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Using Bankruptcy for Debt Assistance in Owatonna, MN After Divorce

One of the most commonly reported causes of debt and the filing of bankruptcy cases is divorce. No matter what a married couple’s financial situation is before a divorce, the legal, emotional, and physical process of ending a marriage wreaks havoc. If you’ve worked through a divorce and find yourself facing serious debt, you are not alone. Divorce is one of the most difficult life changes in many ways, including having a significant impact on your finances. Divorce typically splits savings and properties between spouses, legal fees and attorney costs can be high, child support payments are required from the spouse that does not gain custody of any dependents in the marriage, and alimony payments are generally assessed against one party in the divorce as well. All that said, it’s not surprising that post-divorce finances can be complex and burdensome. If you’re looking for debt assistance in Owatonna, MN after a divorce, Behm Law Group, Ltd. can provide legal support and protection throughout a bankruptcy case. Our skilled attorneys will handle your case with care, expertise, and sensitivity from start to finish.

 

Most attorneys will recommend waiting to file for bankruptcy until after a divorce is finalized or filing jointly as spouses before a divorce is started. This is largely because of the complexities of overlapping state and federal legal procedures and the significant costs with filing two different legal proceedings at the same time.

 

However, if you need to use bankruptcy for debt assistance after a divorce, you won’t need to worry about the overlap or going through two complicated legal processes – divorce and bankruptcy – at the same time. If you aren’t filing jointly with your spouse, it’s likely you’ll qualify for Chapter 7 bankruptcy. Those eligible for Chapter 7 have income-to-debt ratios below the state median or average income for a household of a similar size.

 

Chapter 7 works to liquidate non-exempt assets in exchange for debt discharge. Filers are allotted several bankruptcy exemptions that protect the equity or value they have in their home, car, furniture, and household appliances and many other assets from the liquidation process.  In the vast majority of chapter 7 bankruptcy cases, the only things people lose are their burdensome debts.

 

Why Divorced Spouses Will Qualify

  • If you have custody of your children, you have to support them with a lower income than when you were married. This situation means divorced spouses often resort to being more dependent on credit cards and other forms of borrowing.
  • The spouse that did not gain custody of the children of a marriage may be required to pay alimony and child support. Though they only support themselves in their household, there are many new financial obligations in their lives that result from a divorce.
  • Divorced spouses may lose health insurance that they otherwise had through their ex-spouse’s workplace. If they don’t qualify for state-supported programs, they may have significant trouble paying for health insurance or medical bills.

 

Chapter 7 will not allow the discharge of certain debts involved with divorce, like alimony and child support, but it will discharge many other debts, including medical bills, credit card debt, foreclosed mortgages, bounced checks, checking/savings account lines of credit, past due utility bills, loans concerning repossessed vehicles and many other loans.

 

To learn more about using bankruptcy for debt assistance in Owatonna, MN after a divorce, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.

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Who Files for Bankruptcy for Debt Relief in Marshall, MN?

At Behm Law Group, Ltd., we work with clients experiencing a broad range of financial and personal circumstances. Our attorneys offer legal protection and services for those working through Chapter 7, 12, and 13 bankruptcies. Clients whom we’ve helped regain stable finances with long-term debt relief in Marshall, MN and local communities have a variety of demographics including age, income, debt load and type, race, economic standing, marital status, number of dependents, and much more. What we’ve learned in our twenty-six years of providing comprehensive services to our clients is that there is no single aspect of a filer’s life that causes the filing of a bankruptcy case. If you are among those struggling to make debt payments on time, you can join filers who have regained long-term debt relief and a balance of their finances through filing for bankruptcy relief.

 

We work primarily with individual consumer cases for Chapter 7 liquidation and Chapter 13 reorganization bankruptcies. We also work with family farmers and fishers who file Chapter 12 reorganization and businesses working through a Chapter 7 liquidation case.

 

While there’s a lot of variety in the reasons why people file bankruptcy for permanent debt relief, some statistics reveal trends in exactly who filers are in regard to some important demographics. The American Bankruptcy Institute provides very detailed statistics for time frames and regions in the U.S., but we can look at some broader information for our nation.

 

Statistics based on 2019-2020.

 

Top causes of bankruptcy:

  • Job loss makes it 2.5 times more likely for a household to file
  • Medical bills were cited as the reason for bankruptcy in 29% of survey participants that filed in a recent study, and 57% reported they had troubles with medical debt
  • Possibly due to the coronavirus pandemic, illness and related job loss has skyrocketed to the top-cited causes of bankruptcy
  • Divorce is a major life change that often results in bankruptcy for one or both spouses

 

Marital status:

  • 64% of filers are married
  • 15% are divorced
  • 17% are single
  • 3% are widowed

 

Age:

  • The median age of filers in the U.S. is 38 to 45
  • Senior citizen filer rates are increasing
  • Under-25-year-old filer rates are decreasing

 

Household Income:

  • Around 60% of filers have an income of $30,000 and below
  • Rates of filers with an income of over $60,000 have been increasing since 2007

 

Education:

  • About 20% of filers have a Bachelor’s degree or higher
  • 36% have a high school education
  • 29% have a high school diploma with some college education
  • These factors may change if laws are passed to allow the inclusion of student loan debt in a bankruptcy case

 

Some possible changes in the coming years to the bankruptcy code might show some alterations to bankruptcy statistics, but for now these numbers show who mostly files for bankruptcy relief in the U.S. today.

 

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

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You Probably Won’t Lose Property If You File Chapter 7 Bankruptcy in Luverne, MN

A common misconception about bankruptcy in the United States is that the individuals or businesses that file will lose all their property. While it’s true that property can be at risk in any bankruptcy case, the fact is that the vast majority of individual filers don’t lose a single piece of property in a liquidation, Chapter 7 bankruptcy.  In the vast majority of cases, all people lose are their debts.  This is largely because of the exemptions filers can claim to protect their property from the liquidation process and because of filers’ financial conditions prior to bankruptcy. For individual consumers, Chapter 7 is the liquidation process the bankruptcy code provides. If you’re considering filing for Chapter 7 bankruptcy in Luverne, MN, or the surrounding areas, Behm Law Group Ltd. provides legal protection and guidance throughout the process.

 

Chapter 7 bankruptcy is a liquidation process that works to discharge debts in exchange for the sale or liquidation of non-exempt assets. However, because of the situation most people are in when they file for Chapter 7 bankruptcy and because of the available bankruptcy exemptions, individuals will probably not lose any property to the Chapter 7 liquidation process.

 

Situation: In order to qualify for Chapter 7, filers need to pass the Means Test, which measures your debt-to-income ratio. If this measurement is lower than the state median or average for a household of similar size, you’ll be eligible for Chapter 7. This generally means you have a low income or you have a lot of debt that “outweighs” a middle to upper-middle class income. If this is the case, you probably don’t own much property of high value. You may have a house, a car or two, other common items like appliances and furniture, and maybe even some valuable jewelry or tools in your name, but these items often fit into the range of monetary values set by the bankruptcy exemptions.

 

Exemptions: When you file for bankruptcy, the goal of the process is not to devastate your finances or have you lose all your property, but instead to provide you with permanent debt relief while remaining fair to your creditors. This means that there are exemptions you can claim to protect your property up to certain values. Exemptions keep those properties from being vulnerable to the liquidation process.  In Minnesota, filers can claim the exemptions provided under Minnesota state law or the federal bankruptcy exemptions provided under the bankruptcy code, but they cannot mix and match between the two. The current exemption amounts filers can claim often cover the values of most people’s properties. Additionally, in some cases, exemption amounts can be doubled when spouses file jointly.

 

Because of the available exemptions and because filers who qualify for Chapter 7 bankruptcy often don’t own a lot of high-value property, most filers will not lose any property or very little property to the liquidation process. If you’re planning on filing for Chapter 7 bankruptcy in Luverne, MN, or other communities in the area, our attorneys can help you protect as much property as possible and work through a successful case. Contact Behm Law Group Ltd. today by calling (507) 387-7200 or emailing stephen@mankatobankruptcy.com.

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Vehicle Repossession and Chapter 13 Bankruptcy in Mankato, MN

When you purchase a car and establish a loan, that contract comes with certain requirements. If you miss monthly payments, you’ll likely have to pay late fees and other monetary penalties. When too many payments are missed, your vehicle will likely be in danger of being repossessed. In many cases, individuals whose cars are going to be repossessed are struggling financially in other ways as well. If you’re unable to meet monthly debt payments, including your car payments, filing for bankruptcy can halt the repossession of your car and offer long-term debt relief. If you file for Chapter 7 bankruptcy, your car may be at risk of being liquidated by the chapter 7 trustee or being taken by the vehicle lender after your bankruptcy case has concluded.  However, you may be able to protect it from the liquidation process by asserting an appropriate vehicle exemption.  You may also protect it from being seized by the vehicle lender after your case has concluded by entering into a reaffirmation agreement with the vehicle lender.  In a reaffirmation agreement, you and the vehicle lender mutually agree that the vehicle loan will survive the bankruptcy process and that you will continue to be contractually liable on it.  Another way to keep your car and stop possible repossession is through Chapter 13 reorganization bankruptcy. With the help of Behm Law Group, Ltd., you can build a strong petition for Chapter 13 bankruptcy in Mankato, MN and the surrounding areas, work through a Chapter 13 repayment plan, and find permanent financial stability.

 

Chapter 13 bankruptcy is a reorganization process. When you file a Chapter 13 petition, you’ll work with your bankruptcy attorney to create a proposal that takes your debts and structures them into a manageable repayment plan suited to your income and reasonable, necessary living expenses.  The proposal is called the Chapter 13 Plan and it lasts three to five years. The Chapter 13 Plan will provide for the discharge of up to 100% of unsecured debts.  It can also provide for the payment of your secured debts, including your vehicle loan, under terms that are much more favorable to you and which are designed or suited to your unique budget circumstances.

 

Because your car loan can be included in your Chapter 13 repayment plan, you will be able to keep your vehicle since you’ll still be repaying the debt; you’ll just be repaying the debt under different terms.  This aspect of Chapter 13 stops vehicle repossession, but repossession is also halted immediately when you file because of the automatic stay injunctive mandates of 11 U.S.C. § 362.  The automatic stay prevents creditors from starting or continuing their collection activities, including repossession. Even if the vehicle creditor has already taken your car (as long as they haven’t sold it), they may have to return it to you when your bankruptcy case is filed and the mandates of the automatic stay take effect.

 

When You File

  • The automatic stay is in effect
  • Your Chapter 13 repayment plan proposal is submitted to the bankruptcy court
  • All your creditors will be able to review your Chapter 13 Plan
  • Your car lender may return your vehicle if it has been repossessed
  • The case is resolved through the bankruptcy court and there is finality when your case is completed
  • You start making monthly plan payments to the Chapter 13 trustee within thirty (30) days after your bankruptcy case has been filed
  • You can catch up on any missed car payments
  • After the three- to five-year plan is finished, the debt on your car is completely paid off

 

Chapter 13 reorganization bankruptcy can also help you catch up on many other missed payments, such as missed mortgage payments, and it can help you pay off other secured debts in full under more favorable terms.  Chapter 13 can significantly help you resolve your financial problems in a short, three-to-five year period. Outside of Chapter 13 bankruptcy, you may have to repay missed payments in a lump sum instead of being able to spread the payments over a three-to-five year repayment period.

 

To learn more about vehicle repossession and Chapter 13 bankruptcy in Mankato, MN, contact Behm Law Group, Ltd. at (507) 387-7200 or stephen@mankatobankruptcy.com.

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Liquidating Your Own Assets vs. Chapter 7 Bankruptcy in Windom, MN

We all have many financial obligations to meet each month, from car payments and mortgages to health insurance and retirement funds. For many households, meeting those obligations is difficult, and since the coronavirus pandemic in 2020, the poverty rate spiked from 9.3% in June to 11.7% in November of the same year. Small business owners had their own troubles in the pandemic with statewide shutdowns dramatically decreasing revenue. For those with accumulated debts and many other financial obligations they’re having a hard time paying, bankruptcy can be a source of long-term, effective debt relief. If you’re considering filing for Chapter 13 or Chapter 7 bankruptcy in Windom, MN, Behm Law Group, Ltd. can help you build a strong case for the most beneficial outcome.

For individuals and businesses alike, the most commonly filed kind of bankruptcy is Chapter 7 liquidation. This chapter works to discharge debts in exchange for the liquidation/sale of the filer’s non-exempt assets. Individual filers are typically able to protect all of their property with the exemptions provided under state law or under the bankruptcy code.  At worst, exemptions will protect the equity or value a bankruptcy filer has in one’s home, car, appliances, items for their jobs/business, and other various properties.

In a business case, the process of Chapter 7 bankruptcy sometimes results in the shutdown of business operations. Businesses organized as corporations or LLC’s are not able to claim exemptions in bankruptcy.  Therefore, when a business files for bankruptcy relief, all the business assets will be liquidated or sold by the chapter 7 trustee. For a struggling business, the question can become whether it should either file for bankruptcy relief or liquidate/sell its assets and use the proceeds to directly work with its creditors to settle its debts.

Benefits of a business liquidating its assets on its own:

  • The process will be private
  • The business won’t have to pay bankruptcy filing fees or bankruptcy attorney fees
  • The business can choose which debts it will repay first and how much each creditor gets from the liquidation of the assets
  • The business can generally prioritize the payment of personal loans to friends and relatives
  • It’s likely that the business will get more value from the liquidation/sale of its own assets than having the assets liquidated in a bankruptcy because the business would have more control over the selling process and there would not be any funds paid to a chapter 7 trustee from the sale of the assets

Benefits of filing for Chapter 7 bankruptcy:

  • Liquidation/sale will be done more quickly
  • One’s personal assets generally won’t be vulnerable in a Chapter 7 business case unless one’s business is a sole proprietorship or a partnership
  • The business receives the benefit of the automatic stay on creditor action during the bankruptcy which prevents creditors from employing or continuing collection activities
  • Business bankruptcy typically won’t affect your personal credit
  • The liquidation process is handled through the bankruptcy court, so you have no responsibility in finding buyers or distributing repayment to creditors.  The chapter 7 trustee takes care of all such details.
  • The court also administers and governs any interaction between you and your creditors so the process will be as fair as possible
  • There is complete finality when the bankruptcy process is over.  No creditors will be able to sell any of their claims to debt purchasers.

If you’re personally liable for your business debts–for example, if you own a sole proprietorship or partnership–you may want to consider filing for bankruptcy and having the chapter 7 liquidation process address your personal and business debts together. With a partnership, however, it’s important to make sure your partner understands they’re still liable for their end of the business debts unless they also file for bankruptcy relief.

Whether you own a business or not and you’re considering filing for Chapter 13 or Chapter 7 bankruptcy in Windom, MN, contact Behm Law Group, Ltd. at (507) 387-7200 today or stephen@mankatobankruptcy.com.

 

 

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The Difference Between Insolvency and Bankruptcy in Pipestone, MN

In the U.S., filing for bankruptcy is a process for individuals and businesses alike. Of the six different chapters in the bankruptcy code, the most commonly filed individual consumer cases are Chapter 7 and Chapter 13. Chapter 7 bankruptcy works to sell the filer’s non-exempt assets in exchange for the discharge of their debts. Chapter 13, on the other hand, works to reorganize the filer’s debts into a three- to five-year repayment plan suited to their income and reasonable living expenses. If you’re struggling to make debt payments on time and your financial obligations are severely compromising your quality of life, you’re not alone. Every year, thousands of Americans use bankruptcy to resolve debts for long-term financial stability. At Behm Law Group, Ltd., we work with clients in many different circumstances to help them file a successful petition for Chapter 7 or Chapter 13 bankruptcy in Pipestone, MN and the surrounding communities.

The words bankruptcy and insolvency are often equated and sometimes used interchangeably. Legally speaking, however, they are different situations. An individual or business becomes insolvent as soon as they’re unable to repay their debts, but they do not become bankrupt until they start the legal process of filing a bankruptcy petition.

There are two types of insolvency:

  • Cash-flow insolvency: This kind of insolvency is a scenario where a debtor, individual or business, cannot pay debts with their income or saved cash. They may have assets that have value but don’t have the required cash flow/income to repay creditors. The value of their assets, if they were sold, could still be enough to pay off their debts but then they would have very few assets to continue their business operations or reorganize and rehabilitate their personal financial situations. Essentially, they don’t have the necessary liquid assets, aka, cash. Often a cash-flow insolvent party can work with their creditors to negotiate timelines, interest, penalties, or other resolutions that allow them to resolve the debt when their cash flow has increased.
  • Balance-Sheet Insolvency: A balance-sheet insolvent party doesn’t have the asset value to pay their debts. They might have a short-term cash flow that allows them to make upcoming payments, but they don’t have enough cash or sufficient assets to sell to bring them out of debt. Those in this situation can find relief through various debt repayment agreements with their creditors or a third-party debt settlement provider. Filing for bankruptcy, however, is by far the most effective method of resolution.

When an insolvent party faces the consequences of their situation and chooses to permanently resolve their situation through the bankruptcy process, they meet the legal definition of being bankrupt.

If you are facing cash-flow or balance-sheet insolvency and want to begin the process of filing for bankruptcy in Pipestone, MN and the local region, Behm Law Group, Ltd. can help you put together a successful petition and avoid complications. To learn more, contact us today at (507) 387-7200 or stephen@mankatobankruptcy.com.

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Restaurant Bankruptcy in 2020 and Filing for Bankruptcy in Waseca, MN

At Behm Law Group, Ltd., we work with individuals filing for Chapter 7 liquidation and Chapter 13 reorganization bankruptcy. We also help local businesses file Chapter 7 cases and offer legal guidance and protection to family farmers and fishers working through Chapter 12 reorganization bankruptcy. In the past year, COVID-19 has hit everyone, but it has been especially hard on the restaurant industry. Many restaurants and other food service companies closed down or filed for business bankruptcy. Although Behm attorneys don’t work with businesses filing for reorganization through Chapter 11 business bankruptcy, we still find it important to take note of bankruptcy patterns in current events. Since the coronavirus shutdowns in early 2020, there has been a sharp increase in bankruptcy filings by many in the restaurant industry in Waseca, MN and across the country.

While it’s unfortunately common and often expected for small or family-owned restaurants to struggle during times of economic depression or other financially restrictive events, like a forced temporary closure, the large corporations that own restaurant chains are usually safe from that fate. However, with the prolonged closure during the pandemic and decreased customer bases because of the fear of viral spread, many restaurant chains filed for bankruptcy during the past year.

Ten U.S. restaurants chains that filed for bankruptcy in 2020:

  1. Bar Louie: Owned by Sun Capital Partners, Bar Louie’s chain filed for bankruptcy on January 27th with unlisted assets.
  2. Cosi: Cosi filed for bankruptcy on February 24th with $40 million in assets.
  3. Bravo Italian Kitchen: FoodFirst Restaurants, owners of Bravo (also of Brio Tuscan Grill), filed for bankruptcy on April 10th with assets of $307 million listed.
  4. Souplantation: Owned by Garden Fresh Restaurants (also owners of the Sweet Tomatoes chain), Souplantation filed on May 14th with $50 million listed in assets.
  5. Le Pain Quotidien: Owned by PQ New York 9, Le Pain Quotidien filed on May 27th with $3 million listed in assets.
  6. HopCat: HopCat owners BarFly Ventures (also owners of Stella’s Lounge and Grand Rapids Brewing Co.) filed for bankruptcy on June 3rd with $1 million in assets listed.
  7. Chuck E. Cheese: With an impressive asset listing of $1.7 billion, Chuck E. Cheese owners CEC Entertainment filed for bankruptcy on June 25th.
  8. California Pizza Kitchen: CPK owners Golden State Capital filed on July 29th with $13.5 million listed in assets.
  9. Sizzler: Sizzler USA filed on September 21st, 2020 with $1 million listed in assets.
  10. Ruby Tuesday: With assets listed as $146 million, NRD Capital Management, owners of Ruby Tuesday, filed for bankruptcy on October 7th.

While the majority of chain restaurants that filed for bankruptcy in 2020 petitioned for Chapter 11 reorganization, there have been hundreds of smaller companies that had to file for Chapter 7 bankruptcy relief this past year.

To learn more about filing for bankruptcy in Waseca, MN and the local area, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.

 

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Issues with Debt Management in Fairmont, MN: Requirements for Involuntary Bankruptcy

Bankruptcy is a process available to individuals and businesses alike. If you’re struggling to meet monthly payments on time and debts are piling up, you can choose to use bankruptcy for long-term debt relief. The majority of individual consumer and business bankruptcies are filed voluntarily. If the filer is ready to pay the required bankruptcy fees and ideally is also able to pay for legal representation, they will file a voluntary case that is appropriate for their debts and incomes. However, there are instances when bankruptcy cases are involuntary. If you’re considering filing for voluntary bankruptcy to help with long-term debt management in Fairmont, MN, Behm Law Group, Ltd. can help.

Involuntary bankruptcy for individuals or businesses work similarly. If creditors bring involuntary bankruptcy legal proceedings to the court, you can be forced into a case that will work its way through the resolution of debts, for better or worse for any party involved.

An involuntary bankruptcy case occurs when creditors can prove that a debtor is able to repay their debts and is choosing not to do so for some reason. Creditors may believe they will not get repaid if an involuntary bankruptcy is not initiated.

Because debtors who can repay debts but choose not to often have value in nonessential assets that could be sold, involuntary bankruptcy cases are typically filed against businesses due to their more complex financial circumstances. There are several requirements that must be met before an involuntary bankruptcy can be filed.

Some of the main requirements for involuntary bankruptcy include:

  • The case to be filed must be a Chapter 7 liquidation (individual or business) or a Chapter 11 reorganization (business)
  • Involuntary bankruptcy debtors cannot be nonprofit organizations, family farmers or fishers, banks, credit unions, or insurance agencies
  • Creditors filing must have a claim against the debtor that isn’t “contingent as to liability or the subject of a bona fide dispute as to liability or amount.” Whether a claim is part of a bona fide dispute varies greatly from case to case
  • The debt load owed must be at least $16,750
  • Creditors must be able to prove that the debtor is able to repay their debts
  • If a debtor has fewer than twelve creditors for debts that will be handled in the bankruptcy, just one creditor needs to file for an involuntary bankruptcy proceeding
  • If a debtor has twelve or more creditors, at least three creditors must each participate in the filing of the involuntary bankruptcy proceeding
  • Debtors must respond to an involuntary bankruptcy filing within 21 days before the proceedings start.

Debtors that have an involuntary case filed against them do have the option to convert it into a voluntary case.

To learn more about involuntary bankruptcy proceedings and debt management in Fairmont, MN and the surrounding area, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.

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When Redeeming Property During a Chapter 7 Bankruptcy in Redwood Falls, MN is Beneficial

If you are struggling to make debt payments on time or if trying to pay off debts has significantly damaged your quality of life, finding debt relief through bankruptcy might be the right choice. The most commonly filed type of bankruptcy is Chapter 7, which discharges debts in exchange for the liquidation of non-exempt assets. This means some of your property may be subjected to sale and the resulting sale proceeds may be paid over to your creditors. However, in the vast majority of chapter 7 bankruptcy cases, a person is able to protect all of his or her property.  Chapter 7 bankruptcy isn’t designed to leave filers destitute and without property to reorganize.  There are ways to protect your assets from liquidation. By asserting and taking advantage of the applicable bankruptcy exemptions, filing a reaffirmation agreement on a debt that is secured by some of your property, or by redeeming an asset by paying the present value of that asset to the creditor holding a secured lien on that asset, you can keep your home, car, appliances, and other important items. Behm Law Group, Ltd. provides protection and guidance for those filing for Chapter 7 bankruptcy in Redwood Falls, MN and the surrounding areas. Our attorneys help you work through your petition to protect your assets from liquidation and to file a strong case for long-term, bankruptcy court enforced debt relief.

Each state has different bankruptcy exemptions that Chapter 7 bankruptcy filers can claim. The most current exemptions will protect the value in your home, car, household appliances, clothing, retirement accounts, life insurance policy proceeds, and many additional miscellaneous items.

Filers can also choose to redeem an asset in a Chapter 7 bankruptcy petition from a creditor that has a secured lien on that asset.  In order to redeem an asset, one must pay the asset’s present value to the secured creditor in one lump sum. The value of the property you want to redeem may be agreed upon between you and the creditor. If the creditor believes that the property is worth more than you do, you can present the matter to the bankruptcy court and the bankruptcy court will determine the appropriate value for the asset.

If you have the resources/funds to redeem an asset, it can be beneficial to your financial circumstances in many ways. Redeeming an asset makes the most sense if:

  • The value of the property is less than the debt against it. If the subject debt has accumulated over time with missed payments, late fees, and interest, it makes sense to pay off the actual, present value of the property in a redemption rather than pay the total debt owed. For example, if you bought a car worth $15,000 in 2015 and the loan in 2021 has only been reduced to $10,000 but the value of the car has depreciated to $5,000, it makes more sense to pay the $5,000 value of the car than the $10,000 debt.
  • If the asset works well and will be reliable going forward or if it is an asset that is unique, difficult to replace and is needed for your employment, trade or profession, such as specific mechanical tools or farming equipment or equipment used in construction, it makes sense to redeem the asset rather than invest time and energy looking for a new replacement.
  • Sometimes it may be challenging to obtain a loan to purchase a vehicle or other asset after a bankruptcy.  In such circumstances, it makes sense for someone to use proceeds from a retirement account, use tax refunds or use the cash value that has been built up in a life insurance policy to redeem an asset.

To learn more about redemptions and filing for Chapter 7 bankruptcy in Redwood Falls, MN and the local region, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.

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What Happens to Secured Property in Chapter 7 Bankruptcy in St. Peter, MN

When you file for bankruptcy, information about all your debts, income, and properties must be disclosed in your bankruptcy paperwork. Documentation about your financial history as far back as six months to two years must be reviewed for any bankruptcy chapter. Any material inaccuracies or omissions of debts, income, and properties can be considered fraudulent and result in a dismissal of your case. Because of the strict and thorough documentation requirements for any bankruptcy petition, filing without the help of a professional can be difficult and risky. The guidance and protection Behm Law Group, Ltd. attorneys provide will help you file a successful petition and receive long-term debt relief through Chapter 12, Chapter 13 or Chapter 7 bankruptcy in St. Peter, MN.

Chapter 7 bankruptcy is the most filed for individual consumers and businesses alike. Chapter 7 works to liquidate non-exempt assets in exchange for a discharge of debts. The value of your non-exempt liquidated property is distributed among your creditors. Because a key part of a Chapter 7 bankruptcy case is the liquidation of your non-exempt assets, it’s important to know how you can protect property from that process.

Protecting properties from liquidation is accomplished by asserting exemptions provided either under state law or under the bankruptcy code, but it can also be done through a reaffirmation agreement or through redemption.

  1. Exemptions: Allotted exemptions vary by state.  In most states, you are allowed to claim the federal exemptions provided under the bankruptcy code instead of the exemptions provided by a particular state if the federal exemptions serve your situation better. Typical exemptions claimed protect the home, car, and household appliances, clothing, life insurance policies, jewelry and many other items from liquidation. Exemptions also change over time as incomes and costs of living are adjusted. A recent list of common Minnesota exemptions can be found here.
  2. Reaffirmation agreement: In Chapter 7, if you are current on payments for a certain debt, such as your car loan, you can file a reaffirmation agreement to have that debt preserved or exempted out of the bankruptcy process. This basically leaves a debt as-is, meaning you can keep your property secured by the subject loan, but you still have to make payments on the debt as usual. More on reaffirmation agreements can be found here.
  3. Redemption: Finally, you can protect a property from the liquidation process through redemption. You indicate that you wish to redeem a certain property item when you file your initial bankruptcy petition paperwork. You notify the court and the creditor that has a lien that you wish to keep a certain item of property.   Through redemption you must pay a secured creditor the present value for the property that serves as the creditor’s collateral.  Typically, that value is paid in one lump-sum payment to the secured creditor.  However, sometimes the issue of what constitutes present or current value for that asset will be disputed.  If you and the affected secured creditor disagree on that value, the issue is presented to the court at a redemption hearing and the court determines what constitutes the present or current value for the asset.

These ways of protecting a property from the liquidation process can become complex depending on the circumstances of each loan, property type, creditor, and much more. Behm Law Group, Ltd. can help you work through this and many other parts of a Chapter 7 bankruptcy in St. Peter, MN. Contact us at (507) 387-7200 or stephen@mankatobankruptcy.com today to learn more.