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Why You Can No Longer Choose to File for Chapter 7 Bankruptcy in Mankato, MN Anymore

Bankruptcy has long been an option to individuals and businesses that cannot repay their debts. In the United States, bankruptcy is designed to be the fairest possible process to filers, creditors, and other parties involved. However, since 2005, the consumer bankruptcy process changed significantly with the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) and the establishment of the Means Test and other laws. This act limited individual qualification for chapter 7 bankruptcy, but it also helped streamline and simplify parts of the court process as a whole. If you are considering filing for bankruptcy and don’t know where to start, Behm Law Group Ltd. can help. We provide comprehensive legal protection and guidance for Chapter 13 and Chapter 7 bankruptcy filings in Mankato, MN, and the local areas.

 

For at least ten years before the BAPCPA was put into place, the issue of bankruptcy abuse in the United States was becoming more significant. Filers could choose to file for Chapter 7 bankruptcy with little to no limitations on their income-to-debt ratios and have debts discharged quickly. Because of this, it was the impression of many in Congress that people were taking advantage of the bankruptcy system and were too flippant about filing for bankruptcy relief.  In short, many in Congress believed that filing for chapter 7 bankruptcy relief had become too easy and that the process had become very unfair for the creditors involved.

 

In addition to fewer limitations for one to file for Chapter 7 bankruptcy relief before the BAPCPA was enacted, filers were not required to undergo a pre-bankruptcy filing credit counseling course. According to the BAPCPA, filers must now undergo a credit counseling course with a court-approved agency within 180 days before filing their bankruptcy petition.

 

The most significant change the BAPCPA enacted was the Means Test, which created a mathematical formula of determining whether a filer qualifies for Chapter 7 liquidation or Chapter 13 reorganization. The Means Test measures a filer’s income and debt amounts. If a person’s projected monthly income for a household of their size is equal to or  lower than the state median or average income of a similar-sized household, the person will qualify for Chapter 7 bankruptcy. If their projected income is higher than the state median or average income for a similar-sized household, the filer can only file for Chapter 13 bankruptcy.

 

In addition to stricter rules for qualifying for Chapter 7 bankruptcy and the credit counseling requirement, the BAPCPA also extended the period of time that needs to pass before one can file for chapter 7 bankruptcy relief again.  With the enactment of the BAPCPA, the waiting period was extended from six to eight years.  So, if someone filed for Chapter 7 bankruptcy relief on January 1, 2016, that same person could not qualify for chapter 7 bankruptcy relief again until January 2, 2024.

 

These are two of the main changes the BAPCPA created in the bankruptcy law, but there were several other changes made to protect creditors, such as limiting automatic stay provisions and lien avoidances, establishing stricter case dismissal rules, and changing bankruptcy exemption allowances.

 

Overall, with the passage of BAPCPA bankruptcy filers are unable to choose to file for Chapter 7 bankruptcy unless they satisfy the means test and meet certain other requirements. These limitations help the bankruptcy process maintain fairness and balance between the interests of creditors and bankruptcy filers and they help to prevent many types of potential bankruptcy fraud.

 

To learn more about how filing for Chapter 13 and Chapter 7 bankruptcy in Mankato, MN, and the surrounding areas will impact your debts and other financial circumstances, contact Behm Law Group Ltd. by calling (507) 387-7200 or emailing  stephen@mankatobankruptcy.com today.

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Repayment Plan Adjustments for Chapter 13 Bankruptcy in Pipestone, MN

Bankruptcy is a legal debt remedy that many people believe is limited to individuals struggling severely due to a low income and debts they cannot repay. Many people aren’t aware that Chapter 13 (aka “wage earner” bankruptcy) can provide just as much support to those with steady incomes and accumulated debts as Chapter 7 (aka “liquidation” bankruptcy) offers those at or below a state’s median or average income. Both chapters are valuable support systems for individuals in many different financial circumstances. Whether you plan to file for Chapter 7 or Chapter 13 bankruptcy in Pipestone, MN, Behm Law Group Ltd. can help you build a strong case and receive long-lasting debt relief.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy works to reorganize your debts into a three- to five-year repayment plan that fits your income. Over that time, you will pay only a percentage of your unsecured debts, like credit card debts and medical bills.  At the end of the three-to five-year period, the remaining balances on those unsecured debts will be discharged.

With secured debts, like mortgages or car loans, one can pay those debts in chapter 13 under adjusted and more favorable terms.  With a vehicle loan, for instance, one can lower the applicable interest rate.  Further, one must only pay the present value of the vehicle rather than what is actually owed on the subject loan.  This is called “cram down”.  For instance, if one has a vehicle that is worth $10,000.00 but one owes $20,000.00 on the subject loan, one must only pay the $10,000.00 present value.

Also, if someone is delinquent or past due with one’s mortgage payments, those past due payments can be paid back or “cured” through a chapter 13 plan and the mortgage lender will not be able to commence foreclosure proceedings.

Your submitted petition will include your proposed repayment plan that you and your attorney have worked out together. The trustee will review the plan and your creditors will be allowed to examine it as well.  Your bankruptcy plan will then be submitted to and approved by the bankruptcy court.

Although the court may take a month or two to review and approve a submitted plan, you will still be required to start payments to the trustee within thirty (30) days after the plan has been filed with the bankruptcy court.  During this time, however, it’s possible that you may have a change in financial circumstances that necessitates a modification to your plan even before it is approved by the bankruptcy court.

Submitting an explanation and documentation to the bankruptcy court denoting the changed financial circumstances will likely be an acceptable basis for the bankruptcy court to allow the plan to be modified before approving it.   Presume that you initially submit a three-year (36 month) plan that provides for monthly payments of $500.00.  Presume further that after you submit your initial plan your monthly income decreases so that you can only afford to make monthly payments of $200.00.  If you and your attorney provide the chapter 13 trustee and the bankruptcy court with documentation denoting the reasons for the income changes, you can file a modified three-year (36 month) chapter 13 plan that provides for monthly payments of $200.00.

If you have income or other financial circumstances that change after your plan is confirmed or approved by the bankruptcy court during your three- to five-year repayment period, you will be able to make further adjustments. If you’ve had a major life change like losing your job, getting divorced, or having a child, you can file a motion with the bankruptcy court to change the terms of your chapter 13 plan.

To learn more about repayment plan adjustments with Chapter 13 bankruptcy in Pipestone, MN, contact Behm Law Group Ltd. by calling (507) 387-7200 or emailing stephen@mankatobankruptcy.com.

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Today’s Results of the Pandemic and Bankruptcy in Luverne, MN

While vaccination distribution is greatly improving worldwide conditions in the face of the coronavirus pandemic, there are still residual effects of a global economic shutdown negatively impacting the finances of many people and businesses so far in 2021.  The three stimulus packages in the United States have done their part in protecting many households and businesses from severe financial instability, but that financial support has limitations, and it is not something that people and businesses can rely on indefinitely.  The positive economic effects of the three Covid-19 stimulus packages have mostly been fully realized. Today, many businesses and individuals need to turn to bankruptcy to resolve their debts that were accumulated in 2020. While many different households and businesses can use bankruptcy for debt relief, the pandemic and subsequent shutdowns have greatly affected several industries much more than others. If you are considering filing for bankruptcy as a small business or as an individual consumer, Behm Law Group Ltd. can help. Our attorneys will guide and protect you throughout the process of filing for bankruptcy in Luverne, MN, and the surrounding areas.

 

We primarily work with individuals and small businesses filing for Chapter 7 liquidation or Chapter 13 reorganization bankruptcy. So far, the federal government’s stimulus support and many other aspects of the 2020 CARES Act have protected low-income households from bankruptcy.  Federal loans, federal and state grants and other Covid-19 related financing alternatives offered by various banks and credit unions have helped many small businesses stay afloat during the shutdowns. However, as previously noted, there are several industries that were more highly impacted by the pandemic, and we are beginning to see more and more bankruptcies in these industries.

 

Industries most affected and showing the most increase in bankruptcy rates include:

 

  • Real estate showed an increase in bankruptcies from 605 in 2019 to 985 in 2020.
  • Oil and gas had an increase from 236 bankruptcies in 2019 to 785 in 2020.
  • Restaurants showed an increase from 400 bankruptcies in 2019 to 660 in 2020.
  • Entertainment increased bankruptcy rates from 132 in 2019 to 524 in 2020.
  • Retail showed an increase from 284 bankruptcies in 2019 to 440 in 2020.

 

These numbers are just a sign of how devastating the pandemic has been for these industries as well as others such as tourism, gaming, and hotel industries.  As we saw with the effects of the 2008 financial crisis, the peak in bankruptcy filings that the economic recession directly caused didn’t happen until 2010.   It is likely that individual and business bankruptcies will begin to greatly surge during the second half of 2021 and throughout 2022 and into 2023.

 

Even with government assistance, many companies can only pay their workers what they’re owed before shutting down. These struggles will continue while our economy goes through its healing process.

 

The good news is that bankruptcy is always an option for individuals and businesses alike. The government-sanctioned process of permanent debt relief through bankruptcy has been and will continue to provide support for those struggling financially.

 

To learn more about how filing for bankruptcy in Luverne, MN, and the local region can help you get back on your feet as an individual or business, contact Behm Law Group Ltd. by calling (507) 387-7200 or emailing stephen@mankatobankruptcy.com.

 

 

 

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Why Bankruptcy is Better for Debt Relief in Windom, MN Than a “Debt Relief Program”

There are a few options available for those struggling to make debt payments on time. One is to work directly with your creditors to find some kind of agreement to reduce your debt or negotiate lower temporary payments with a future lump sum. Another is to work through a debt consolidation, settlement, or resolution provider and pay them to work with your creditors on your behalf. You can also choose a route through the U.S. legal system and file for bankruptcy. For anyone straining to repay debts, one of these choices may be better suited than others, depending on their circumstances. At Behm Law Group, Ltd., we never recommend working with a debt relief program. Not only are these programs limited in the type of debt relief they can provide in Windom, MN, but they’re also extremely costly and highly detrimental to credit scores. While bankruptcy also has its costs and can impact your credit, it’s almost always a better option for those with multiple types of debts they can’t repay.

Debt relief programs like the U.S.’s largest, Freedom Debt Relief®, may seem like an easier path than going through the process of filing for bankruptcy. In reality, however, these programs tend to prey upon debtors who are unfamiliar with all their options or have outdated perceptions of the social implications of bankruptcy.

While debt relief programs might look good on the surface, and they certainly make an effort to advertise the “benefits” of choosing debt settlement, consolidation, or resolution with their services, potential customers of any relief program should make every effort to read the fine print before choosing.

 

Fine Print of Debt Relief Programs

  1. Debt relief programs are expensive. Program fees range from around 15% to 35% of the debt that’s being negotiated. That may not seem too large of a fee, but it’s taken out of every debt handled. If you have, for example, the debts that Freedom Debt Relief says is the average they handle ($25,000 across multiple credit lines), you will pay them between $3,750 and $8,750. With those same unsecured debts, you would have a Chapter 7 bankruptcy court filing fee of around $338.00, and a flat rate attorney fee of between $1,000 and $1,750.
  2. Debt relief programs take a long time. Freedom Debt Relief says they handle cases in a two- to four- YEAR-LONG time frame. Chapter 7 bankruptcy takes as little as three to four months. Additionally, debt relief programs typically extend the period you will spend repaying the debts they negotiate up to five years and even longer.
  3. Debt relief programs only handle specific debts. Generally speaking, debt relief program customers only have their credit card and medical bill debts negotiated. In contrast, bankruptcy handles those debts in addition to mortgages, car loans, tax debts, debts related to any other properties, and many others.

When you consider these facts, it’s clear that filing for bankruptcy is a less expensive, faster, and much more effective option. More importantly, with regard to your credit record, bankruptcy has a much more positive overall impact that debt relief programs.  With bankruptcy, your credit rating will fall but there will be a floor from which it will start to rehabilitate immediately after your case is filed.  With so-called “debt relief programs”, your credit rating will be negatively impacted every month for several years and there will be no chance for the rehabilitative process to start.

To learn more about why it makes sense to use bankruptcy for debt relief in Windom, MN and the surrounding areas, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.

 

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Why a Bankruptcy Lawyer is Worth the Cost

Bankruptcy is a court administered legal process that almost always requires the support of a bankruptcy lawyer to be done correctly. Like most other legal processes, you can represent yourself in a case, but bankruptcy is a complex and nuanced procedure, and having the support of a bankruptcy lawyer will vastly improve your chances at filing and completing a successful case. In the United States, 8-10% of individuals filed a bankruptcy case without the help of a lawyer, and only around 2% of those cases were successfully completed. Compared to the 60% success rate of attorney represented cases, it’s undeniable that the guidance and support of a bankruptcy lawyer is crucial despite the modest costs involved. At Behm Law Group, Ltd. we can give you the protection and legal advice of an expert, skilled bankruptcy lawyer in Mankato, MN.

Specialize in Chapter 7,12, and 13

Our firm specializes exclusively in Chapter 7, 12, and 13 bankruptcy matters. We work primarily with both individual filers and businesses. As bankruptcy attorneys, we understand the financial difficulties clients are facing, but our guidance and protection is well worth the modest costs. Our assistance can actually save you time, stress and further legal costs.

What We Do

Behm bankruptcy lawyers help you build your bankruptcy case every step of the way, from determining what chapter to file to preparing paperwork and finalizing case details, to providing protection even after your case is closed if aggressive creditors continue to pursue you. This includes:

  1. Taking into account your current income-to-debt ratio and payments you may be delinquent with, such as mortgage payments or vehicle loan payments, to determine if Chapter 7 liquidation or Chapter 13 reorganization will be effective for you.
  2. Case preparation such as helping you with the Means Test, valuing your property so you can correctly disclose your assets to the bankruptcy court, guiding you with what exemptions to choose in order to protect your property, and helping you with budgeting and the planning of your finances after your case is closed.
  3. Working with the bankruptcy trustee and the bankruptcy court during the processing of your case, including completing all your paperwork and providing correct documents to the bankruptcy trustee, helping you prepare for your bankruptcy hearing, protecting you from creditors that may ignore the injunctive mandates of the automatic stay, negotiations with creditors you want to continue working with on reaffirmation agreements, and helping you create and propose an acceptable and effective Chapter 13 bankruptcy plan .
  4. Supporting you even after your case is closed with protection from creditor harassment and helping you make chapter 13 repayment plan adjustments when your financial circumstances change.

Even if your debts and financial circumstances appear to be simple, a bankruptcy lawyer will still play an essential role in helping you file a successful case, avoid the possible dismissal of your case, and protect you from aggressive creditors. To learn more about how a bankruptcy lawyer in Mankato, MN is worth the fees involved, contact Behm Law Group, Ltd. at (507) 387-7200 or stephen@mankatobankruptcy.com

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Bankruptcy Mills What You Need to Know

If you’re struggling financially, you need to know what support systems are in place to help you recover and get permanent financial stability. For many people each year, that support system comes in the form of bankruptcy. Filing for bankruptcy is a highly effective way to resolve debts and get relief from financial stress for those in many different circumstances. Whether you file for Chapter 7 liquidation bankruptcy or Chapter 13 reorganization bankruptcy, you can find debt relief through a legitimate legal process. If you’re considering filing for bankruptcy, getting help from a professional who truly has your best interests in mind is an important part of the process that will protect you from potential bankruptcy pitfalls. With the legal protection and guidance of Behm Law Group Ltd., you can file a successful case for bankruptcy in Waseca, MN, and the surrounding areas.

Specialize in Bankruptcy

There are other firms in the region who handle bankruptcy cases; however, at Behm Law Group, Stephen J. Behm has specialized exclusively in bankruptcy for nearly 20 years. Other firms might have the bulk of their attention on other civil or criminal cases, but our legal expertise is solely dedicated to individual and small business bankruptcy cases.   In fact, since 2003, Stephen Behm has been a certified consumer bankruptcy specialist certified by the American Board of Certification.

Anyone who practices responsibly in bankruptcy will not try to “sell you” on the bankruptcy process.  Everyone’s life circumstances are different.  Depending on the specific circumstances one is facing, bankruptcy is sometimes not the best option.  Any attorney who truly has your best interests in mind always needs to consider that dynamic.  Compared to our small, dedicated firm, “bankruptcy mills” are a dramatically different experience for filers who simply need help with their case.  From the benefit of nearly 25 years of bankruptcy practice experience, it is the opinion of Stephen J. Behm that anyone looking to file a solid, successful case should avoid bankruptcy mills and so-called national bankruptcy law firms.

What to be on the Alert For

Again, the following is based on the professional opinion of Stephen J. Behm.  The biggest sign of a bankruptcy mill or a national bankruptcy law firm is excessive advertising on bulletin boards, radio, and TV commercials; junk mail ads; and even bench signs. Bankruptcy mills advertise affordable prices, but those prices don’t mention their similar approach to every individual case. Bankruptcy mills usually will take on hundreds of cases. Their goal is to process as many cases as possible as fast as possible. They will often hold themselves out as being better and more highly rated or more highly qualified because of their size.  They will indicate that they have ‘filed thousands of cases” or “the most” cases in a particular area.  Some indicate that the bankruptcy process is an “easy process” where one only has to fill out “a bunch of forms”.  The filing of a bankruptcy petition is a serious legal matter and it requires work on your end to provide your attorney with all the documentation and information that your attorney needs to accurately and completely prepare your bankruptcy petition.  Your bankruptcy petition and related schedules are legal pleadings that you sign under oath and subject to penalty of perjury.  The factual representations made in those legal pleadings need to be accurate.  The filing of any bankruptcy case is certainly nothing to fear.  However, it needs to be done correctly and all the disclosures required by the bankruptcy code need to be made.

How They Work

Again, the following represents the opinion of Stephen J. Behm.  Bankruptcy mills and national bankruptcy law firms typically work hard at the initial consultation to get the filer to sign a retainer agreement and provide the first down payment. This initial consultation is usually done with a non-attorney staff member called an “attorney intake coordinator.” The client is then passed to a “prep team” of other non-attorney staff. This team gathers documents and files paperwork for the client.  A client may not even meet an attorney until the Meeting of Creditors.  Choosing to file for bankruptcy relief can be terrifying.  It is essential that one sits down across a desk with one’s attorney and visits personally and in a tactile manner with that attorney.  While videoconferencing tools such as Zoom, which is what we use at Behm Law Group, Skype and GoToMeeting are very helpful, nothing has more value and is more important in the bankruptcy process than being able to visit with your attorney in person.

To learn about the best way to file for bankruptcy relief in Waseca, MN or to determine if bankruptcy is even the right course for you, contact Behm Law Group Ltd. by calling (507) 387-7200 or emailing stephen@mankatobankruptcy.com.

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Using Bankruptcy for Debt Relief after a Layoff in Fairmont, MN

Since the start of the coronavirus pandemic in the United States, thousands of individuals have been laid off when government shutdowns required businesses to close. While many have returned to work, there is a large population still suffering the effects of job loss and the debts accrued during that time. If you are struggling to meet debt payments each month due to a layoff, filing for bankruptcy will likely help you find much needed permanent debt relief and long-term financial stability. Behm Law Group Ltd. is one of the only law firms specializing exclusively in bankruptcy cases in southern Minnesota. Our attorneys provide legal services for those filing for Chapter 7, 12, or 13 bankruptcy. With our help, you can file a strong case and permanently resolve your financial issues for effective debt relief in Fairmont, MN, and the surrounding area.

 

The most important factor to consider after a layoff is how to distribute your funds. If you plan on filing for bankruptcy, use your income for essential items like food, gas, and utilities and mortgage and vehicle loan payments. The debts that accrue with your credit card bills, medical debts, past due utility bills and other such debts can be addressed and fully discharged when you eventually file for bankruptcy.

 

You will not be penalized for prioritizing and paying certain debts for essential things, such as your homestead mortgage payment, over other debts that are not essential. Generally speaking, you should not spend money on items like gambling or fancy vacations to foreign countries.  You should also not be paying friends or relatives on debts that you owe to them.  The bankruptcy trustee administering your bankruptcy case will review your bank account statements and other financial documentation.  The trustee could sue any friends or relatives you may have paid and recover the money you paid them for the benefit of your creditors.

 

Most people who have been laid off and had a lack of sufficient income for that time period choose to file for Chapter 7 liquidation bankruptcy. This chapter provides significant debt discharge in many cases, but only those with incomes below the state median or average income for a similarly-sized household will qualify. When you file your petition, the past six months of your earnings are analyzed to determine if you qualify for Chapter 7 bankruptcy. If you were recently laid off from a well-paying job, you may not be able to qualify for Chapter 7, but you can instead opt to file Chapter 13.  However, sometimes you can still qualify for a chapter 7 bankruptcy even though you’ve had a high paying job, you’ve been laid off from that high paying job and your income has been higher than the state average income for a household of similar size.  For instance, if you’re receiving unemployment compensation or your re-employment prospects are not encouraging you may still be able to qualify for a chapter 7 even though your income level was previously quite high.

 

Chapter 13 restructures debts into a three- to five-year repayment plan that is suited to your income. Whatever balances of your unsecured debts remain at the conclusion of your chapter 13 plan will be discharged.  If you had debts with the Internal Revenue Service (IRS) or the Minnesota Department of Revenue (MDR), the principal of those debts would be paid in full.  If you have just been laid off and your last six months of income prevent you from qualifying for Chapter 7, thus pushing you to file for Chapter 13, you may find that down the line a continued decreased income or ongoing diminishment of income will change your ability to meet your repayment plan requirements. Chapter 13 Trustees allow chapter 13 plans to be altered or modified when income changes are experienced during the three- to five-year plan repayment period to accommodate this reality.

 

To learn more about filing for bankruptcy and getting debt relief after a layoff in Fairmont, MN, and the surrounding region, contact Behm Law Group Ltd. by calling (507) 387-7200 or emailing stephen@mankatobankruptcy.com today.

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Retirement Plans and Bankruptcy in Redwood Falls, MN

Filing for bankruptcy is a big life decision. It has the power to permanently resolve debts and provide lasting financial stability, but can come with some risks if your circumstances aren’t ideal for the bankruptcy process and you aren’t completely forthcoming with your bankruptcy lawyer. When it comes to large financial choices like filing for bankruptcy, people tend to look at the big picture. Most of the time, this includes questions about what will happen to retirement plans and how contributions can continue. The answers to these questions can vary from case to case, but for the most part, filing for bankruptcy won’t impact retirement funds negatively. With the guidance and support of a Behm Law Group, Ltd. attorney you can file a strong and successful case for bankruptcy in Redwood Falls, MN and the surrounding areas.

 

Bankruptcy can be a complex and nuanced legal process. The various chapters handle debts and incomes differently, and debts themselves are handled based on whether they are priority, secured, or unsecured debts. Retirement funds can be sources of income in the bankruptcy process, depending on what kind of retirement funds you have.

 

In Chapter 7 bankruptcy, your debts are discharged in exchange for the liquidation of your non-exempt assets. While some of your non-exempt assets may be liquidated, you can protect most of your property with the bankruptcy exemptions provided under either the bankruptcy code or Minnesota state law. Exemptions like the Homestead Exemption and the Vehicle Exemption will allow you to protect the equity or value in your house and your car depending on how much debt you owe against them. Learn more about Chapter 7 exemptions.  Generally speaking, the bankruptcy exemptions are very generous and, in most cases, all someone loses is debt.

 

Although your retirement fund is considered an asset, many may not even be considered as part of your bankruptcy estate. 401(k)s, 403(b)s, Keoghs, and many other retirement plans are fully exempt from bankruptcy liquidation. Roth IRAs and traditional IRAs are also not subject to liquidation, but they have an exemption limitation up to $1,362,800 per person. This amount is adjusted as cost-of-living changes. The most recent adjustment was in 2019 and the next is projected for 2022.

 

In Chapter 13 bankruptcy, your debts are reorganized into a manageable three- to five-year repayment plan. During that time, all your disposable income – income that is not needed to cover your reasonable and necessary living expenses – must go to repaying your creditors. However, as long as you have had a history of making contributions to your retirement account, you will still be allowed to do so in chapter 7 and chapter 13 bankruptcy cases.  Learn more about disposable income. In fact, in some cases you will be allowed to make larger contributions to your retirement account if you are close to retirement age.

 

Overall, your retirement plan will not be affected negatively by a bankruptcy, but you may have to adjust your contributions for a three- to five-year period if you file for Chapter 13, depending on your age and how close you are to retiring. To learn more about filing for bankruptcy in Redwood Falls, MN, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.

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Bad Faith Dismissal and the U.S. Bankruptcy Code

Each year in the United States, thousands of individuals and businesses use bankruptcy as a lawful way to permanently discharge debts they can’t repay. If you’re one of the many people struggling to meet monthly debt payments, bankruptcy might be the best solution. There are two main bankruptcy chapters individual consumers can utilize to permanently resolve debts: Chapter 7 and Chapter 13. Chapter 7 works to completely discharge most debts within 90 to 120 days and Chapter 13 works to reorganize debts into a manageable repayment plan under much more favorable repayment terms which lasts 3 to 5 years. No matter which chapter you file under, however, you will have to meet all the requirements set forth by the bankruptcy code, and above all, prove that your case has been filed in “good faith.”  With the help of Behm Law Group Ltd. expert attorneys, you can build a good faith case and successfully navigate the U.S. bankruptcy code in Jackson, MN, and the surrounding areas.

 

Bad faith cases can be filed with ulterior motives to manipulate the bankruptcy system in abusive ways rather than just simply receiving the intended, lawful benefits of debt discharge or debt reorganization. One example of a current case with allegations of bad faith is the National Rifle Association (NRA) Chapter 11 case. The NRA filed for Chapter 11 bankruptcy in January 2021. Chapter 11 bankruptcy works similarly to Chapter 13 reorganization, but it is designed for very large business entities and for individuals, such as Wayne Newton or 50 Cent, who have a lot of assets and massive debt loads.

 

The NRA stated that it planned to reorganize its debts and then move from New York to Texas, reincorporating in Texas while its debts were repaid through a Chapter 11 plan of reorganization. However, New York Attorney General Letitia James has had an open investigation into the NRA operations since 2019, and she immediately posed questions as to the possible bad faith filing of the NRA’s bankruptcy case.

 

In a press statement, James said, “While we review this filing, we will not allow the NRA to use this or any other tactic to evade accountability and my office’s oversight.”

 

In contrast to a bankruptcy filing, the NRA also announced that it was “in its strongest financial condition in years.”

 

The NRA’s petition also revealed the nonprofit organization’s business dealings to be solvent according to the debt-to-income ratio. After the New York Attorney General filed a lawsuit against the NRA in 2020 for allegedly acting fraudulently to allegedly displace $64 million from charitable work to support the wealthy lifestyles of executives, the NRA filed its own lawsuit against the Attorney General, claiming that her office had violated its rights.

 

By its filing for bankruptcy in 2021, the NRA will likely significantly delay the New York Attorney General’s suit and possibly the entire investigation. If the NRA is reorganized in Texas, the Attorney General would no longer be able to continue her office’s investigations. The revelations from the NRA’s bankruptcy petition and its apparent lack of financial woes have led to questions about whether the case has been filed in good faith.

 

Whether a case involves a business or individual, hints of bad faith will most likely lead to a dismissal. While the NRA case has a way to go until all these details are worked out, the attorneys at Behm Law Group would most certainly ensure that your bankruptcy case would be filed in good faith.

 

To learn more about the bankruptcy code in Jackson, MN, call Behm Law Group Ltd. at (507) 387-7200 or email stephen@mankatobankruptcy.com.

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Debts Discharged in Chapter 13 Bankruptcy

If your debts are piling up with no end in sight, you’re not alone. People all across the U.S. struggle financially for many different reasons. No matter how you’ve incurred debts like credit card debts, medical expenses, mortgage delinquencies, car loans and debts following vehicle repossession, and many other kinds of secured and unsecured debts, almost all can be treated favorably and discharged completely through bankruptcy. Both Chapter 7 and Chapter 13 bankruptcy are designed to help individual consumers work through a debt relief process overseen by a bankruptcy court that remains fair to all parties involved. Behm Law Group, Ltd. can help you navigate the unfamiliar and nuanced process of bankruptcy from start to finish. Our attorneys work with individuals and businesses filing for Chapter 7 or Chapter 13 bankruptcy in St. Peter, MN and the surrounding region.

 

Chapter 7 bankruptcy is reserved for filers with modest household incomes (incomes below or equal to the state median/average income of a similar sized household) or a debt-to-income ratio that justifies eligibility. Chapter 13 bankruptcy, on the other hand, is a process that wage-earning individuals can qualify for who have more robust and steady incomes. Unlike Chapter 7 where debts are discharged completely within 90 to 120 days, Chapter 13 bankruptcy reorganizes debts into a three- to five-year repayment plan where the repayment terms are adjusted favorably in light of your monthly income and necessary monthly living expenses.

 

Chapter 13 bankruptcy addresses debts in unique ways that are beneficial to your long-term financial rehabilitative consequence.  The purpose of Chapter 13 bankruptcy is for you to propose a plan of reorganization, lasting 3 to 5 years, where you make one monthly payment to a chapter 13 trustee which the chapter 13 trustee divides up among your creditors.  Generally, the repayment terms of the chapter 13 plan are much more favorable to you than what you may experience outside of bankruptcy.    A primary goal is to have as many of your debts, even secured debts like vehicle loans and priority debts like tax debts and child support arrearages, incorporated into your chapter 13 plan for payment by the chapter 13 trustee with the payment you make each month of your plan’s duration.  How a particular debt can be treated in a chapter 13 plan depends on what kind of debt it is.

 

Secured Debts

 Secured debts are debts that are secured by or collateralized by one of your assets.  If you don’t make your monthly payments to a creditor who holds a secured debt, the creditor can take or seize the asset that operates as security or collateral for the loan.  A good example is a vehicle loan.  With vehicle loans, a person can do something known as “cram down” in chapter 13 bankruptcy.  This is where the amount of a particular vehicle loan is reduced or crammed down to the present value of the vehicle.  The interest rate of the vehicle loan can also be crammed down.  For instance, presume you own a vehicle that is presently worth $5,000.00 and you presently owe $15,000.00.  Presume further that the interest rate you pay outside of bankruptcy on the vehicle loan is 15%.  In chapter 13 bankruptcy, rather than paying your vehicle loan payment to the creditor you simply include the loan for payment in your chapter 13 plan.  Your plan could provide for a reduction of the loan from $15,000.00 to the present value of the vehicle – $5,000.00.  In addition, your plan could provide for a cramdown of the interest rate that would be applied to the $5,000.00 from 15% to 5%.

 

Home mortgages arrearages/delinquencies are also secured debts that can be addressed favorably through chapter 13 bankruptcy.  Presume that before filing chapter 13 bankruptcy, your monthly mortgage payment is $1,000.00 and presume further that you are $10,000.00 behind with your mortgage payments.  Your chapter 13 plan can provide for payment of the $10,000.00 mortgage delinquency and the mortgage creditor would not be able to foreclose on your home.  However, going forward throughout your chapter 13 bankruptcy plan, you would be required to continue making your regular, monthly mortgage payments.  The chapter 13 trustee would only pay the pre-bankruptcy mortgage arrearage/delinquency over 3 to 5 years.  If you failed to make your ongoing, regular monthly mortgage payments to your mortgage lender, the mortgage lender could get relief from your bankruptcy case and commence foreclosure proceedings against your home.

 

Tax Debts and Child Support Arrearages

 Tax debts and child support arrearages are priority unsecured debts.  Generally, these debts are not secured by or collateralized by any of your assets.  They are, technically, unsecured debts.  However, due to certain public policy considerations, the drafters of the bankruptcy code wanted to make these debts more difficult to discharge in bankruptcy.   However, they can still be favorably treated in chapter 13 bankruptcy.  The bankruptcy code requires the chapter 13 trustee to pay these debts in full.  The chapter 13 trustee will pay these debts first or at the same time as the trustee pays the secured debts included in the chapter 13 plan.  While the chapter 13 trustee pays these debts first, the debts are usually not paid with interest.

 

General Unsecured Debts

These debts are lowest on the trustee’s payment priority list and they are generally paid last and receive whatever funds are left over after the chapter 13 trustee pays secured debts, tax debts and child support arrearages.  Generally, the chapter 13 trustee does not pay interest on these debts.  When the term of your chapter 13 plan has concluded, whatever is left owed on these debts is completely discharged.  Common unsecured debts that are only fractionally or partially paid in Chapter 13 bankruptcy include the following:

 

  1. Credit card debt: Credit cards are often a significant factor in pushing an individual to file for bankruptcy. Fortunately, they are the most easily discharged.
  2. Medical bills: Like credit card debt, medical bills are also a large piece in many bankruptcies but are also easily discharged. This includes medical bills incurred from uninsured medical treatments.
  3. Some tax debts: While most tax debts are excepted from discharge in bankruptcy, older tax obligations can be discharged, as long as the older tax debt was not incurred through fraud.
  4. Unsecured personal loans: Personal loans that are not secured by some kind of property can be discharged. A good example of an unsecured personal loan is a payday loan.
  5. Some judgment debts: If someone has sued you for breach of contract or negligent conduct and obtained a judgment against you, the debt underlying the judgment can be discharged in Chapter 13 bankruptcy. An exception to this would be debts reduced to judgment where you may have injured someone either while driving under the influence of alcohol or in a fistfight.

 

To learn more about how debts are handled with Chapter 13 bankruptcy in St. Peter, MN, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.