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What does a Municipal Bankruptcy Mean?

When it comes to money, emotion can wreak havoc in our lives. A relative or friend uses a doleful expression to request a “loan” to stay out of dire circumstances. After a while, these “loan” requests become more frequent. Now that you’ve started a precedent, how do you stop? This same dilemma can happen with Minnesota cities just like Mankato, Owatonna, and Albert Lea. The bankruptcy attorneys at Behm Law Group, Ltd. want to illustrate a case in point.

It used to be that cities which experienced financial difficulty simply increased taxes. Then came The Depression of the 1930s. This method no longer worked.

Subsequently, a Chapter 9 municipal bankruptcy law was created. Only about half of the states in the U.S. incorporated this law into their systems according to an article by Adrian Shirk.

Since 2008, over 50 cities have filed for Chapter 9 bankruptcy; only 13 successfully. By far the largest municipal bankruptcy in the U.S. is Detroit, Michigan.

Cited Reasons for Detroit’s Bankruptcy

Detroit filed for Chapter 9 bankruptcy on July 18, 2013. To many, this result was inevitable. After reviewing Detroit’s financial history since the 1950s, reporters Nathan Bomey and John Gallagher concluded that time and time again, city leaders either refused or failed to enact tough decisions that could have staved off financial collapse.

They cited these factors as having the greatest impact on Detroit’s bankruptcy filing:

  • mass departure of city residents
  • sharply decreasing tax revenues
  • soaring home abandonment
  • billion-dollar borrowing by city leaders
  • creation of new taxes
  • failure to reduce expenses when necessary
  • large bonuses given to workers and retirees
  • failure to reduce health care benefits

All of these factors over many, many years spelled financial disaster. It seems some leaders never want to play the bad guy. In so doing, they become the bad guy anyway.

Let us explain. When people encounter difficult situations, your heart may go out to them. But, when it comes to money, a leader has to weigh the considerations of all residents. It’s not about making people happy in the short term by giving them money. It’s about how to effectively use taxpayer money to achieve the best, long-term results. This takes thorough planning, discipline, transparency, and effective communication.

A city needs to be run like a business. Leaders have to pay for street lighting, signs, police, fire, utilities, courthouses, public schools, public hospitals, parks, other public properties, and municipal salaries, benefits, and pensions.

In fact, the top two sources of municipal debt are the employee salaries and benefits of both current and retired employees.

Just like in a personal household or in another business, when income declines and expenses stay the same or increase, adjustments need to be made to stay out of debt. In a city’s case, city services suffer first. Maintenance items get postponed. Residents have to endure the new normal. City morale tanks.

Sometimes, the state offers to provide money in exchange for taking more control over the city’s budget.

Some Decisions Detroit Made After Bankruptcy

In Britain, if a city were to file for bankruptcy, everything would be liquidated. In the U.S., the counterparties have to stay as long as they are assured their debts will be paid.

This rule was fortunate for Detroit. Creditors eyed the 57,604 piece collection of artwork in the city-owned Detroit Institute of Art. Instead of auctioning everything off and losing part of the city’s culture, the collection was divested to a series of charitable trusts. For the next 20 years, the Detroit Institute of Art “committed to contribute $100 million to the city’s recovery.”

In addition, Detroit agreed to:

  • restructuring labor union pensions
  • utility shut-offs
  • state loans

According to the Michigan Constitution, pensions can’t be cut; however, Chapter 9 bankruptcy takes precedence over this rule.

While Detroit had more than 100,000 creditors, far more than you would ever likely have, we can still learn from Detroit’s predicament.

Steps to Avoid Bankruptcy

Work to keep income greater than expenses. If circumstances change, drill down to discover the root cause, and act accordingly. Do not react emotionally or let your emotions dictate how to spend your money. At times, that can be easier said than done.

Have a financial plan. Follow your plan. Scrutinize changes. Follow up with careful decision making. Even with that, if you ever have questions about bankruptcy in Mankato, Albert Lea, or Owatonna, MN, consult the bankruptcy attorneys at Behm Law Group, Ltd.

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Recovering Tuition in Bankruptcy in Mankato, Minnesota

For parents in and around Mankato, MN, imagine your sons and daughters going to college. Emotions overflow. A new adventure awaits. All that hard-earned money is finally producing more educated citizens. Now you have the time to pursue other interests. Behm Law Group, Ltd. congratulates you on this new chapter in your life.

Let’s fast forward a couple of years. Let’s say you’ve incurred a large amount of debt. You worry. Your financial decisions don’t seem to bring you much income, so you file for bankruptcy. At least your children’s futures will be better, you think. They’re already well on their way to achieving degrees.

There’s one slight hiccup the bankruptcy attorneys at Behm Law Group, Ltd. want you to be aware of. When someone files for bankruptcy, the court normally appoints a trustee. What do you think that trustee’s job is? It’s not to safeguard your money. Rather, it’s to help creditors recoup as much money as they can.

In fact, court-appointed trustees can review payments made 4-6 years prior to the bankruptcy in most states. If there doesn’t appear to be a viable need for that spent money, it can be re-taken by the trustees. Essentially, the end result would be as if you never spent the money in the first place.

Whoa, you exclaim! How could that affect you? Remember that tuition you paid? You may view that expense as essential and beneficial. Of course, your children can prove the education made their lives better. Or, can they?

Actually, in many cases, a court-appointed trustee can and has recovered spent tuition monies. Now you’re wondering what your rights are. We’re glad you asked.

Contact the bankruptcy attorneys at Behm Law Group, Ltd. for your bankruptcy needs in the Mankato, Minnesota area. Find out what trustees can and can’t do in your situation. Find out how recovered tuition would impact your child’s education. Get some answers and some peace of mind.

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Heirlooms & Bankruptcy in Mankato, Minnesota

You might think all you need is more money. Then you would never have to worry about bankruptcy. You could buy all sorts of expensive items and live in luxury. Certainly, it’s possible to live luxuriously without declaring bankruptcy. It’s possible to live modestly without declaring bankruptcy, too. Either way, you’re likely to have some family heirlooms that have been passed down through the generations. If you declare bankruptcy, can you keep those heirlooms? Or, would you have to give them up to pay creditors? The bankruptcy attorneys at Behm Law Group, Ltd. declare that it depends. Whether you live in Mankato, Faribault, Albert Lea, or Owatonna, MN, circumstances can differ between cases

If you ever find yourself in a financial bind, creditors will be looking at your assets and nipping at your heels for any way they can collect on their money. They have to follow rules in this process, however.

If you are contemplating bankruptcy now or in the future, please seek legal advice first. Behm Law Group, Ltd. specializes in bankruptcy and can help you work with creditors. We can inform you of your rights under bankruptcy law and what you can and cannot do. We can clarify future expectations. We can help you in southeastern Minnesota with a professional and courteous manner.

Whenever someone experiences a loss on TV due to a natural disaster of some sort, he or she inevitably expresses thankfulness for surviving and a will to re-build, but regret at having lost items of sentimental value. Family heirlooms have sentimental value.

It can take many years to acquire them. The memories remain priceless. Before you even consider relinquishing those treasures during a bankruptcy, let us review your options with you at Behm Law Group, Ltd.

It’s possible to re-build and to start over. It’s possible to buy new things. In a disaster it’s not always possible to keep remnants of family history. Let the bankruptcy attorneys at Behm Law Group, Ltd. work with you in Mankato to make sure any bankruptcy you encounter doesn’t become a disaster. Contact us today.

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Rebuilding After A Bankruptcy in Mankato, MN

For business owners in Mankato, Albert Lea, Owatonna and Faribault, MN, are you worried about what protesters could do in your area? We have seen the mayhem and destruction caused by protesters in larger cities across the country for some time now. Who’s to say where this chaos will move to next? If such an event happened to you, should you rebuild after declaring bankruptcy? Behm Law Group, Ltd. believes these are all good questions. Planning never hurt anyone. Failing to plan has.

We’re assuming that an act of destruction to your business would cause you to declare bankruptcy. Such may not be the case, especially if you have adequate insurance. The question of rebuilding remains either way.

You could decide that protests occur in enough areas and it would be difficult to escape them. You’ll rebuild and take the chance nothing bad will happen again. Or, maybe you were thinking about retirement. The insurance settlement would help you to live a life of peaceful enjoyment.

There is another option you may not have considered. Many people dream of doing something else. Are you one of these people? You have made a decent living toiling away at your business in Mankato, Albert Lea or Owatonna, but your soul doesn’t feel complete. Then bankruptcy comes along. You didn’t want this. You certainly wouldn’t recommend it. But, in this case, maybe it makes sense for you.

Perhaps bankruptcy would close one chapter, so you could start the next. Perhaps you could now pursue another hobby or interest with gusto and make it into a new business venture. You know you have the entrepreneurial skill set. You know you have the drive. Now you also have the passion.

Maybe you’re not worried about protests reaching your city. That doesn’t mean some other circumstance wouldn’t result in the same outcome.

The bankruptcy attorneys at Behm Law Group, Ltd. want you to dream big. What do you really want to do when you grow up? You could define your next steps in your plan.

You might decide you don’t want to wait for bankruptcy. You want to start now with your new business idea. Why not?

With any business, you have to expect the best, but plan for the worst. Include Behm Law Group, Ltd. in your planning. If nothing else, you will have the peace of mind of knowing what your next steps would be. Contact us today.

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Business Partners and Bankruptcy in Mankato, Minnesota

Does becoming an entrepreneur sound exciting, yet scary, to you? Would you feel more confident if you could have a business partner? After all, they say two heads are better than one. Of course, you’ve chosen the right person, someone nice and funny. Maybe this person resembles yourself. The bankruptcy attorneys at Behm Law Group, Ltd. strongly suggest you vet any potential business partner to help avoid bankruptcy in Mankato, Minnesota.

You might think we’re simply being pessimistic or, because we’re lawyers, we’re just trying to garner some business. Ask yourself though; how well do you really know this person? How well do you really know anyone? Even people in established relationships have been shocked to find out something about their partners that they never knew before. A relationship is just one aspect to consider.

Starting a business requires money. First, you have to seriously look at how you handle money. If your potential partner handles money just like you do, you’ve only found a similarity. If you know you have money issues, then the partner would have those same issues. And you thought bankruptcy wasn’t a possibility in Mankato, Minnesota, because the partner seemed “nice.”

What if the partner handles money differently? Now you have a potential conflict. How are you at dealing with conflicts and disagreements? How does your partner take care of such matters? If you have a business agreement, do you stipulate how differences are to be addressed? Are you still satisfied that being nice is the only qualification for becoming a business partner?

The bankruptcy attorneys at Behm Law Group, Ltd., would like to suggest you vet any potential business partner. No relevant topic should be considered too sacred to discuss, including bankruptcy. Consider researching the person’s background, observing him or her in various situations, and asking others for their unvarnished opinions. The time you invest in uncovering answers now may help you avoid bankruptcy later on.

If you decide to start a partnership after a thorough analysis, make sure you draft a business agreement that incorporates all important points. Don’t leave anything to chance. Once a disagreement arises, you will both feel better that a written course of action exists. At the point of contention, you will be able to focus on specifics rather than becoming embroiled in emotions.

The bankruptcy attorneys in Mankato, Behm Law Group, Ltd., are here for you should bankruptcy issues surface. And, by the way, we’re nice, too. We don’t just act that way. We are that way. Unless you’re the other guy. Then we’re tenacious. Don’t believe us? Just call Behm Law Group, Ltd. to find out.

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Can Intentional Sabotage Cause Bankruptcy Around Mankato, Minnesota?

Over the past few weeks we have been bombarded with news stories regarding the Germanwings co-pilot who deliberately crashed a plane directly into the French Alps. An unimaginable, unspeakable act–yes. Yet, we need to talk about it. Certainly, the parent company of Germanwings, Lufthansa, never dreamed this could happen. There is speculation Lufthansa may not be able to survive the anticipated lawsuits of the 150 passengers who perished.

Can intentional sabotage of your business or home cause bankruptcy? The short answer is yes, it could. However, there are many factors to consider. What does your insurance cover? How carefully do you screen your employees? How carefully do you screen your visitors? What is the wording in your business contracts? These reflect some of the considerations.

We aren’t advocating paranoia in southern Minnesota. Far from it. We only want you to take a closer look at your situation. If you employ some common-sense strategies, it’s likely you could minimize your exposure to risk.

For instance, given the current craziness in the world today, how likely is it that you could be subjected to sabotage? People wanting to make a horrific statement seem to choose some businesses more frequently. Is your business one of those?

Do you have a thorough vetting process for your employees, or do you sacrifice safety because you choose not to spend the time? What about your conflict resolution skills? Do employees harbor resentment because they don’t believe they’ve been heard? How difficult is it for you to incorporate needed change?

Do you have a procedure to handle visitors? Or do they roam around unattended with everyone assuming they have a right to be there?

The answers to these questions will be different depending on your business and your locale. While the bankruptcy attorneys at Behm Law Group, Ltd. don’t pretend to know your business better than you do, we could certainly help you in determining what your risk of bankruptcy would be in the event of intentional sabotage.

Behm Law Group, Ltd. specializes specifically in bankruptcy and can answer all of your bankruptcy questions in St. Peter, New Ulm, Mankato, Fairmont, Albert Lea, RedwoodFalls, Worthington, Marshall, Waseca and Owatonna, MN.

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Accidental Bankruptcy in the Mankato, Minnesota Area?

You’re in your parked car ready to drive away. Then it hits you. Literally. Another driver backs into you. Perhaps they were distracted. You don’t care about that. You care that your car is damaged, and your back hurts. You sue for damages. The other driver files for bankruptcy. What now?

Typically, when someone files for bankruptcy, in some cases, their debts can be erased. You’re probably wondering why someone would be able to shirk responsibility under the guise of bankruptcy, especially if filing after the fact, whether in Mankato, Owatonna, or Albert Lea, MN.

Bankruptcy isn’t always as simple as we’d like it to be. Lots of factors can affect a legal decision. We encourage you to contact Behm Law Group, Ltd. when you’ve encountered a situation similar to the one above.

Depending on your viewpoint in the Mankato, MN area, bankruptcy may be an advantage or a hardship. Although it may seem like an easy pass like in the example above, qualifiers do exist to prevent people from wrongfully filing for bankruptcy. Some types of debt can be extremely difficult to discharge. Some examples of debts that could follow you continuously include:

• Child support and alimony
• Student loans
• Tax debt
• Any debt not mentioned in the bankruptcy paper work

Just because someone filed for bankruptcy after a car accident they caused does not necessarily mean that they don’t owe you anything. In certain cases, judges can be convinced that certain debts should remain.

The bankruptcy attorneys at Behm Law Group, Ltd. can answer all of your questions regarding bankruptcy in Mankato, Faribault, Waseca, Fairmont, Worthington, Redwood Falls, St. Peter, Marshall or New Ulm, MN, accidental or not. Bankruptcy law can be confusing and emotionally draining, but with our help, you can get through it. Contact us today!

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Bankruptcy During Tax Season

While bankruptcies occur year round, timing is everything. Once you have determined you need to file for bankruptcy, consult with local attorneys, especially those whose practice focuses exclusively on bankruptcy. Factors such as assets, upcoming life changes (like marital status), and pending judgments you might have affect when you should file.

As you can see in the table below, people tend to file for bankruptcy predominantly around tax season. These statistics represent the 2014 bankruptcy filings according to the U. S. Courts:

Month in 2014 U.S. Total Filings Business Filings Non-Business Filings
January

70,491

2,233

68,258
February

74,508

2,228

72,208
March

70,491

2,233

68,258
April

90,670

2,563

88,107
May

87,966

2,467

85,499
June

76,223

2,253

73,970
July

79,239

2,218

77,021
August

77,190

2,098

75,092
September

75,312

2,039

73,273
October

81,179

2,295

78,884
November

64,250

1,830

62,420
December

65,161

2,094

63,067
Total

936,795

26,983

909,812

The highest number of total bankruptcy filings in the U. S. for 2014 was in April. In fact, according to Bob Lawless, bankruptcy filings consistently top out in the beginning part of the calendar year. Typically, January and February tend to accumulate at least 15% of the total filings, as is the case here.

Although the reasons could be numerous, let’s take a look at a few possibilities for why the beginning of the year and, in particular, the tax season may garner so much attention:

  • With taxes due April 15, people focus more on their finances and are apt to make significant changes then.
  • People think bankruptcy will lessen their tax burden.
  • Folks feel they can’t be audited if they file for bankruptcy.
  • Some think they can go on a spending spree before April 15, file for bankruptcy, and then owe nothing.
  • They expect a large tax refund and believe they can simply use that to pay toward a bankruptcy.

Wouldn’t it be nice if bankruptcy were that simple? It’s not. That’s why you should contact the bankruptcy attorneys at Behm Law Group, Ltd. Here’s why:

  1. In a bankruptcy, certain debt called priority debt cannot be discharged. Priority debt includes child support, DWI charges, some penalties, plus more.
  2. A bankruptcy does not stop an audit. The IRS gets priority here.
  3. If you go on a spending spree before declaring bankruptcy, that could be construed as intentional fraud.
  4. If you have filed for bankruptcy, you may or may not be able to spend your tax refund.

These are just a few examples where legalities can get tricky. You need to understand there are enough nuances within bankruptcy law that could really cause you problems if you don’t know what you are doing.

When to file tax returns regarding bankruptcy has its own issues. One thing that is certain is you cannot discharge taxes that haven’t been filed in the first place. For specific advice, contact the bankruptcy attorneys at Behm Law Group, Ltd. We serve mankato, MN and the surrounding areas, including Marshall, Worthington, Owatonna, New Ulm, St. Peter, Redwood Falls, Waseca, and Fairmont.

One good thing to keep in mind is that discharged debt doesn’t really affect taxes because it isn’t considered to be taxable income.

This April 15, if you are considering filing for bankruptcy, make sure you have the facts. It may not be in your best interest to file now. Any important financial change deserves careful thought. For further advice, contact your local bankruptcy attorney.

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The Importance of Having Support When Filing Bankruptcy

Support is underrated. Without any support, our minds may wander. We may be continually distracted from doing what we need to do. But, if we’re supported by someone who has our best interests at heart, we gain focus. Our supporters many times have the perspective we need to bring clarity to our situation. If ever you were to need support, it’s during bankruptcy. The bankruptcy attorneys at Behm Law Group will support you, but we can’t be with you at all hours.

It’s nice to have the support of someone who knows you even better. Few people succeed without having support of some type. We suggest you cherish your support network before, during, and after bankruptcy.

Bankruptcy in can be a very emotional experience. With so much uncertainty about your future, your emotions could interfere and possibly cause you to do something irrational. Temper your impulsiveness.

Talk with a trusted family member or friend. Share your fears and plans. Really listen. Just considering alternatives will allow your subconscious to work on your problem for you. Eventually, you’ll get to where you know which path is right for you.

One consolation is that the bankruptcy attorneys at Behm Law Group have worked with hundreds of bankruptcy cases. We may not know you as well as your friends, but we do understand bankruptcy very well. We understand its ramifications. We know what’s typical and what’s not. So, please include us in your support system.

Yes, things will be different. You’ll need to look at money a little differently than you did before. Surrounding yourself with people who share your vision is extremely important regardless of where you want to go in life. There’s nothing like getting the feedback you need while you venture forward on a new path.

Life brings us challenges all the time. Normally, they are ones we can learn to master and to overcome.

If you’re a Mankato-area resident contemplating bankruptcy and you don’t know who would help you, then turn to the bankruptcy attorneys at Behm Law Group. As professionals, we’ll deal with you frankly and compassionately. We know how the law can work for you.

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4 Post-Bankruptcy Planning Tips for Mankato Residents

So you survived bankruptcy. Now what? Maybe you think it was just a passing phase. Some other guy caused your pain. You can just go back to operating as before, right? Actually, you should take a closer look at your future vision.

While there are many steps you could take, we want you to nail down the following four:

1) Count your blessings: Hey, you survived. Good for you! It could have been worse. But, you made it. Accept that you have another chance. Do something good with it.

2) Promise yourself you’ll do better this time: If you think you can’t, you can’t, and you won’t. If you think you can, then you can. This means you have to have a positive mindset after bankruptcy so you won’t repeat the same scenario. Try something conservatively new and different to re-charge your batteries. Make a promise to yourself. Write it down. Look at it often to remind you to carry on.

3) Create a plan: Just focusing on active steps will help you to develop a positive mindset. Certainly, part of your plan should include the obvious. Live within your means. If you want more, then figure out a way to earn more money. Differentiate between wants and needs.

Yet, a plan doesn’t have to always be about work and drudgery. You already went through that with bankruptcy. Incorporate rewards into your plan. A reward doesn’t have to cost money. Instead, spend more fun time with your family. Allow yourself time to read a book, hike outside, or meet a friend. Each time you accomplish a have-to, reward yourself with a want-to item.

4) Implement your plan: Decide on a time frame for when you want to accomplish each goal. Stick to it. So long as you reward your efforts regularly, it should be easier to follow your plan.

In time, your new way of thinking will become a good habit. The bankruptcy attorneys at Behm Law Group hope that your good habits will be tough to break!

Located in Mankato, Behm Law Group serves the bankruptcy needs of Marshall, Worthington, Owatonna, New Ulm, St. Peter, Redwood Falls, Waseca, and Fairmont, MN.