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Undue Hardship and Federal Student Loan Debt Relief in Marshall, MN

There are many debts that can be discharged through a bankruptcy case. Most commonly for individual consumers, credit card debt, medical bills, mortgages, old utility bills, bounced checks, and car loans, and others can be discharged. However, there are debts that are considered priority debts, and these are generally not subject to debt relief in the bankruptcy process.

Debt Relief

Child support, alimony, most tax debts, personal injury claims caused by intoxication, criminal fines and penalties and several other debts are priority debts that are generally not subject to discharge in a bankruptcy case. While student loans are not priority debts, until very recently, the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) made it very difficult to discharge student loans through bankruptcy. In 2019, a new bill was introduced in the House of Representatives that, if passed, may make it much easier to discharge student loan debts in bankruptcy. This bill, the Student Borrower Bankruptcy Relief Act (SBBRA) would remove the 2005 BAPCPA restrictions. Until then, receiving debt relief in Marshall, MN for student loans will be difficult. If you’re considering filing for bankruptcy, Behm Law Group, Ltd. can help you work through all debts that could be discharged in your case.

Undue Hardship

Until the SBBRA passes, bankruptcy filers will only be able to discharge their federal student loan debts in their bankruptcy case if they are able to prove “undue hardship.” This requires you to actually sue the student loan lender by filing an adversary proceeding in which you request the court to discharge the student loans on the basis of undue hardship .  It is your burden to prove or demonstrate factors substantiating undue hardship to the bankruptcy court.

Threshold for  Undue Hardship

In Minnesota, the threshold to prove undue hardship  is more favorable/lenient than in other parts of the country.  The bankruptcy court may review the totality of your financial circumstances to determine if it would be an undue hardship for you to pay the student loans.  To demonstrate undue hardship and possibly have your federal student loan debts discharged in your bankruptcy case, you may need to demonstrate, among other things, the following:

  • You have participated in an income contingent repayment program or other repayment options presented to you by the student loan lender but those options have not been successful.
  • You have reached the top of your earning potential in the job market in your area and there is little possibility for you to increase your income either in your current job or by changing your employment.
  • You’ve made good faith efforts to repay the student loan prior to filing for bankruptcy.
  • You are older and close to retirement and there is no realistic chance that you could fully repay the student loan before you reach retirement age.
  • Retaining the student loan debt would make it extremely difficult for you to pay your reasonable and necessary monthly living expenses.
  • You have some physical or mental impairment that negatively impacts your ability to remain employed or find alternate employment that would provide you with an increased income.

If the court finds evidence that all these conditions are present, it may allow you to include your federal student loans for discharge in your case. If they are included for discharge in an individual consumer case, they could be handled as follows:

  • They may be discharged in full. This is most likely when undue hardship is demonstrated in a Chapter 7 liquidation case.
  • They may be discharged partially. You would still be required to repay the part of your student loans that are not discharged.
  • They may not be discharged at all.  However, they may be restructured under  lower interest rates and other more lenient terms. This outcome is most likely when undue hardship is demonstrated in a Chapter 13 reorganization case.

Adversary Proceedings

In any adversary proceeding you file to prove undue hardship your creditors will have a chance to fight the case. If you plan to attempt to prove undue hardship for federal student loan debt relief, it’s crucial to have the protection of a highly experienced bankruptcy attorney.

To learn more about finding debt relief in Marshall, MN, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.

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The Most Common Exemptions Allowed Through Bankruptcy Code in Luverne, MN

When you file for Chapter 7 bankruptcy as an individual, some of your non-exempt assets may be liquidated in exchange for a discharge of your debts. While this is always a possibility, in most chapter 7 bankruptcy cases people don’t lose anything other than their debts.  This is because part of filing for individual consumer bankruptcy relief is taking advantage of various generous bankruptcy exemptions provided either under the federal bankruptcy code or under state law to protect your property.  Exemptions are allotted value amounts that can be used to protect the equity or value you have in your property.

Bankruptcy Code

In Minnesota, filers can choose either the Minnesota state exemptions or the federal bankruptcy code exemptions, but they aren’t allowed to mix and match between the two. For some filers, Minnesota exemptions might be more beneficial than the federal exemptions and vice versa. If you’re considering filing any kind of individual consumer petition, Behm Law Group Ltd. can help you navigate the nuances of the bankruptcy code in Luverne, MN, and the local area to build a strong case. Our attorneys provide legal protection and aid so you can effectively find long-term debt relief through bankruptcy.

Commonly Claimed Exemptions

There are many ways individual asset exemptions can apply in a chapter 7 liquidation process, but the most commonly claimed exemptions include:

  • Homestead: The homestead exemption protects your primary place of residence. Currently, the exemption amount in Minnesota is a maximum value of $420,000 for non-agricultural land. Agricultural land of up to 160 acres can be exempted up to $1,050,000 if it’s being used for farming purposes.  A rental property, such as an apartment building that you may own, can also be exempted if you are using part of it as your primary place of residence.  Under the federal bankruptcy exemptions, a person is allowed $25,000 to protect one’s primary place of residence.  If two married people file for bankruptcy relief, and provided they both are listed as owners of the homestead, each one would be able to claim $25,000 for a total of $50,000.
  • Motor vehicle: For vehicles that are the primary household car, such as one you use to drive to work or drive your children to school, you can exempt $4,600 per person. You can also exempt up to $46,000 if that vehicle has been adapted to accommodate disabilities. Under the federal bankruptcy exemptions, a person is allowed $5,000 to protect the value in a vehicle.
  • Personal property: Additional personal items like clothing, furniture, appliances, and food can be exempted in varying amounts. In Minnesota, for example, you can exempt appliances and furniture up to $10,350 and wedding rings up to $2,817. Under the federal bankruptcy exemptions, each person is allowed $13,400 to protect one’s personal property and $1,700 for one’s jewelry.
  • Tools of the trade: Farm equipment and other “tools of the trade” can also be exempted given your occupation. If a certain portion of your income is from your trade, the court wants you to protect the necessary tools from liquidation so you can continue using them to make a living. For farm equipment, Minnesota allows $13,000 to be exempted and $11,500 for any other non-farm tools of the trade. Under the federal bankruptcy exemptions, a person is only allowed $2,525 to protect one’s tools of the trade.
  • Wages: If you file for bankruptcy, some of your wages may be at risk of liquidation. For unpaid wages, the State of Minnesota exemptions allow you to protect 75% or 40 times the federal hourly minimum wage. Your wages will be exempted up to three times those amounts (whichever is greater).
  • Wildcard (federal): The Minnesota state exemptions don’t offer a wildcard exemption provision, but if you claim federal exemptions, you could be allowed $13,900 for a wildcard exemption that you could use to protect any asset. That amount may be dependent on what you choose to apply the exemption to. Learn more here.

To learn more about the bankruptcy code in Luverne, MN, and about filing a bankruptcy case, contact Behm Law Group Ltd. by calling (507) 387-7200 or by emailing stephen@mankatobankruptcy.com.

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Categorizing Debt Claims for Liquidation Bankruptcy in Pipestone, MN

Several types of bankruptcy are available to individuals and businesses. For individual consumers, Chapter 13 and Chapter 7 are both potential options. Chapter 13 works to reorganize debts into a three-to-five-year repayment plan suited to your income and reasonable and necessary monthly living expenses. Chapter 7, on the other hand, is a liquidation bankruptcy where non-exempt assets are sold/liquidated in exchange for the discharge of debts. This latter chapter is the most common form of bankruptcy for individual and small business bankruptcy filers.

Bankruptcy Attorney

If you are considering filing for bankruptcy through either chapter, you need to be aware of the level of detail that will be required in your petition. The bankruptcy court will require your bankruptcy attorney to review documentation concerning your income, assets, debts, and other particulars of your financial situation. Because of the strict documentation requirements that are necessary to adequately and completely draft a bankruptcy petition, we recommend getting help from a professional. Behm Law Group Ltd. attorneys provide legal guidance, protection, and support throughout reorganization and liquidation bankruptcy in Pipestone, MN, and the surrounding areas.

Liquidation Bankruptcy

When you file for any kind of bankruptcy, your debts will be classified and treated differently depending on their status as secured, unsecured, or priority. For liquidation Chapter 7 bankruptcy, these different debts are handled in the following ways:

  1. Secured debts are secured to a property, such as a home or car. Debts that are secured to an asset can be discharged in liquidation bankruptcy.  The secured creditor can take and sell its collateral and apply the sale proceeds against the debt you owe.  If the sale proceeds are insufficient to pay off all the debt, the unpaid balance is discharged and you are not responsible for paying it.  Alternatively, many people want to retain their house or their car and they want to retain the debts that are secured by those assets.  In many cases, people will reaffirm the debts with the secured creditors by entering into a reaffirmation agreement.  A reaffirmation agreement is a document that memorializes the terms and conditions of the original mortgage or vehicle loan.  By signing it, a filer agrees to continue being liable on those debts after a bankruptcy case has concluded.  Essentially, a filer can preferentially treat those secured debts and exempt them out of the bankruptcy process.  Any equity or value that a filer has above the debt against a house or a car is protected from one’s creditors by asserting one of the many exemptions that are provided under state or federal law.  Exemptions are allowed in varying amounts. The exemptions also change over time as market values fluctuate (some current important exemptions for Minnesota).

 

  1. Unsecured debts are not tied to or secured by a property. Some of the most common unsecured debts include credit cards, medical bills, overdue utility bills bounced checks, and personal loans. In chapter 7 liquidation bankruptcy, these debts are completely discharged. However, there are unsecured debts that are considered priority, and these are treated differently than general unsecured debts.

 

  1. Priority debts are usually excepted from a chapter 7 discharge. General Common priority debts include alimony, child support, tax debt, criminal fines and penalties and debts for personal injury caused through intoxication and wrongful death claims.  Like all debts, they must be disclosed or listed in a bankruptcy.  There are some nuanced exceptions to the general rule that priority debts are not discharged.   One exception for instance is 1040-type tax debt that is dated/ old.  For instance, presume that you owe $5,000.00 for the 2010 tax year because your employer did not withhold enough out of your paychecks.  Presume further that you duly filed your 2010 state and federal tax returns by April 15, 2011.  Presume still further that you filed for chapter 7 bankruptcy relief on August 21, 2021.  This sort of dated/old tax debt would very possibly be discharged in your chapter 7 bankruptcy case.

In every bankruptcy case, all debts are handled in complex ways that vary depending on the situation. However, overall, the secured, unsecured, and priority debts will likely be addressed as previously described. To learn more about filing for chapter 13 reorganization or chapter 7 liquidation bankruptcy in Pipestone, MN, and the local region for long-term debt relief, contact Behm Law Group Ltd. by calling (507) 387-7200 or by emailing stephen@mankatobankruptcy.com.

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Famous Bankruptcy Frauds and Finding Permanent Debt Relief in Windom, MN

If you are facing debts you can’t repay, there are several options for individuals and businesses alike to permanently resolve those financial burdens. In many cases, filing for bankruptcy can be the most effective choice for people with common kinds of debt. For individuals, Chapter 7 and Chapter 13 are both very effective depending on the types of debt you hold, your income, and your ordinary, monthly living expenses. Behm Law Group, Ltd. attorneys offer expert legal advice and protection for individual consumers and businesses filing for Chapter 7, 12, and 13. We can work with you to determine if filing for bankruptcy will be the best way to find permanent debt relief in Windom, MN and the surrounding areas.

Bankruptcy Fraud

Since the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) was established in 2005, committing bankruptcy fraud has become more difficult. Three of the most famous cases of celebrity bankruptcy fraud after the BAPCPA was enacted were cases of tax evasion and asset hiding. Both illegal actions are common ways of using the bankruptcy process to deceptively protect assets while trying to obtain permanent debt relief.

Three famous cases attempted since the BAPCPA was passed in 2005 include:

  1. Lenny Dykstra: In 2008, retired MLB center fielder Lenny Dykstra filed a Chapter 11 bankruptcy case. His petition listed less than $50,000 in assets and $10 million to $50 million in debt liabilities. He was quickly found to have hidden and sold more than $400,000 in assets. He entered a plea deal in 2009 and was sentenced to six months in a federal prison, 500 hours of community service, and a restitution fee of $200,000.
  2. Joe and Teresa Guidice: In 2009, “The Real Housewives of New Jersey” star Teresa Guidice and her husband Joe Guidice filed bankruptcy. They reported over $10 million in debt and a liquidation auction was scheduled. They withdrew their petition before that date in 2010. In 2013, they were charged with conspiracy to commit wire, mail, and bankruptcy fraud, largely due to their failure to file tax returns for five years and their failure to report Teresa’s earnings from the housewives show. Teresa served 11 months in prison, and Joe completed his 41-month sentence in 2019. He is currently held in an ICE detention center awaiting deportation because he never acquired U.S. citizenship.
  3. Abby Lee Miller: Dance studio owner Abby Lee Miller (whose studio was featured in the reality show “Dance Moms”) filed a Chapter 11 case in 2010. She was quickly charged with bankruptcy fraud after assets she had hidden were discovered. Her charges also included perjury in court. Miller was sentenced to one year in federal prison, two years supervision after release, a $40,000 fine, and a $120,000 restitution fee.

Debt Relief

All these cases of fraud are extreme examples, but they exemplify some of the most common methods of asset hiding, tax evasion, and falsification of forms. To learn more about using bankruptcy for legal permanent debt relief in Windom, MN, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.

 

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Filing Bankruptcy in Mankato, MN: When You are Personally Liable for Business Debt

When a business files a bankruptcy case, it’s generally processed without holding the owners, members, or shareholders personally responsible for business debt. However, there are several scenarios when business owners can be held liable for business debts. Typically, this depends on the type of business, whether it’s a limited liability corporation (LLC), sole proprietorship, partnership, nonprofit, or other form of incorporated company. If you are filing bankruptcy in Mankato, MN and the surrounding areas for your business or your personal debts, Behm Law Group, Ltd. can help you put together a strong petition that will provide long-term, effective debt relief. Our attorneys work with clients filing for personal/business Chapter 7 bankruptcy or personal Chapter 13 or 12 bankruptcy.

Chapter 7

Companies of any type can use Chapter 7 to liquidate their business assets in exchange for the discharge of business debts. This type of bankruptcy, while available to multiple types of businesses, can sometimes force the closure of all company operations. Chapter 11, 12, and 13 are all reorganization bankruptcies that usually allow companies to continue operating while they repay their debts under different and adjusted terms that are much more beneficial. Who can file which chapter does, however, depend on the type of ownership and the type of company involved.

Chapter 13

Chapter 13 is generally a non-business bankruptcy, but filers who own sole proprietorship businesses can use this reorganization process to resolve their personal and business debts together in one case.

Chapter 12

Chapter 12 bankruptcy is also a non-business bankruptcy, similar to Chapter 13, but it is intended solely for family farmers and fishers that make at least 50% or more of their income from farming and fishing operations. Filers that qualify for Chapter 12 use it to resolve their personal and business debts together.

Chapter 11

Chapter 11 is usually reserved for businesses where the businesses propose chapter 11 plans of reorganization and reorganize their debts under markedly adjusted terms.  Through this process, businesses can impair many rights that their creditors hold outside of bankruptcy.  Most of the time, business owners, members, or shareholders will not be responsible for business debts in a Chapter 11 case. There are some exceptions to this rule, such as:

  1. A personal guarantee was made in the loan contract. This is often done for corporate credit cards and other unsecured business loans where there is no collateral involved. A personal guarantee clause can be included in loan/credit applications that makes business owners personally liable for business debts.
  2. If employers didn’t pay employee withholding taxes. If you fail to pay so-called trust taxes withheld from employee paychecks, such as FICA, etc., you will be personally liable if your business is unable to pay the taxes.
  3. The court has pierced the corporate veil of your corporation. If your creditors want to hold you responsible for business debts because of serious business mismanagement or fraudulent activity and the court agrees, you and any shareholders of company stock may be personally liable for the debts of the business.

Bankruptcy

Aside from these specific exceptions, you may not be responsible for business debts in a bankruptcy unless you are a sole proprietor or partner of the company involved.

To learn more about filing bankruptcy in Mankato, MN and how you may be responsible for certain business debts, contact Behm Law Group Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.

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Piercing the Corporate Veil and Chapter 7 Bankruptcy in Waseca, MN

Bankruptcy is one of several ways for individuals and businesses in the United States to resolve debts they can’t repay. While there are different chapters of bankruptcy that follow some general processes and rules, there are also complicated aspects and nuanced conditions that change from case to case. When it comes to business bankruptcy, the question of who is liable for the business debts is a key point of the case. That liability is determined by the way a business is organized for tax, revenue, and general legal purposes. If you are considering using Chapter 13 or Chapter 7 bankruptcy in Waseca, MN, to resolve your business debts, Behm Law Group Ltd. can help you build a strong case for long-term debt relief and financial balance.

Bankruptcy

In filing for bankruptcy, the way that your business is established determines whether or not you’re responsible for its debts. When a business is set up as a sole proprietorship or partnership, for example, the owners of the business are personally responsible for their company’s debts. If a business is set up as a limited liability company (LLC) or corporation, on the other hand, the owners, members, or shareholders are generally not personally responsible for the company’s debts.  Some lenders, however, will require the owner of a company to sign a personal guarantee for the company’s debts.

While business owners often establish their company as an LLC or corporation in order to not be held personally responsible for business debts, there is one exception where they can be held liable. A court process called “piercing the corporate veil” can render owners, members, or shareholders of an LLC or corporation personally liable for business debt.

To pierce the corporate veil of your company, your creditors need to file a lawsuit. If the court sides with your creditors, you, any other owners, members, or shareholders of your company’s stock may be forced to repay the business debt or include it in a personal bankruptcy case. If you aren’t filing for bankruptcy, your creditors can pull from your home, bank accounts, investments, wages, or other assets to repay the debt owed.

Chapter 7 Bankruptcy

If you are filing for bankruptcy, and the court pierces the corporate veil, your business debts are included in the same way your personal debts are. In a Chapter 7 bankruptcy case, your business debts will likely be included in the discharge process, but if they are secured to an asset, that property will also likely be repossessed and liquidated by the creditor to repay the debt. In a Chapter 13 case, business debts will be included for payment in your repayment plan.

Generally speaking, piercing the corporate veil in court is very rare. The process will only be approved if your company acted recklessly or fraudulently in its borrowing practices or business dealings, if your creditors were unjustly left with unpaid funds, or if there isn’t an actual separation between your finances and your company’s finances.

To learn more about how business debts are handled in a Chapter 13 or Chapter 7 bankruptcy in Waseca, MN, or the surrounding areas, contact Behm Law Group Ltd. by calling (507) 387-7200 or emailing stephen@mankatobankruptcy.com.

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Long-term Credit Repair after Bankruptcy in Fairmont, MN

If you’ve been thinking about credit repair and resolving your debts with a bankruptcy case, you might be aware of the potential damage it could do to your credit. While it’s true that a bankruptcy case will likely lower your credit score and temporarily prevent you from qualifying for mortgages and some other loans for a few years after your case is completed, those things are far out-weighed by the benefits of filing.

Credit Repair

Despite the immediate impact on your credit score, the effects of a bankruptcy case will be a steady process of credit repair, budget simplification and long-term financial stability/rehabilitation. Behm Law Group Ltd. attorneys work with clients filing for Chapter 7, 13, or 12 bankruptcy from start to finish. With our professional guidance, you can find permanent debt relief through bankruptcy and begin your own process of credit repair and financial rehabilitation in Fairmont, MN, and the surrounding areas.

While a bankruptcy case will definitely have an impact on your credit score, the extent of that effect varies greatly. How much your score might drop almost entirely depends on the condition of your credit before filing.

Impacts on Credit

  1. Good–Excellent (690–850): If your score is in the good-excellent range, you’ll take the biggest hit when you file for bankruptcy. Most scores will drop into the fair–bad range, typically by around 200 points.
  2. Fair (630–689): Even with a fair credit score, you’ll probably still take a hit. Those with a fair score will drop into the bad range, but usually not by more than 150 points.
  3. Bad (300–629): Those with bad credit will see the smallest change in credit points after filing for bankruptcy. If your score is very poor, it might not drop at all with the filing of your case, and if it’s on the higher end of the range, you’ll likely see small changes, usually by under 100 points.

The other aspect of a bankruptcy case that will determine how much your credit score drops is the type of chapter you file. Chapter 7 liquidation bankruptcy will generally cause greater drops in credit because it may “look worse” to lenders. This is because your creditors in a Chapter 7 bankruptcy case almost always receive far less than what they’re owed.  In most Chapter 7 cases, most creditors receive nothing.

Chapter 13 bankruptcy, on the other hand, can result in the full repayment, under adjusted terms, of secured debts and the partial repayment of unsecured debts. Through your repayment plan, most creditors are repaid at least some of what they’re owed, making it “look better” to potential lenders. Consequently, a Chapter 13 case may have a lower impact on your credit.

Even considering these details, bankruptcy is still a highly effective option for credit repair and financial rehabilitation for many filers. Bankruptcy permanently relieves debts and opens the door for filers to begin comprehensive work to repair their credit and stabilize their finances.

To learn more about bankruptcy and credit repair in Fairmont, MN, contact Behm Law Group Ltd. by calling (507) 387-7200 or emailing stephen@mankatobankruptcy.com.

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Planning Your Case and Getting Bankruptcy Assistance in Redwood Falls, MN

If you are facing debt you know you won’t be able to repay, filing for bankruptcy could be the most effective option for permanently resolving your financial issues. While filing for bankruptcy might seem scary, it’s actually a government-administered process that provides long-term, effective debt relief for thousands of households and businesses each year. There are several types of bankruptcy that handle debt in different ways. Chapter 7 liquidation bankruptcy is the most common format for an individual consumer case. In this process, the filer’s non-exempt assets are liquidated in exchange for the discharge of several kinds of secured and unsecured debts. For filers who don’t qualify for liquidation bankruptcy because their debt-to-income ratio is too high, Chapter 13 reorganization bankruptcy is another option for debt resolution. This process restructures debts into a three- to five-year repayment plan suited to the filer’s income. The adjusted payment terms are much more favorable than outside of bankruptcy.  No matter what kind of chapter you file, Behm Law Group, Ltd. can provide legal guidance and complete bankruptcy assistance in Redwood Falls, MN and the surrounding areas.

Behm attorneys can help you determine if bankruptcy will be the best choice for resolving your financial situation. If it’s the best course of action, we can help you start the planning process for your petition with expert bankruptcy assistance.

Before you file your petition, keep in mind several financial practices you can implement to get the most out of your case and to protect yourself from the consequences of fraud:

Financial Practices

  • Upcoming bills: Depending on the case details, bankruptcy will most likely eliminate any utility debts.  However, any utility debt you incur after your bankruptcy case is filed will be considered “new debt” that will not be included for discharge in the bankruptcy process. This is also true with several other debts including medical and credit card debt.
  • Fund transfers: When you file for bankruptcy, your financial transactions will be examined by your bankruptcy attorney and by the trustee assigned to administer your bankruptcy case. All your income, debts, assets, and accounts are examined, particularly your financial transactions for the six months prior to your bankruptcy filing.  Before you file your petition, avoid any unnecessary transfers between credit cards. That is, do not pay off one credit card with another credit card that may have a slightly lower interest rate.  If you engage in such a transaction, make sure that it’s reported in your petition. Also, transfers of any assets to other people can appear as fraudulent conduct if it seems like you’re moving assets to prevent the trustee from possibly liquidating them.
  • Reasonable spending: Other actions that may look like attempts at bankruptcy fraud are certain spending patterns. If you charge excessively on a credit card right before filing a petition, such as taking a trip to Europe, it might look like you’re abusing the bankruptcy process to purposefully have that debt discharged. The same is true for purchasing luxury items and engaging in any other extravagant spending. Instead, be as frugal as you can while still trying to meet your living expenses.

Bankruptcy Assistance

To learn more about planning before filing your petition and getting the permanent bankruptcy assistance in Redwood Falls, MN you need, please contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.

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Is Debt Consolidation an Effective Option for Debt Work-Out in St. Peter, MN?

In the U.S., there are several ways that individuals can resolve debts. Debt settlement through a third-party program is often aggressively advertised as the “best” way to work out debts, but that route comes with many caveats, including significant additional fees. Other debt work-out systems include debt management plans through a credit counselor, debt consolidation, and, of course, bankruptcy. While a bankruptcy case might not be the right choice for resolving everyone’s debts, making the decision to file a petition can be one of the most effective, fastest, and longest-lasting ways to find debt relief. If you’re looking for the best kind of debt work-out in St. Peter, MN and the local regions, Behm Law Group, Ltd. can help. Our attorneys will work with you to determine if bankruptcy will be an effective option and which type of bankruptcy chapter to file. We provide guidance, support, and legal protection for all our clients from the start of their cases to the end.

Debt Work-Out

Debt work-out systems outside of bankruptcy have their uses, but they’re also heavily restricted in the debts they address, the individuals that qualify, and the debt amounts that are resolved. For example, when it comes to debt consolidation, debtors can only qualify if they meet rather strict credit score requirements.

How Consolidation Works

Debt consolidation processes take your debts and combine them into a single account. That account is then paid off slowly with your own monthly payments, or you may have the option to receive a consolidation loan. A consolidation loan is provided through a bank, credit union, or online lender. Those loans usually range between $1,000 and $100,000 and carry interest rates as high as 36%. That loan amount is used to repay your consolidated debts, and you begin to payoff that lender in single monthly payments. The amount of your consolidation loan depends on your credit. If your credit is too low, you may not be eligible for a consolidation loan at all.

Consolidation Problems

Using consolidation for debt work-out is usually only a good option for people with high credit (usually 650 or better) and specific debts (like credit card debts, mortgages, and medical bills). Debt consolidation systems are very complicated. They frequently incorporate nuanced methods of debt treatment like balance transfer cards, conversion of unsecured debts to secured debts, and other “loop-hole” processes. These methods can carry significant hidden fees and often have unexplained and unintended consequences. In addition to using complex systems with inaccessible fine print, debt consolidation programs will impact your credit in varying ways depending on the amount of debt owed, credit history, and the various types of your credit accounts.  In addition, debt consolidation programs are often funded and sponsored by various credit card companies.  Credit card companies don’t want you to file for bankruptcy relief and they often want to squeeze as much money as possible from you through debt consolidation programs.

Overall, debt consolidation is a tricky process that might leave you with more fees and headaches than the filing of a bankruptcy petition.

To learn more about using bankruptcy for debt work-out in St. Peter, MN and why it might be better than debt consolidation, please contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.

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Debt Relief in Jackson, MN Through Bankruptcy While Unemployed

Due to the pandemic, the past year has been difficult for many people. During the first shutdowns in the U.S. for the spring of 2020, the unemployment rate spiked from just above 4% to a staggering 15%. Over the following year, that number slowly decreased to around 6%. While that’s much better than 15%, things are still not back to normal. If you’re among that 6% of unemployed people, you might be finding it increasingly difficult to make debt payments on time. For those struggling financially, Behm Law Group, Ltd. can provide legal advice and guidance to file for bankruptcy and permanent debt relief in Jackson, MN. Even for unemployed individuals, bankruptcy can still be a viable option for debt resolution.

The bankruptcy code does not require bankruptcy filers to be employed, even for cases that are typically considered “wage earner” bankruptcy, like Chapter 13 reorganization. However, both your past and present income will affect your eligibility for certain chapters, and there are fees involved in bankruptcy that still need to be paid even though you’re only source of income is unemployment income.

That said, it’s still completely possible for unemployed individuals to find long-term debt relief through bankruptcy. In fact, many Chapter 7 filers are unemployed or are only employed part-time.

How Unemployment Affects Bankruptcy

The main aspect of unemployment and employment that affects bankruptcy is the question of income. To qualify for Chapter 7 bankruptcy, your debt-to-income ratio needs to be lower than the state median or average income of a similarly sized household. This ratio is determined through the Means Test, which examines your income from the past six months. That means if you recently became unemployed, you might not satisfy or pass the means test and be eligible for Chapter 7, even if your income has taken a nosedive.   However, even if you don’t pass the means test you might still be able to file for Chapter 7 bankruptcy relief if your recent job loss and loss of income is sufficiently explained in your bankruptcy paperwork.

If you don’t qualify for Chapter 7 with unemployment income, you can potentially file for Chapter 13 bankruptcy relief instead. Like with Chapter 7, much in Chapter 13 bankruptcy is dependent on your income. If you’ve been unemployed for a while, your Chapter 13 plan payments may be as low as $100.00 initially.  If you get another job and your income increases, your chapter 13 plan payments could increase.

Eligibility for either chapter all depends on the length of your unemployment relative to the past six months of your income.

Affording Bankruptcy While Unemployed

Bankruptcy court filing fees and the costs of an attorney might make it seem difficult to afford to file for bankruptcy on unemployment income. For those who can’t meet those costs, remember you can always apply to have some court filing fees waived, and there are many attorneys who offer sliding-scale prices for clients who are struggling financially.

Debt Relief

To learn more about finding permanent debt relief in Jackson, MN while unemployed, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.