Behm Law Group, Bankruptcy Attorneys

When you take on a loan agreement of any kind, you’re responsible for repaying that debt for as long as you’re able to meet monthly debt payments without detriment to your wellbeing or the wellbeing of the members of your household. In the event you’re unable to keep making debt payments, you have several options for negotiating around this difficulty, one of which is to enter into the legal process of bankruptcy. If you find you’re having difficulties meeting debt payments from month-to-month, Behm Law Group, Ltd. offers the assistance and counsel of a knowledgeable, experienced bankruptcy lawyer in Mankato, MN.

If you choose to file for bankruptcy, you’re entering into a legal proceeding that’s designed to provide a fair outcome for all parties involved. No matter what type of bankruptcy you file for, the parties involved include you as the debtor, your creditors, and the bankruptcy trustee who is assigned by the U.S. Bankruptcy Court to oversee and administer your bankruptcy case and who is, essentially, a fiduciary or advocate for your creditors.

Your bankruptcy trustee may oversee the administration of your case, but each party still has a role in determining the outcome. Part of this outcome relies on whether there are adversary proceedings involved in your case.

What are adversary proceedings?

In a nutshell, an adversary proceeding is a complaint from one of the parties involved in your case that is issued as an official file to the court. It is a separate and distinct legal proceeding from the bankruptcy filing itself.  This filing can come from you, one of your creditors, or your bankruptcy trustee, and it can be a result of a number of aspects of your case.

When do they happen?

Adversary proceedings can be filed for a wide range of complaints about your bankruptcy case. Common complaints filed as adversary proceedings include:

1. A creditor claims your debt cannot be discharged because you incurred the debt through fraudulent activity.
2. You have multiple mortgages on your home and want to strip the junior liens to handle them as unsecured claims in your case.
3. Your bankruptcy trustee discovers you made fraudulent transfers of accounts or properties within two years of filing.
4. Your bankruptcy trustee discovers you made preferential transfers of accounts or properties within 90 days of filing.
5. You have a jointly owned property and your trustee wants to force the sale of that asset in a liquidation case, possibly forcing both you and the co-owner to forfeit the possession of the property.
6. Your creditor or trustee objects to the discharge of any particular debt or to your entire discharge/debt relief in your case on the grounds of your possible fraudulent activities as a debtor.

With the guidance of a knowledgeable bankruptcy lawyer, you can avoid many kinds of adversary proceedings that could render your case illegitimate or, when warranted, file your own adversary proceedings to affect positive change in your case.

 Find A Bankruptcy Lawyer Today

If you’re considering filing for individual or business bankruptcy, contact Behm Law Group, Ltd. at (507) 387-7200 to get started with an experienced bankruptcy lawyer in Mankato, MN today.

When filing for bankruptcy, you’ll have to take all your property into consideration. Your home, car, and even expensive jewelry are part of your bankruptcy estate and will be handled according to the exemptions you can claim, the equity in your property, and any additional claims your creditors make. Whether you file for Chapter 7 liquidation bankruptcy or Chapter 13 reorganization bankruptcy, there is a possibility that you might not be able to retain all of your property in the process. With the professional guidance of Behm Law Group, Ltd. attorneys, you can find the optimal solutions to resolving property issues and protecting your property when  filing for bankruptcy in Windom, MN.

One of the biggest concerns for homeowners filing for bankruptcy is whether or not they’ll lose their home in the process. That’s where the homestead exemption comes into play, protecting most homes from liquidation during Chapter 7 bankruptcy. Because debts are restructured in a Chapter 13 case, homeowners generally don’t have to worry about losing their homes in Chapter 13 bankruptcy.

However, there are cases where a filer owns multiple rental properties in addition to one’s principle residence. The homestead exemption you can use to protect your primary residence isn’t applicable to rental properties, so it can be more difficult to keep rental properties when filing for bankruptcy.

Rental Property in Chapter 7

If you have equity on your rental property and its value is higher than the debt you owe, you probably want to hang onto that property. To try and protect your rental property from liquidation during the Chapter 7 filing process, you have to assert an exemption claim. Because you can’t use the homestead exemption, your only choices include a portion of the un-used federal homestead exemption (up to $11,850) and the federal wildcard exemption (adding another $1,250). In Minnesota people can elect to utilize either the state or the federal exemptions, so it’s possible you can protect some value in your rental property depending on its worth versus how much debt is against it. If the value of your rental property is less than the debt against, the trustee will not attempt to liquidate it because the entire value is extinguished by the debt against it.  Essentially, the creditor that holds the mortgage or other secured lien has full and complete rights to it.  Generally, you can keep making mortgage payments on the rental property outside of bankruptcy.

Rental Property in Chapter 13

In Chapter 13, your property debts are reorganized with other applicable debts into a three to five year repayment plan. This means you’ll be able to keep your rental property and continue making the monthly payments on it.  However, you can only do this if there is equity or value in the rental property above the debt you owe against it and the property generates a positive income for you.  In other words, the income you receive from the rental property must exceed the associated monthly expenses (mortgage payment, utility payments, property tax payments, insurance payments, etc.). If the rental property generates negative revenue, however, you will be required to surrender it in Chapter 13. You may also be able to find options to cram down or strip liens off to keep a rental property that generates a negative cash flow.

Find Professional Help When Filing for Bankruptcy

If you’re considering filing for bankruptcy in Windom, MN and own rental property, Behm Law Group, Ltd. can help you work to retain that property during the bankruptcy process. Contact us at (507) 387-7200 for more information about filing for bankruptcy and how our expert bankruptcy attorneys can help you.

Whether you file for liquidation bankruptcy (Chapter 7) or reorganization bankruptcy (Chapter 13), a bankruptcy estate – a legal entity that is separate and distinct from you, the bankruptcy filer – will be created by operation of the bankruptcy code.  All of your property will essentially be dumped into the bankruptcy estate and, for a time, the bankruptcy estate will actually own the property.  However, Congress did not want people to emerge from the bankruptcy process completely destitute and with no ability to reorganize their financial situation.  While there is a risk that one may lose some assets when one files for bankruptcy relief, such a situation is the exception rather than rule.  Most people go through bankruptcy and retain all of their assets.  Congress allocated various value allotments called “bankruptcy exemptions” that people can assert and absorb most or all of the property back out of the bankruptcy estate.  Depending on your situation and the exemptions you claim, Behm Law Group, Ltd. can help you understand how your exemptions work and what role they play when you file for bankruptcy in Pipestone, MN.

When exemptions come into play during your bankruptcy case, you may use them to protect your value interest or equitable interest in your assets from liquidation.  There is a common misunderstanding that one gets to keep a car or a house, etc. in bankruptcy.  It is much more accurate to say that one gets to protect or keep an equitable interest in an asset.  For instance, if you own a home worth $200,000 and the mortgage loan is $150,000, your equitable interest is $50,000.  It is this $50,000 that you would protect with the applicable bankruptcy exemption.  The applicable bankruptcy exemption would not make the underlying mortgage go away and you would still have to pay it or the mortgage lender could initiate foreclosure proceedings against your house.  Every individual filer has access to the bankruptcy exemptions in both Chapter 7 and Chapter 13 cases.  As indicated above, the policy goal of bankruptcy is rehabilitative and the intent behind the bankruptcy code is not to leave a bankruptcy filer completely destitute.  Rather, the intent is to allow a person some property with which to reorganize one’s financial situation and move forward free of debt entanglement (other than those debts one actually wants to retain).

In Minnesota, a bankruptcy filer can choose either the exemptions provided under Minnesota state law or the exemptions provided under the federal bankruptcy code.  Whether one elects one or the other depends largely on how much equity or value one has in one’s homestead.  Again, equity is the value of an asset in excess of the debt owed on that asset.  For instance, presume again that one owns a home worth $200,000 and that one owes $150,000 on the subject mortgage.  One, therefore, has $50,000 equity.  One would protect this equity with one’s homestead exemption.  The homestead exemption under the Minnesota state exemptions is $390,000 for a homestead that is located in a city/town and $975,000 for a rural homestead or farm.  The homestead exemption under the federal bankruptcy code is $23,675.  In this example, given the $50,000 equity figure, one would want to use the exemptions provided under Minnesota state law where one could protect the full $50,000.  If one were to choose the exemptions provided under the bankruptcy code, one could protect only $23,675 and the bankruptcy trustee administering one’s case could sell the house, pay off the $150,000 mortgage and pay the bankruptcy filer the exemption claim of $23,675 and use the rest to pay one’s creditors.

The analysis regarding one’s property and the applicable bankruptcy exemptions needed to protect it can be highly nuanced and exceedingly detailed and whether one chooses the exemptions provided under Minnesota state law or those provided under the federal bankruptcy code depends on one’s unique circumstances.  For more information about how exemptions can benefit your situation when you file for bankruptcy in Pipestone, MN, contact Behm Law Group, Ltd. at (507) 387-7200.

In most cases, individuals and small businesses fight against filing for bankruptcy until it becomes clear that it is the most sensible option. In many cases, before the decision to file for bankruptcy is made, the filer attempts to meet or repair debts in many ways. Payments or money transfers are common occurrences before bankruptcy petitions are filed, but in some situations, those transactions might be reversed after your case is filed. Behm Law Group, Ltd. offers legal advice and assistance to help you understand how your case will unfold when you file for Chapter 7 bankruptcy in Marshall, MN.

In a Chapter 7 bankruptcy case, the bankruptcy trustee is a fiduciary for creditors and the trustee is obligated by the bankruptcy code to ensure that the person filing for bankruptcy is forthright and honest and that he or she has listed all of his or her creditors and listed all of his or her assets. The trustee is also tasked with making sure that the process is fair for all creditors and making sure that all creditors are treated equally.

One responsibility of a trustee in the trustee’s role of making sure creditors are treated fairly and equally is to identify and recover any preferential transfers in a bankruptcy case.

Preferences 

If you have multiple unsecured creditors (creditors that do not have collateral securing the debts) in your case and, within the ninety days prior to the filing of your case, you have made payments or transfers to any one creditor totaling $600.00 or more, this is considered an avoidable preference.  This means that you have preferred one similarly situated creditor over another creditor who may not have received any payment.   If a trustee finds that you preferred one creditor over another, the trustee will be obligated to avoid the preference by demanding a refund of what you paid from the preferred creditor.  The trustee will then distribute that amount equitably among all of the similarly situated creditors.

Preference claims can either be voluntary payments you made or involuntary garnishments from your pay checks or bank accounts. For creditors labeled “insider creditors”, such as your friends or family, any payments totaling $600.00 or more made within a year of the date that your case is filed will be deemed a preference.  If you pay a friend or relative more than $600.00 within a year before your case is filed, the trustee can and will demand a refund and disburse it among all creditors.  For other creditors, such as credit cards and medical debts, known as “arms-length creditors”, payments of more than $600.00 within ninety days before your case is filed will be deemed preferential.

Strong Arm

To reverse any claims deemed to be preferences, the trustee has the right to use his or her “strong arm” powers under the bankruptcy code and undo the transactions.

If you suspect you may have made a preference payment, or if you have other concerns about your situation, you should not try to undo or reverse it.  Behm Law Group, Ltd. can help you throughout the process of filing for Chapter 7 bankruptcy in Marshall, MN. For more information, please contact us at (507) 387-7200 today.