. There’s also a greater range in types of debts that can be discharged in a Chapter 13 plan than in a Chapter 11 plan.

 If you’re struggling with accumulated debts and financial obligations for your small business, filing for reorganization bankruptcy is often a helpful option. To find out more information about how to qualify for Chapter 13 bankruptcy in Marshall, MN, contact Behm Law Group, Ltd. at (507) 387-7200 today.

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When Things Aren’t Straightforward During a Petition for Bankruptcy in Luverne, MN

Preparing for bankruptcy requires a significant amount of paperwork for the filer. The forms, schedules, and other paperwork involved in a bankruptcy petition are necessary to determine how your case will be handled. Filling out any of this information about your financial situation incorrectly can drastically impact how well a bankruptcy case can go. Behm Law Group, Ltd. provides important legal advice and assistance for those struggling financially. If you’re considering filing for bankruptcy in Luverne, MN, our bankruptcy lawyers might be your key to a successful case.

When you file for bankruptcy, you must list all of your debts in your bankruptcy paperwork. This includes mortgage debts, vehicle loans, tax debts, student loans, old utility bills, debts to friends and relatives, among others.  These claims of debt are often straightforward for individual consumer bankruptcy cases, but in some cases, claims can be more complicated. If your debts depend on several past actions or disagreements, they may fall into the categories of contingent, unliquidated, or disputed. 

Contingent Claims: When the amount of your claim depends on a pending event or decision, it is considered contingent. Cosigners on secured loans often face contingent claims when filing for bankruptcy because the principal signer is responsible for the debt until that signer defaults their claim.

Unliquidated Claims: In cases of unliquidated debts, a claim exists on paper, but its amount has yet to be determined. This often includes claims involved in pending legal cases such as lawsuits and insurance claims. Debts owed to your lawyer involved in pending cases are also considered unliquidated claims.

Disputed Claims: Whenever you and your creditor disagree on the amount or even the existence of a debt, it is a disputed claim. This can include personal debts, mortgages, and car loans, but it can also include tax debts in dispute with the IRS.

Finalized claims can be resolved during your bankruptcy case, but the end result depends on a number different aspects of your financial situation. For example, liens, creditor decisions, and the determination of pending events will all affect how your claims are decided.

For more information about how your claims will be handled during your case, contact Behm Law Group, Ltd. at (507) 387-7200 today. Our experienced lawyers can be the key to helping you prepare for bankruptcy in Luverne, MN.

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Understanding Unsecured Debt and How It’s Treated During Bankruptcy in Windom, MN

In most cases of consumer bankruptcy, the debts accumulated will be partially made up of unsecured debts. Whether this means the filer has a large amount of credit card debt or simply a significant amount of personal loans, if you’re struggling with your debts, unsecured or otherwise, bankruptcy might be the right option for you. Behm Law Group, Ltd. can help you understand how your unsecured and secured debts are treated differently when you file for bankruptcy in Windom, MN.

Unsecured debts are treated differently in both Chapter 7 bankruptcy and Chapter 13 bankruptcy. The type of bankruptcy case you file under will decide the outcome of how unsecured debts change the way your bankruptcy case is handled.

What is Unsecured Debt?

There are many kinds of debt that fall into the category of unsecured debt. The most common of these is credit card debt, but several other types of debt many people encounter in life are also considered unsecured. The fundamental definition of unsecured debt is any debt that doesn’t use a tangible property as collateral. Any debt that involves a property, such as a home or a motor vehicle, is considered secured debt and is treated differently in both Chapter 7 and Chapter 13 cases.

Some other examples of unsecured debt include:

  • student loans
  • utility bill debts
  • income tax debts
  • personal loans not involving property
  • medical bills
  • pending court judgments
  • and, of course, credit debts in all forms

How are Unsecured Debts Treated?

In a Chapter 7 case, your unsecured debts will most likely be entirely discharged. There are, however, exceptions to this. For example, student loans are not subject to the general discharge granted in Chapter 7 or Chapter 13 cases.  In order to get student loans discharged, one must start an actual lawsuit against the student loan creditors and ask the bankruptcy court to specifically discharge the student loans. In a Chapter 13 case, the way your unsecured debts are paid in your chapter 13 repayment plan and how much of those debts are paid depends on the amount of disposable income you have.

If you’re considering bankruptcy because of your accumulated unsecured debts, contact Behm Law Group, Ltd. for legal advice and assistance. For more information about filing for bankruptcy in Windom, MN, contact us today at (507) 387-7200.

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When and Why a Business Might Be Subject to Involuntary Bankruptcy in Pipestone, MN

In the majority of situations, a bankruptcy case is a voluntary legal process. However, Congress put provisions in the bankruptcy code so that it would be a fair process for both the filer and creditors involved in a case. While most cases of bankruptcy are set into motion by the choice of the filer because of accumulated debts and difficulty in meeting financial obligations, there are times when creditors can force a bankruptcy case upon the debtor. If you are facing involuntary bankruptcy in Pipestone, MN, Behm Law Group, Ltd. can help you through the process with legal advice and assistance.

Involuntary bankruptcy occurs very rarely, but it’s legal for creditors to file bankruptcy proceedings against their debtors. In most situations, involuntary bankruptcy is forced on businesses, but on some occasions, involuntary bankruptcy can be filed against an individual.

When Involuntary Bankruptcy Occurs

The bankruptcy code includes provisions that protect creditors against debtors who may refuse to pay their debts despite having viable assets which could be used to pay creditors. If a debtor isn’t paying debts to their creditors but has assets that could be used to repay creditors, it’s possible for creditors to file an involuntary bankruptcy against that debtor. Small businesses find themselves forced into involuntary bankruptcy more often because businesses typically have more assets than individuals.

If you own a small business and aren’t paying your debts but own a large amount of assets, your creditors can, sometimes, legally force you into bankruptcy. Because most individuals have significantly fewer assets compared to businesses, filing an involuntary bankruptcy is often unhelpful for creditors because the possible return to the creditors would be far less than the cost of forcing an individual into bankruptcy.

How It Works

If your creditors know you have assets but are refusing to pay your debts, they can file a petition to the bankruptcy court against you, requesting forced bankruptcy action.  Usually, three creditors must be required to do this.  If an involuntary bankruptcy is filed against you and if you don’t respond within 20 days, the bankruptcy court will allow creditors to go forward with the involuntary bankruptcy action. If you do respond, you’ll have a hearing and a chance to defend your situation. If you’re forced into involuntary bankruptcy, the process after that will be similar to a voluntary bankruptcy case.

If your creditors have threatened or have begun the process of petitioning your involuntary bankruptcy in Pipestone, MN, Behm Law Group, Ltd. can help. For more information about our bankruptcy lawyers and your case, contact us at (507) 387-7200 today.