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

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

Chapter 7

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

Chapter 13

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

Chapter 12

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

Chapter 11

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

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

Bankruptcy

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

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

Filing for Bankruptcy in Mankato, MN, Is Not about Morality

Although the concept of debt has been around since ancient times, the unnecessary social stigma of owing money hasn’t lessened much despite the increase in individuals with debts since the development of the credit card. Those people with debts they can’t repay still face socially imposed stresses that result in shame, guilt, and other negative impacts. However, recent studies show that up to 80% of U.S. citizens have debt of some kind, from mortgages to credit card debts. The high prevalence of debt should make having debt more acceptable in our society, but unfortunately that is not the case. At Behm Law Group Ltd., we work with clients filing cases for Chapter 7, 13, and 12 bankruptcy in Mankato, MN. Many of our clients communicate the severe stresses they face with unstable finances and how difficult it is to discuss these problems with their loved ones because of the stigma surrounding debs generally and bankruptcy specifically.

The idea that filing for bankruptcy is somehow a morality issue is simply not true. The misconception behind the social stigma of bankruptcy is that filers handled their finances poorly, perhaps even maxing out multiple credit cards, gambled excessively, or engaged in other irresponsible behaviors.  The truth is that people file for bankruptcy for all kinds of reasons and with many kinds of debt.

In the United States, the most common reasons individuals file for bankruptcy stem from unavoidable life circumstances that are completely beyond their control. Whether someone accumulated debt from various sources or from one sudden event, filers report the following as the most typical causes of bankruptcy:

  1. Medical expenses: Because U.S. healthcare bills can be very costly and because the way insurance covers medical expenses is complex, many people file for bankruptcy to resolve large medical debts. These bills are often sudden and unexpected, throwing financial stability out the window.
  2. Job loss: The loss of an income will certainly throw a wrench in making debt payments on time, especially if a household has been living paycheck to paycheck. In many cases, a job loss is completely out of an individual’s hands. A recent example of a large period of job losses that workers had no control over was during the U.S. coronavirus shutdowns.
  3. Divorce: Sometimes marriages just don’t make sense anymore, and divorce is the right path for a couple. However, divorce significantly changes financial circumstances for both spouses, and legal fees can be high. In addition, ordinary living expenses may become unmanageable because each spouse must support his or her own household on only his or her own income instead of both spouses having the benefit of both incomes to support one household.  Because of this, divorce is listed as a common reason why debts can’t be repaid.
  4. Natural disaster: Even with insurance, disasters like fires, floods, and tornados can put a serious strain on a household. If property is damaged from these natural disasters, repairs can add significant costs to an individual’s budget.

All these life events are situations that can’t really be avoided and have nothing to do with morality, responsibility or intellect.  The reality of bankruptcy is that filers are in their financial situations for a lot of reasons and none of the causes may be because of poor morals or bad choices.

To learn more about filing for bankruptcy in Mankato, MN, and the surrounding area, contact Behm Law Group Ltd. by calling (507) 387-7200 or by emailing stephen@mankatobankruptcy.com.

 

The Difference Between Insolvency and Bankruptcy in Pipestone, MN

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

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

There are two types of insolvency:

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

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

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

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

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

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

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

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

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

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

 

Who Files for Bankruptcy in Jackson, MN?

The most common feelings of those who are in a difficult financial situation are a sense of being stranded, trapped, and alone. If you’re struggling to make debt payments on time, the truth is that you are not alone. Each year, thousands of U.S. citizens file for bankruptcy because of debts they will never be able to repay. The social stigma that may linger around bankruptcy today doesn’t take into account the fact that it is actually a vital part of a balanced economy.

The process of bankruptcy is designed to bring those feeling alone with their debts out of their financial stress so they can again become active, participating members of the economy. Behm Law Group Ltd. attorneys work with clients in diverse financial and personal situations, providing legal guidance and protection throughout the process of filing for bankruptcy in Jackson, MN, and the surrounding area.

While it may not seem so to some individuals, many, many people find long-term debt relief through bankruptcy each year. Many of our clients don’t know anyone else in their lives who have experienced it, which is a large part of why they may feel the process is daunting. However, because many are ashamed for having had to file for debt relief, it is not something that they readily share with other people.  It is quite likely that you interact with many people every day, including relatives, who have had to file for relief.

Demographics and other statistics of individual and business bankruptcy filings are reported annually. For the duration of 2021, the effects of the 2020 COVID-19 pandemic on bankruptcy rates can only be projected for now, but all recent reports in the past year tell us that there is no single demographic that never reports cases. This means cases are filed from all demographics regardless of age, marital status, ethnic background, property ownership, or types of debt.

When looking at the averages of that broad range of demographics, the individual and businesses filers look something like the following based on available 2020 reports:

Total bankruptcy cases:                      544,463

Total Chapter 7 filings:                      381,217

Total Chapter 13 filings:                    154,341

Total Chapter 11 filings:                        8,113

Total individual bankruptcy cases:     522,808

Total individual Chapter 7 filings:      369,020

Total individual Chapter 13 filings:    153,236

Total business bankruptcy cases:       21,655

Total business Chapter 7 filings:        12,197

Total business Chapter 13 filings:       1,105

Total business Chapter 11 filings:       7,561

This means the most commonly filed cases were Chapter 7 liquidation at 70.02%; the next most common of Chapter 13 reorganization drops to 28.35%, and finally, Chapter 11 reorganization drops to 1.49% (some additional uncommon chapters totaled to 0.14%).

While no demographic group is exempt from having to file for bankruptcy relief, there are ways to target which regions have the most cases each year. For 2020, the states that topped the list are mostly in the U.S. Southeast, including Alabama, Georgia, Mississippi, Arkansas, Kentucky, and Tennessee.

These averages can give you an idea about who files for bankruptcy, but the truth is that people and businesses of all kinds file. To learn more about the benefits of bankruptcy in Jackson, MN, contact Behm Law Group Ltd. by calling (507) 387-7200 or by emailing stephen@mankatobankruptcy.com.

 

 

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.

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.

 

 

 

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.

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.

Adversary Proceedings vs. Contested Matters for Debt Relief

Each year, thousands of U.S. households struggle with debt, and while a very few will eventually find ways to overcome that debt, most people will not. For those who know they will be unable to repay their debts, filing for bankruptcy is an effective option to resolve their debts permanently and without the threat of wage garnishment, creditor harassment, and foreclosure. Filing bankruptcy to discharge your debts provides a government-sanctioned process that provides permanent debt relief that is enforceable by law. At Behm Law Group Ltd., we help clients work through Chapter 7, Chapter 12 and Chapter 13 bankruptcy filings to find effective, long-lasting debt relief in Mankato, MN, and the surrounding area.

 

No matter what chapter you file, bankruptcy can be a detailed and nuanced process that requires the sharing of your current financial information with a third party. Your petition will need to include all of your debts— even ones that you want to keep—your income sources, your properties, and virtually all other aspects of your financial situation. The bankruptcy petition that you complete with your attorney is something that you sign under oath.  You make the representations in your bankruptcy petition subject to penalty of perjury.  Creditors rely on the accuracy of those representations.  The trustee administering your bankruptcy case relies on the accuracy of those representations. The bankruptcy court itself relies upon the accuracy of those representations.  Bankruptcy is an “on your honor” proceeding.  When you file bankruptcy, no one comes knocking on your door and invading your residence to see what you own.  However, it is vital and incumbent upon you and your attorney to make a good faith and detailed review of your financial circumstances and to make sure that the bankruptcy petition is completed as accurately as possible.  The willful failure to correctly complete your bankruptcy paperwork may result a dismissal of your case, at best.  At worst, the making of an intentionally false statement, concealing property or obtaining money or property by fraud in connection with a bankruptcy case can result in fines up to $250,000.00, or imprisonment for up to 20 years, or both.

 

The reason the court needs such detailed information is to:

  1. determine if you qualify for bankruptcy;
  2. correctly evaluate how to handle your case;
  3. work through each debt with respect to how creditors will be repaid or discharged; and
  4. avoid difficulties like contested matters and adversary proceedings.

 

In your particular case, there may be issues brought to the court from the trustee, bankruptcy judge, or one of the creditors involved. These issues could be presented either as contested matters or as adversary proceedings. Both will extend the duration of your case and both can cost you more money the longer they are left unresolved.

 

Adversary Procedures

These contests are lawsuits within a bankruptcy case typically brought to the court by creditors who want to have a discharge of a particular debt revoked, denied or otherwise objected to, creditors who are hoping to recover money or property from parties other than the bankruptcy filer, or creditors who wish to stop some other court action related to your case. Although it’s related to your case, an adversary proceeding is a separate and distinct matter.

 

Contested Matters

Contested matters are similar to adversary proceedings, but they are not proceedings that are distinct and separate from your case. Creditors or other parties can bring contested matters in a case by filing a motion that requires the court to make a ruling based on a particular matter. Contested matters are often resolved more quickly than the resolution of adversary proceedings, but they will still extend the duration of your case and you still likely will have to pay your lawyer more money to assist you in resolving them.  The court will usually consider lifting the automatic stay, objecting to a creditor’s proof of claim, or objecting to a proposed chapter 13 repayment plan as contested matters.

 

 

To learn more about adversary procedures, contested matters, and how bankruptcy can provide permanent debt relief in Mankato, MN, and the surrounding region, call Behm Law Group Ltd. at (507) 387-7200 or email stephen@mankatobankruptcy.com.