3 Factors to Consider When Using Bankruptcy for Business Debt Relief

For individual consumers and businesses alike, bankruptcy is always an option that can help restructure, dissolve, and generally treat debts that filers wouldn’t be able to repay. The process of bankruptcy is designed with fairness to both the filers and creditors, but also serves to support economies from local municipalities to the national economic system. At Behm Law Group Ltd., we provide services for Chapter 7, 13, and 12 cases, guiding filers through the complex process of each step in their case and providing legal protection against creditor harassment and abuse. While we primarily work with individuals filing for Chapter 7 liquidation bankruptcy and Chapter 13 reorganization bankruptcy, we also guide small businesses using bankruptcy for long-term debt relief in Luverne, MN, and the surrounding areas.

 

Chapter 7 bankruptcy is the most commonly filed case for individuals and businesses. It functions to liquidate non-exempt assets in exchange for the permanent discharge of debt. Business owners who file Chapter 7 can have only their business debts or both their business and personal debts handled in the case, depending on how their business is structured and depending whether both the business and they themselves, personally, are contractually liable on the debts.  Sometimes a business will close following the completion of a business chapter 7 case.  Many times, a business will continue operating after a business chapter 7 case has concluded but the business will operate with a lot less debt.  Sole proprietorship businesses can also file for Chapter 13 bankruptcy and have personal and business debts rolled into one case. This chapter works to reorganize debts into a manageable repayment plan lasting three to five years. Business operations can continue during a Chapter 13 case as long as the business finances fit into the case requirements.

 

If you plan to use any type of bankruptcy for business debt relief, it’s important to take these three major factors into consideration:

 

  1. Is your business currently profiting? If your business is still making money, filing for bankruptcy might not be the right choice. For example, if you’re facing a temporary hard time, incurring more debt to help you through the difficult period that you would be able to repay when your business situation is more stable is probably a better choice than bankruptcy. Filing for bankruptcy is the right choice when your business is consistently losing money with no end in sight.
  2. What’s the asset-to-debt ratio? Every business has assets, whether that includes real estate, equipment, or stock holdings. If the value of your assets exceeds the total debt your business owes to its creditors, bankruptcy might not be the best option. Rather, it may behoove you to engage the services of a lawyer to help you construct various non-bankruptcy work-out arrangements with your creditors.
  3. Who is liable for the business debt? If you own a sole proprietorship, you are personally responsible for business debts. In this case, you can use Chapter 13 to restructure both business and personal debts into one manageable three to five year repayment plan, but this may only be effective if you are also struggling with personal finances. If you don’t file for bankruptcy relief and you’re personally responsible for business debts, the business creditors can use legal action to pursue your personal assets.

 

To learn more about bankruptcy and business debt relief in Luverne, MN, and the local region, contact Behm Law Group Ltd. by calling (507) 387-7200 or email stephen@mankatobankruptcy.com.

Part Two: Utility Bills and Debt Relief This Winter

This is the second part of a blog series covering frequently asked questions concerning utility bill debts and bankruptcy. The first part can be found here. Utility debts occur when you miss monthly utility payments for any period of time. As an unsecured debt (a debt that does not have collateral – secured by any property), it is always fully discharged in an individual consumer bankruptcy case. Because of that, bankruptcy is one of the best options for finding relief from utility bill debt and other unsecured debts like credit card balances and medical bills. At Behm Law Group Ltd., our attorneys are dedicated to helping households work through Chapter 7 or Chapter 12 or Chapter 13 bankruptcy cases to receive permanent, effective debt relief in Mankato, MN, and the surrounding communities.

While filing for bankruptcy relief will be denoted on your credit profile for a limited period of time (usually 5 to 7 years), the benefits almost always outweigh the potential negatives because your debts will be fully discharged in bankruptcy. Utility bill debts are debts that are handled in bankruptcy, and if you owe those debts, filing for bankruptcy can also stop your utility services from being shut off and keep creditors from harassing you. These are some of the more frequently asked questions about how utility debts are handled in bankruptcy.

When is filing for bankruptcy not enough to prevent service shut off?

Although the automatic stay injunctive mandates of 11 U.S.C. §362 are immediately imposed upon all creditors when you file your bankruptcy petition, there are still some steps that you must take to stop possible utility service shut off. In your petition paperwork, make sure your utility bill debts are listed in the correct section. Listing those unpaid bills as debts will allow the bankruptcy court to notify your utility providers of your bankruptcy filing and prevent service shut-off. Within 20 days of filing, you must also show your utility provider that you will be able to pay your utility bills that are incurred and come due after the date that your bankruptcy petition is filed. This proof is called “adequate assurance.”

What is “adequate assurance?”

Adequate assurance is a good faith measure of proof to your provider that you will be able to pay your future utility bills. This proof can be offered in several different forms, including letters of credit provided by a lender, security deposits (much like a damage deposit with a landlord if you’re renting an apartment), certificates of deposit, prepayment, surety bonds, or another type agreed on by you and your utility provider.

What happens if my provider doesn’t accept my offer of adequate assurance?

If you and your provider don’t agree on a form of adequate assurance, you can request the bankruptcy court to order your provider to accept that assurance. The bankruptcy judge may also order you to modify the form or amount of the assurance deposit.

Utility bill debts are stressful, especially when service shut-off is a threat during the colder months. If you’re struggling financially, contact Behm Law Group Ltd. at (507) 387-7200 or stephen@mankatobankruptcy.com for more information about bankruptcy and debt relief in Mankato, MN.

Filing for Chapter 13 Bankruptcy with a Business Partner in Worthington, MN

For individuals in the position to file for bankruptcy, there are two common options available: Chapter 7 or Chapter 13 bankruptcy. Chapter 7 works to liquidate your non-exempt assets in exchange for the discharge of your debts. This process is most common for filers without a steady income and the loss of non-exempt property does not occur in most Chapter 7 cases. However, for those with income who want to keep properties that could otherwise be liquidated in Chapter 7, Chapter 13 is a better option. Chapter 13 bankruptcy works to restructure your debts into a manageable three-to-five-year repayment plan that is based upon your monthly “net” income and your monthly reasonable and necessary living expenses.

While Chapter 7 is a bankruptcy process available to individuals and businesses in Worthington, MN, alike, Chapter 13 is mostly filed by individuals. If you own a sole proprietorship or partnership business, you may be able to combine business and personal debts and use Chapter 13 bankruptcy to resolve all debts at once.

If you’re in the position to file for Chapter 13 bankruptcy in Worthington, MN and the surrounding area, Behm Law Group, Ltd. can help you build a strong case and get your reasonable repayment plan put into place.

For Chapter 13 filers with a sole proprietorship, combining business and personal debts is relatively simple because there’s only one party filing for bankruptcy. For partnership businesses, however, that process can get a little more complicated. These complications often create situations where filing for Chapter 13 bankruptcy is less than ideal for a partnership.

What to consider:

  • Your business contract: Many partnership businesses build clauses into their contracts that will dissolve the business as soon as one partner files for Chapter 13 bankruptcy. This is largely because of the potential negative results in a bankruptcy case that could befall a non-bankruptcy filing partner.
  • Potential case results: If the non-filing partner is able to repay the debts with their personal income, a creditor could request to have the case switched to a Chapter 7 on those grounds. The creditor could possibly receive more money in this case by targeting your partner’s assets, and your business would be forced to close down operations.
  • Who has to pay: If your partner files for bankruptcy, they’ll wipe out their responsibility for that business debt. This may leave you fully responsible for the debt. Additionally, if either of you guaranteed the debt, a bankruptcy case may trigger a clause that will require an immediate full payment of a loan.
  • Who will own the business: When your partner files for bankruptcy, they give up their share in the business to the bankruptcy trustee. Their ownership interest in the business becomes property of their bankruptcy estate. Technically, this will make a bankruptcy trustee your new business partner. If a trustee chooses to liquidate that asset, you could lose half of your business (or however much your partner owned). However, if the business has no “net” value in excess of the debts it owes, the trustee will likely conclude that it has no value to the bankruptcy estate. In that case, the partner filing for bankruptcy relief would likely be allowed to continue operating the business with the non-bankruptcy filing partner, as was the case before the bankruptcy was filed.

Don’t Try to Navigate Chapter 13 Bankruptcy Alone

If you or your partner plan to file for Chapter 13 bankruptcy in Worthington, MN or the surrounding area, Behm Law Group, Ltd. can help you decide whether or not it’s a good idea. Contact us at (507) 387-7200 or stephen@mankatobankruptcy.com today.

Finding a Home and Rebuilding after Bankruptcy

If you are struggling financially, there are many options available to you for debt relief. While some households might benefit from negotiating wiggle room with their creditors, it’s more likely that people with debts they can’t pay will find long-term, permanent debt relief in bankruptcy. Depending on your financial circumstances, you can file for liquidation or reorganization bankruptcy. If you are unable to make monthly debt payments, Behm Law Group Ltd. can help you file for bankruptcy from start to finish. Our skilled attorneys can also help you understand the process of rebuilding your credit after filing a bankruptcy in Mankato, MN.

Many people fear that filing a Chapter 7 bankruptcy means losing their property, including their house. While filing a chapter 7 bankruptcy can be scary and while there are many misconceptions about it, there are ways to find a new home while you start your financial life over again after your debts have been discharged. In addition to a potential home loss, even those who file for bankruptcy and don’t lose their house (like those that file for Chapter 13 bankruptcy or those renting a residence) will have to face the question of whether or not they can buy a house in the near future. There are several options to consider when trying to find a home after bankruptcy.

Renting: If you just lost your home in a Chapter 7 bankruptcy case, you’re probably not in a position to buy another residence right away. In addition to various limitations to your financial situation, there are laws dictating how long you have to wait after a bankruptcy filing until you can be approved or qualify for some mortgages. Typically, this waiting period is 2-4 years. However, there are many opportunities for you to rent post-bankruptcy. Plenty of renters offer sliding scale leases and will also rent to individuals who are rebuilding their credit.

Buying: For those who have the means to buy a home in the next few years after a bankruptcy, they simply have to get through the waiting period and focus on re-building their credit. The waiting times for different mortgages are as follows:

  1. Conventional loan:
    1. 4 years after a Chapter 7 discharge or dismissal
    2. 4 years after a Chapter 13 dismissal
    3. 2 years after a Chapter 13 discharge (or 4 years from the date you filed)
  2. USDA loan:
    1. 3 years after a Chapter 7 discharge or dismissal
    2. 1 year after a Chapter 13 discharge or dismissal
  3. FHA and VA loans:
    1. 2 years after a Chapter 7 discharge or dismissal
    2. any time after the court dismisses or discharges your Chapter 13 case

Any bankruptcy will be reflected on your credit report for up to seven to ten years. However, many lenders will be very incentivized to work with you because they will know that all of your previous debts have been discharged and that they will not have to compete with those discharged creditors to get paid by you. They will also know that you will not be able to file for bankruptcy relief and qualify for a bankruptcy discharge again for several years. In short, you will be able to rebuild your credit by incurring new debt during the 2-4 year waiting period. If you’re rebuilding after bankruptcy in Mankato, MN, or the surrounding area, work on your credit and stick to the waiting period rules, and you’ll be eligible to apply for the same home mortgage loans as any other applicant. To learn more about filing for bankruptcy, contact Behm Law Group Ltd. at (507) 387-7200 or email stephen@mankatobankruptcy.com

4 Most Common Types of Bankruptcy Fraud

In the United States today, bankruptcy law has many rules that serve to prevent fraudulent cases. Despite these rules, there are times when trustees catch mistakes or intentional abuse, which results in a case being dismissed, the denial of debt relief or the filing of criminal charges.  With the exception of a filer intentionally committing fraud, the chances of one engaging in fraudulent conduct are low.  The guidance and advice of a bankruptcy attorney will ensure the filing of a clean, strong case where there would be less of a chance for mistakes which could be interpreted as fraudulent conduct. If you are considering filing for bankruptcy in Redwood Falls, MN, or the surrounding area, Behm Law Group Ltd. can help you understand what can be interpreted as fraudulent conduct and how to avoid it in your Chapter 7 or Chapter 13 bankruptcy filing.

 

As an individual filer, you have two primary options for bankruptcy: liquidation or reorganization. Chapter 7 liquidation bankruptcy works to discharge your debts in exchange for the sale of your non-exempt assets. Chapter 13 reorganization works to structure your debts into a manageable repayment plan lasting from a three- to five-year period. There are various nuances in the types of fraud between the two bankruptcy options, but in general, four kinds of fraudulent actions make up the most common causes of case dismissal and possible bases for legal action, including the filing of criminal charges, against you.

 

  • Intentional falsification of forms: Whatever chapter you file for, you will be required to submit a large number of forms, documents, and other paperwork detailing your financial history and current situation. False information or the intentional failure to provide any part of these documents can be considered fraud and result in a case dismissal. If you intentionally falsify information, you may even be charged with perjury, which could result in criminal charges being filed against you.
  • Asset hiding: One common type of bankruptcy fraud in Chapter 7 cases is asset hiding. Because some filers can lose assets in liquidation during a Chapter 7 case, they can be tempted to hide assets. While it’s possible that some filers may get away with this, you will be denied debt relief if the trustee discovers that even a small asset of low value has been hidden.
  • Multiple filings: You will be committing fraud if you file multiple cases with different information or in different jurisdictions either at the same time or within unacceptable periods of time between cases. You must adhere to court-regulated timelines between cases and provide requested information, or your case will be dismissed.
  • Bribes: Bribery of bankruptcy trustees is rare but it has happened.  The few who have at first gotten away with it are often caught later. Any bribery on your behalf will result in a dismissal of your case. Depending on the circumstances, there may be even more severe consequences for having offered someone a bribe.

 

If your case is dismissed for any reason, you may have to wait up to 180 days until you can file again. The easiest and most assured way to avoid any case dismissal or other issues with your case’s success is to work with a skilled and knowledgeable bankruptcy attorney.

 

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

Potential Risks of Bankruptcy When Using a Software Program

Many people use online tax software programs to file their taxes each year. These software programs are suitable in a pinch for a wide majority of people with standard sources of income, single-home families, spouses joint filing, and many others. However, these programs may not be effective when used to calculate tax returns for self-employed individuals or filers with complicated incomes.

 

Just as these tax programs aren’t perfect for everyone, online bankruptcy filing software programs can be a risky option if you plan to file without the help of a bankruptcy attorney. Improper filing can add to the risks of a bankruptcy and make a serious situation much worse, including the permanent/irreversible loss of your property. When you employ the expert services of Behm Law Group, Ltd. instead of using an online bankruptcy software filing program in Fairmont, MN, you can avoid these potentially disastrous risks.

 

Bankruptcy software programs are offered through some online providers, ranging in cost. These programs can be very dangerous for those with simple financial circumstances filing for Chapter 7 and especially for those filing for Chapter 13 or have more complicated circumstances.

 

The two most common misconceptions about bankruptcy filing software are that it’s cheaper, and that the program will be easier and will do most of the work for the filer.

 

While bankruptcy software may be less expensive upfront than hiring an attorney, that doesn’t mean it will save you money. In fact, filers using online bankruptcy filing software may lose a significant amount of money in the form of some debts not being discharged and property being lost. For many filers, typical bankruptcy software might not be able to predict all the debts that can be discharged in a Chapter 7. Debts like medical bills, credit debt, or some tax debts might be exempted from the discharge process, and you’ll still be obligated to pay them.

 

It’s a huge misunderstanding to believe that even the best bankruptcy filing software will do the lion’s share of work or will be easier than working with an experienced legal representative. Bankruptcy software programs still require you to complete all the necessary petition paperwork, generate a repayment plan proposal if you’re filing Chapter 13, enter proof of completion of both pre-bankruptcy and post-petition requirements, and overall organize and enter all the information needed to complete a case. A bankruptcy program will simply run calculations and give that information to the bankruptcy court.

 

In a nutshell, online bankruptcy software programs are poor middlemen between the filer and the bankruptcy court. They can’t offer anything close to the in-depth, reliable support system and skilled professionalism of a trained bankruptcy attorney. In addition, bankruptcy software programs may miscalculate your dischargeable debts, cause the loss of property you could otherwise exempt and keep, and may even cause your case to be dismissed due to inaccurate calculations or lack of information.

 

To learn more about filing with an attorney and the potential risks of online bankruptcy programs compared to the benefits of having an experienced bankruptcy attorney in Fairmont, MN, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.

How to File for Bankruptcy with and without a Bankruptcy Attorney

If you’re struggling to meet monthly debt requirements as an individual or a business, you may want to consider filing for bankruptcy as a long-term debt relief solution. Filing for bankruptcy may seem like a drastic choice with some negative effects on your credit, but in reality, bankruptcy has helped thousands of debtors regain their financial footing and improve their quality of life with the reduction of debts.

 

If you’re planning on filing for bankruptcy, there are several ways to do it, with or without the assistance of a bankruptcy attorney. At Behm Law Group, Ltd., we know that there are many individuals who can’t afford a bankruptcy attorney in Jackson, MN and the surrounding area, and we want you to know your options.

 

Filing for bankruptcy is a legal process that’s done through the U.S. bankruptcy court system. Because of this, it requires a comprehensive amount of documentation and paperwork that covers your entire financial history, including debts and income. In addition to the required paperwork, there’s a significant amount of pre-bankruptcy requirements that must be done before you file a case.

 

Filing a petition is a complex process where one will greatly benefit from the guidance of a trained legal professional. With or without an attorney, there are four main ways you will file:

 

  1. Attorney filer: If you can afford a bankruptcy attorney, you’ll have the easiest and most positive experience in filing. An attorney will do many things for you throughout your case. Learn more about what an attorney does here.
  2. Non-attorney petition preparer: If you absolutely cannot afford an attorney and can’t find one that will offer pro bono services, you can use a bankruptcy petition preparer instead. A petition preparer will fill out documents and forms for you and give them to you to send in.  The BAPCPA has guidelines and warnings for working with a petition preparer.
  3. Federal bankruptcy forms: To prepare your petition yourself, it’s recommended you visit a legal aid center for guidance on how to file. You can access the federal bankruptcy forms on the U.S. court website and download all the documents you’ll need to fill out. These templates, while standardized, do not provide any guidance on filling them out.
  4. Bankruptcy software: Filers can pay to use a software program that functions similar to online tax programs. The program will walk the filer through their financial records, asking questions and providing digital forms. However, these programs can be inaccurate because they can have issues translating the more nuanced parts of a filer’s financial circumstances and they are not always accurately updated in a timely way.

 

In general, taking advantage of the knowledge and legal protection of an attorney is the best-case scenario for putting together your petition and filing your bankruptcy. To learn more about filing for bankruptcy with or without the help of a bankruptcy attorney in Jackson, MN, contact Behm Law Group, Ltd. today at (507) 387-7200, or stephen@mankatobankruptcy.com.

What You Can Learn from the Papyrus Bankruptcy as a Small Business Owner

The technological advances we are continually making in many different industries are amazing, but they come with sometimes very unforeseen impacts on other areas of the commercial world. When it comes to paper products like books, legal documents, paychecks, receipts, and even greeting cards, digital replacements for these items have largely taken over.

 

This has severely affected creators and sellers of paper media, including, recently, the greeting card and stationary company Papyrus. The Papyrus bankruptcy, in particular, could give small business owners important information. If you are considering filing for bankruptcy in Owatonna, MN as a small business owner or an individual, Behm Law Group, Ltd. can help you decide which chapter to file and guide you through it.

 

The Papyrus brand, owned by Schurman Fine Papers, is closing all 254 of their stores after filing for Chapter 11 bankruptcy in January of 2020. In addition to the Papyrus brand, the Schurman Fine Paper company owns American Greetings and Carleton Card. The stores that provide all of these paper greeting cards are shutting down because of the oversaturation of digital and e-card media. Papyrus and other Schurman cards will still be sold through department stores, supermarkets, and other companies.

What does this tell you?

Simply put, the replacement of paper cards with digital media dramatically decreased the demand for Papyrus products. If you’re supplying a product that’s losing demand due to the increase of digital versions of that product, you’re looking at a market that may become obsolete. However, you may still be able to maintain a market if you’re able to work through other retailers or transition your product into a digital format.

 

Ideally, if possible, your product should be available in a digital and physical format. Papyrus’s choice of filing Chapter 11 bankruptcy means their income is still high enough to make monthly debt payments pursuant to a Chapter 11 reorganized plan. In the future, if they’re able to successfully pay their debts pursuant to the modified payment terms of this plan, Papyrus may be able to reopen stores or create a whole new product line of digital greeting cards. All of this means there’s still hope for companies making products that are slowly being replaced by digital versions.

 

If you’re a sole proprietor or partner of your business in Owatonna, MN, Behm Law Group, Ltd. can help you file for Chapter 13 bankruptcy and reorganize your debts, or Chapter 7 bankruptcy and work through the liquidation process. Give us a call today at (507) 387-7200 or contact stephen@mankatobankruptcy.com for more information.

Part 1: Costs of Filing and Hiring Bankruptcy Assistance

If you’re having difficulty making your debt payments from month to month, it might be time to consider seeking effective methods of debt relief. While there are many other unreliable forms of debt relief available, bankruptcy is the most efficient and reliable for long-term stability and actual, long-term debt relief.  Bankruptcy is also a system that is based in law, so you can rest easy with the knowledge that you won’t be exposing yourself to predatory debt relief agencies.

 

If you’re having financial difficulties, you may have already looked into what the process of bankruptcy looks like and what fees are involved. To file a successful case, you can find the bankruptcy assistance in Worthington, MN, you need with the expert attorneys at Behm Law Group, Ltd.

 

Filing for bankruptcy without the guidance of a lawyer is possible, but is not recommended. Bankruptcy is a highly nuanced process, and bankruptcy assistance is often key in filing a strong and effective case. This is especially true for those filing a reorganization type of bankruptcy, like Chapter 13. Looking at the numbers for the fees involved bankruptcy and the costs of an attorney may be daunting, but breaking down that information to understand it a little better can help you make the decision on whether to file or not.

 

Bankruptcy/Court Fees

 

There are a few fees that cover different aspects of your petition and other parties involved. These fees are often lumped together, but taken apart they look like this:

 

  • Chapter 7 filing fee: $335
  • Chapter 13 filing fee: $310
  • Credit counseling fees: Prior to filing your petition, you must complete credit counseling within 180 days of when you will submit your paperwork. This will typically be around $50 depending on what organization you work with. This is also a fee that can be waived with proof that you’re unable to pay.
  • Debtor education course fees: After filing for bankruptcy relief, you must complete a debtor education course in order to receive a discharge. Again, this varies depending on the organization you choose. The cost can vary quite a bit, ranging from $10 to $50 according to Federal Trade Commission data. This is another fee that may be waived with proof of inability to pay.
  • Miscellaneous fees: Certain cases may have other fees to pay, depending on miscellaneous circumstances. All miscellaneous fees are listed in the Bankruptcy Court database.

 

After adding up all these fees, bankruptcy cases will have fees ranging broadly from $1,000 to as high as $6,000 or more. It all depends on your situation and how complicated your case is. Generally speaking, it’s more expensive to file for Chapter 13 bankruptcy ($2,500 to $6,000) than Chapter 7 bankruptcy ($1,000 to $3,500).

 

Attorney costs vary from law firm to law firm, and there are some lawyers that reserve time to work pro-bono with clients that can’t afford bankruptcy assistance. We’ll cover more information about hiring bankruptcy assistance in Worthington, MN, in part two of this blog.

 

Contact Behm Law Group, Ltd. at (507) 387-7200 or stephen@mankatobankruptcy.com for more information today.

 

Filing for Bankruptcy After Moving to a New State

Moving anywhere is a big ordeal and a lot of hassle, even if it’s just down the street from your old home. Moving to a new state, however, requires even more work due to the logistics of the physical move plus all the paperwork you need to update. Not only does moving to a new state require changes in licenses, registration, addresses on all legal documents, bank accounts, PO boxes, and much more, it can also affect more unusual circumstances, such as bankruptcy filings.

 

If you are considering filing for bankruptcy in Marshall, MN and Minnesota is a new state for you, Behm Law Group, Ltd. can help you build a strong case for Chapter 7 or Chapter 13 bankruptcy and receive long-term debt relief.

 

A move to a new state affects bankruptcy so much because each state has its own specifications for bankruptcy exemptions.

 

What are bankruptcy exemptions?

 

Exemptions are allotted amounts provided under the laws of each state that allow you to protect your property from being surrendered in bankruptcy and sold by the trustee administering your case.  The United States Bankruptcy Code has its own exemptions, too.  Some states allow you to use either a particular state’s exemption allowances or the exemptions provided by the bankruptcy code, depending on which set of exemptions best works with your particular circumstances.  Some states, however, require you to use only a particular state’s exemption allowances and those states prohibit you from using the exemptions provided by the bankruptcy code.  The exemption amounts and the property items that can be protected with the exemptions vary from state to state but most large items, like your home or car, will be protected from liquidation.   However, what you can protect with your bankruptcy exemptions might be affected by a move to another state.

 

In Minnesota, you can exempt your homestead with a value of up to either $420,000, if it is located in a city and is non-agricultural in nature, or $1,050,000, if it is rural and agricultural in nature, and you can exempt the value in your car up to $4,800. In Minnesota, you can also use the federal bankruptcy exemptions in place of the Minnesota exemptions. As indicated above, this is true for many states, though not all. States that currently allow you to use the federal exemptions include Alaska, Arkansas, Connecticut, Hawaii, Kentucky, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Texas, Vermont, Washington, and Wisconsin.

 

How do I know what state I file under?

 

You will be required to file under the state you are currently the resident of.  In order to establish residency for purposes of filing a bankruptcy case in a particular state, you must actually reside in that state for at least ninety-one (91) days of the preceding one hundred eighty (180) days before the date your case is filed.  For example, if you resided in Wisconsin for all of 2019 and then moved to Minnesota on January 1, 2020 and you wanted to file for bankruptcy in Minnesota you would not be able to do so because you would have resided in Wisconsin for the majority of the one hundred eighty (180) day period preceding January 1, 2020.  Rather, you would have to wait until April 1, 2020 in order to file bankruptcy in Minnesota because by that time you would have resided in Minnesota for at least ninety-one (91) days of the preceding one hundred eighty (180) day period.

 

Generally, in order to use a particular state’s bankruptcy exemptions one must reside in that state for two years (730 days).  If one hasn’t lived in a state that long, one would have to use the exemptions of the state that one lived in for the two (2) years before moving to one’s current state.   For example, if you lived in Alaska for four years, then moved to Minnesota a year ago, you would have to use the exemptions provided under the laws of Alaska.  However, because Alaska allows people to use the federal bankruptcy exemptions, you could opt to use those exemptions instead of the Alaska bankruptcy exemptions.  Even if one may have resided in a particular state for two (2) years before relocating to a different state, they may not be able to use the original state’s exemption laws.  Indeed, some states prohibit non-residents from using their exemption laws.   South Dakota is a good example of this.   If you had lived in South Dakota for all of 2018 and all of 2019 and then moved to Minnesota on January 1, 2020, you would not be able to file for bankruptcy relief in Minnesota until April 1, 2020, as indicated above.  When you would file your bankruptcy case on April 1, 2020, you would not be able to use the exemption laws of either the South Dakota or Minnesota because you would no longer be a resident of South Dakota and you would not have resided in Minnesota for the preceding two (2) years (730 days).  In this case, however, you would be able to use the federal bankruptcy exemptions.

 

If you’re considering filing for bankruptcy in Marshall, MN and want to learn more about your exemption options, contact Behm Law Group, Ltd. at (507) 387-7200 or stephen@mankatobankruptcy.com today.