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Bankruptcy in Owatonna, MN, Since 2005

As with all departments of US legislation, bankruptcy is an ever-changing legal process. Because the status of finances and the economy are rapidly transforming with the development of new technology, new energy, and new ways to spend, save, and make money, the laws that govern how debt is handled must change accordingly. Since 2005 the laws, standards, and procedures of bankruptcy have changed significantly. If you’re considering filing for bankruptcy in Owatonna, MN, it’s important to understand how bankruptcy law works today. Behm Law Group, Ltd. provides the legal advice and assistance necessary to successfully navigate bankruptcy.

The most recent changes made to bankruptcy law came in 2005 when Congress amended the bankruptcy code for purposes of determining how consumer households file for Chapter 7 bankruptcy and how Chapter 13 repayment plans are structured. These changes included the following.

Means Test and Income Measurement

 Before the 2005 overhaul, individual filers could choose the type of bankruptcy that worked best with their situation (in their or their lawyer’s opinion). This allowed filers with high incomes to benefit from Chapter 7 bankruptcy in a way that was perceived to be unfair to creditors.  Namely, Congress believed that people with higher incomes could enter into a Chapter 13 repayment plan and pay at least something to their unsecured creditors. Today, all filers are required to take the Means Test to analyze their income for the 6 month period prior to the month in which their bankruptcy petition is filed. The bankruptcy code requires an attorney to add up all of a filer’s gross income for the pre-bankruptcy filing 6 month period and then determine an average.  Then, the bankruptcy code requires an attorney to multiply the average by 12 to determine what a filer’s yearly projected income is and analyze it against the state average income for a household of the filer’s size.  If the filer’s income is in excess of the state average income for a household of the filer’s size, then the person would probably have to file a Chapter 13 instead of a Chapter 7.  For instance, presume a single person needs to file for bankruptcy relief and that he or she earned gross monthly income of $5,000.00.  Presume further that the state average income for a household of 1 in Minnesota is $52,785.00.  The bankruptcy code would require the attorney to add up the $5,000.00 for the preceding 6 months which would be $30,000.00.  Then, the bankruptcy code would require the attorney to determine the monthly average which would be $5,000.00 ($30,000.00 divided by 6).

Next, the bankruptcy code would require the attorney to multiply that average by 12 which would be $60,000.00 to determine the filer’s yearly projected income.  Since the $60,000.00 would exceed the state average income for a household of 1 in Minnesota of $52,785.00, the filer would probably be required to file a Chapter 13 bankruptcy because he or she would not have passed the Means Test.  The monthly income average is measured against some expenses and payments of some debts, so it’s still possible for filers with a high income to qualify for Chapter 7. If a filer doesn’t qualify for Chapter 7 and must instead file for Chapter 13, the expenses of a household are still subtracted in the total of disposable income that must be used to repay creditors through a Chapter 13 repayment plan.

Credit Counseling

Another notable change made with the 2005 bankruptcy overhaul was the requirement of all filers to undergo credit counseling before a petition is filed. The United States Trustee office must also approve the counselors who offer this service. This is necessary requirement irrespective of whether you file for Chapter 7 or Chapter 13 bankruptcy. A counselor may offer an advisable repayment plan in cases of Chapter 13 bankruptcy, but filers are not obligated to follow those plans.

These changes made in 2005 were also accompanied by several other minor details but overall, they were designed to create a situation of fairness for all parties involved in a bankruptcy case. For more information about the changes made or for help with filing for bankruptcy in Owatonna, MN, contact Behm Law Group, Ltd. at (507) 387-7200 today.

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The Difference Between Disposable Income and Discretionary Income During Your Repayment Plan With Chapter 13 Bankruptcy in Windom, MN

A common misconception about bankruptcy is that it’s a financial endgame, halting aspects of your economic and personal life.  With Chapter 7, however, your finances are given a fresh start, free from most debts you faced before filing. With Chapter 13 your options are even broader to keep your life as unaffected as possible throughout the case. When you file for Chapter 13 bankruptcy in Windom, MN, especially with the help of Behm Law Group, Ltd., you can easily integrate your bankruptcy case and repayment plan into your everyday finances.

Chapter 13 bankruptcy is designed to offer you a fresh way to handle your debts while keeping the situation fair to you and your creditors alike. With the system of reorganizing your debts that Chapter 13 provides, you can keep your financial situation manageable and still provide your creditors with the debts they are owed. During the structuring of a Chapter 13 repayment plan, your income is broken down into two basic types: discretionary and disposable.

Disposable Income

With any household, certain amounts of the total income from wages are taken automatically from paychecks and salaries as income taxes. After income tax requirements are met, remaining net income values are considered disposable income. This income can be used for any household necessities and payment obligations such as loan installments and rent.

Discretionary Income

After all household necessities and financial obligations outside of income taxes are met, the remaining income amount is considered discretionary income. This amount can be used to save, spend, or invest based on the household choices.

For example, if you make a salary of $85,000 and you file “Married Joint” on your tax forms, you will have an income tax percentage of 7.85% in the state of Minnesota. That means you will have a disposable income amount of $78,327.50. If you take 75% of that to pay bills, purchase food, fill your gas tank, and meet any other debts and tax requirements, you will have a remaining discretionary income of $19,581.87. You can choose to save, spend, or invest that amount as you wish.

Discretionary vs. Disposable in a Repayment Plan

These described options for disposable incomes and discretionary incomes are viable in a household that is not currently filing for Chapter 13 bankruptcy. How these incomes are treated in a household working through a Chapter 13 repayment plan period are very different. After income taxes and basic household necessities are met, your discretionary income is considered your only disposable income. In a Chapter 13 repayment plan, you must dedicate all your remaining disposable income to paying back your unsecured creditors.

To determine what your disposable income amount may be and to find out more information about the structure of repayment plans with Chapter 13 bankruptcy in Windom, MN, contact Behm Law Group, Ltd. at (507) 387-7200 today.

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Judgment Creditors and Your Assets with Chapter 7 Bankruptcy in Mankato, MN

If your debts and financial obligations put you in a position where you may qualify for Chapter 7 bankruptcy, it’s important to consider that option before one or more of your creditors place a judgment against you in court. If you stall in meeting debts payments but refuse to use bankruptcy options to recover from heavy financial obligations, your creditors have options to take matters to court. At Behm Law Group, Ltd., we encourage you to use the system set in place by the United States Congress to your advantage and file for Chapter 7 bankruptcy in Mankato, MN, if you qualify before your debt obligations lead to a more drastic situation.

Bankruptcy is a complex system of laws in place designed to protect debtors from being unable to resurface from drowning debts. However, that system is also designed to protect creditors, and it offers them several ways of regaining debts owed to them from debtors who do not or cannot meet scheduled payments. One of those options is by acting as a judgment creditor to use the courts approval in regaining what is owed to them.

What is a judgment creditor?  

If your creditor files a successful lawsuit against you and receives a money judgment, that creditor becomes a judgment creditor. Creditors cannot place judgment against secured debts, but any unsecured debts and nonpriority debts are susceptible to a judgment creditor. That title allows a creditor to find information about your assets and offers them more collection techniques than a normal creditor. A judgment creditor can forcibly take up to 25% of your net wages, collect from your bank account and other deposits, repossess certain items such as motor vehicles, and place liens against your properties and assets.

How do they gain information about your assets?

If your creditor has kept records of your debt to them over time, it can often be simple for them to find out what assets and properties you hold. Loan applications to your creditor, for example, give information about your name, address, employer, and certain asset information. The DMV can also provide information to judgment creditors about your registered vehicles including boats, cars, and recreational vehicles. Any real estate you own can also be easily searched on public online records.

If you’re struggling with multiple debts, it may be just a matter of time before your creditors file judgments against you. Filing for bankruptcy before then might save time and money and reduce the stress of legal action taken against you. For more information and to find out if you qualify for Chapter 7 bankruptcy in Mankato, MN, contact Behm Law Group, Ltd. at (507) 387-7200 today.

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The Rise of Consumer Bankruptcy in Owatonna, MN, During the Summer

Bankruptcy in the U.S. has a number of seasonal patterns that have existed for years. These patterns show an increase or decrease in the rates of bankruptcy for consumer households and businesses depending on the status of the economy and certain other events—for example, tax season sees an annual increase in bankruptcy cases during April. For the times of year when bankruptcy becomes more likely an option for individuals and businesses, Behm Law group, Ltd. can help. Our experienced bankruptcy attorneys provide legal advice and assistance to those considering filing for bankruptcy in Owatonna, MN.

In comparison with the last few years, bankruptcy rates have shown an unusual increase in filings during June and July of 2017. The numbers in record showed around a 16% increase in bankruptcy cases from the same time the previous year. These additional cases include both consumer and business bankruptcies.

Though there is no exact pinpoint cause of this abnormal increase in bankruptcy rates, there are several economic conditions that have accumulated against individuals and businesses. These circumstances have pushed those considering bankruptcy into deeper and deeper financial struggle.

From dipping storefront stability due to an ever-growing online shopping market affecting businesses, to changing interest rates and debt treatment affecting most consumers, there is a wide range of aspects to take into account when understanding why bankruptcy is growing.

Although it seems dangerous for so many US businesses and households to rely on bankruptcy relief all at once, it remains a viable option for those struggling with debts and difficult financial obligations. With the help of Behm Law Group, Ltd. attorneys, small businesses and individuals can benefit from choosing to file for Chapter 7 liquidation or Chapter 13 reorganization bankruptcy.

Long-Term Benefits of Bankruptcy

  • Debt relief is the main benefit from filing for bankruptcy. If your debts are treated with Chapter 7, there are several debts you will not have to pay back, and if your debts are treated with Chapter 13, you’ll have a chance to restructure your repayments into a manageable plan in which you pay only small parts of your debts.
  • Credit relief is also a viable long-term option for those with completed bankruptcy cases. Although your credit will not reflect positive changes immediately, you can begin to rebuild your credit over time without the negative impact of accumulated debts.
  • An overall fresh start is possible with bankruptcy, and despite the disadvantages that bankruptcy may pose, the immediate and long-term advantages outweigh the economic damages that may affect you.

If you’re considering filing for bankruptcy in Owatonna, MN, this summer, or in the near future, our attorneys can be key in helping you put together a successful case. For more information, contact Behm Law Group, Ltd. at (507) 387-7200 today.

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When Things Aren’t Straightforward During a Petition for Bankruptcy in Luverne, MN

Preparing for bankruptcy requires a significant amount of paperwork for the filer. The forms, schedules, and other paperwork involved in a bankruptcy petition are necessary to determine how your case will be handled. Filling out any of this information about your financial situation incorrectly can drastically impact how well a bankruptcy case can go. Behm Law Group, Ltd. provides important legal advice and assistance for those struggling financially. If you’re considering filing for bankruptcy in Luverne, MN, our bankruptcy lawyers might be your key to a successful case.

When you file for bankruptcy, you must list all of your debts in your bankruptcy paperwork. This includes mortgage debts, vehicle loans, tax debts, student loans, old utility bills, debts to friends and relatives, among others.  These claims of debt are often straightforward for individual consumer bankruptcy cases, but in some cases, claims can be more complicated. If your debts depend on several past actions or disagreements, they may fall into the categories of contingent, unliquidated, or disputed. 

Contingent Claims: When the amount of your claim depends on a pending event or decision, it is considered contingent. Cosigners on secured loans often face contingent claims when filing for bankruptcy because the principal signer is responsible for the debt until that signer defaults their claim.

Unliquidated Claims: In cases of unliquidated debts, a claim exists on paper, but its amount has yet to be determined. This often includes claims involved in pending legal cases such as lawsuits and insurance claims. Debts owed to your lawyer involved in pending cases are also considered unliquidated claims.

Disputed Claims: Whenever you and your creditor disagree on the amount or even the existence of a debt, it is a disputed claim. This can include personal debts, mortgages, and car loans, but it can also include tax debts in dispute with the IRS.

Finalized claims can be resolved during your bankruptcy case, but the end result depends on a number different aspects of your financial situation. For example, liens, creditor decisions, and the determination of pending events will all affect how your claims are decided.

For more information about how your claims will be handled during your case, contact Behm Law Group, Ltd. at (507) 387-7200 today. Our experienced lawyers can be the key to helping you prepare for bankruptcy in Luverne, MN.

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Understanding Unsecured Debt and How It’s Treated During Bankruptcy in Windom, MN

In most cases of consumer bankruptcy, the debts accumulated will be partially made up of unsecured debts. Whether this means the filer has a large amount of credit card debt or simply a significant amount of personal loans, if you’re struggling with your debts, unsecured or otherwise, bankruptcy might be the right option for you. Behm Law Group, Ltd. can help you understand how your unsecured and secured debts are treated differently when you file for bankruptcy in Windom, MN.

Unsecured debts are treated differently in both Chapter 7 bankruptcy and Chapter 13 bankruptcy. The type of bankruptcy case you file under will decide the outcome of how unsecured debts change the way your bankruptcy case is handled.

What is Unsecured Debt?

There are many kinds of debt that fall into the category of unsecured debt. The most common of these is credit card debt, but several other types of debt many people encounter in life are also considered unsecured. The fundamental definition of unsecured debt is any debt that doesn’t use a tangible property as collateral. Any debt that involves a property, such as a home or a motor vehicle, is considered secured debt and is treated differently in both Chapter 7 and Chapter 13 cases.

Some other examples of unsecured debt include:

  • student loans
  • utility bill debts
  • income tax debts
  • personal loans not involving property
  • medical bills
  • pending court judgments
  • and, of course, credit debts in all forms

How are Unsecured Debts Treated?

In a Chapter 7 case, your unsecured debts will most likely be entirely discharged. There are, however, exceptions to this. For example, student loans are not subject to the general discharge granted in Chapter 7 or Chapter 13 cases.  In order to get student loans discharged, one must start an actual lawsuit against the student loan creditors and ask the bankruptcy court to specifically discharge the student loans. In a Chapter 13 case, the way your unsecured debts are paid in your chapter 13 repayment plan and how much of those debts are paid depends on the amount of disposable income you have.

If you’re considering bankruptcy because of your accumulated unsecured debts, contact Behm Law Group, Ltd. for legal advice and assistance. For more information about filing for bankruptcy in Windom, MN, contact us today at (507) 387-7200.

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When and Why a Business Might Be Subject to Involuntary Bankruptcy in Pipestone, MN

In the majority of situations, a bankruptcy case is a voluntary legal process. However, Congress put provisions in the bankruptcy code so that it would be a fair process for both the filer and creditors involved in a case. While most cases of bankruptcy are set into motion by the choice of the filer because of accumulated debts and difficulty in meeting financial obligations, there are times when creditors can force a bankruptcy case upon the debtor. If you are facing involuntary bankruptcy in Pipestone, MN, Behm Law Group, Ltd. can help you through the process with legal advice and assistance.

Involuntary bankruptcy occurs very rarely, but it’s legal for creditors to file bankruptcy proceedings against their debtors. In most situations, involuntary bankruptcy is forced on businesses, but on some occasions, involuntary bankruptcy can be filed against an individual.

When Involuntary Bankruptcy Occurs

The bankruptcy code includes provisions that protect creditors against debtors who may refuse to pay their debts despite having viable assets which could be used to pay creditors. If a debtor isn’t paying debts to their creditors but has assets that could be used to repay creditors, it’s possible for creditors to file an involuntary bankruptcy against that debtor. Small businesses find themselves forced into involuntary bankruptcy more often because businesses typically have more assets than individuals.

If you own a small business and aren’t paying your debts but own a large amount of assets, your creditors can, sometimes, legally force you into bankruptcy. Because most individuals have significantly fewer assets compared to businesses, filing an involuntary bankruptcy is often unhelpful for creditors because the possible return to the creditors would be far less than the cost of forcing an individual into bankruptcy.

How It Works

If your creditors know you have assets but are refusing to pay your debts, they can file a petition to the bankruptcy court against you, requesting forced bankruptcy action.  Usually, three creditors must be required to do this.  If an involuntary bankruptcy is filed against you and if you don’t respond within 20 days, the bankruptcy court will allow creditors to go forward with the involuntary bankruptcy action. If you do respond, you’ll have a hearing and a chance to defend your situation. If you’re forced into involuntary bankruptcy, the process after that will be similar to a voluntary bankruptcy case.

If your creditors have threatened or have begun the process of petitioning your involuntary bankruptcy in Pipestone, MN, Behm Law Group, Ltd. can help. For more information about our bankruptcy lawyers and your case, contact us at (507) 387-7200 today.

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The Good and Bad of Taxes After Debt Forgiveness in Mankato, MN

Whether you’re on your first, second, or third mortgage, debt gathered on your home over time is often a large factor in your bankruptcy case and how you are affected after your case is finished. If you’re considering filing for Chapter 7 or Chapter 13 bankruptcy, or you’re in the process of filing, it’s important to also think about what happens to your financial situation after your case is complete. Behm Law Group, Ltd. can help you prepare for what comes ahead when you experience debt forgiveness in Mankato, MN.

When your bankruptcy case is finished and you’ve had a mortgage debt cancelled, forgiven, or reduced, there are a number of ways it can affect you when tax season comes around.

The Bad Stuff

Your mortgage debt can be forgiven in a few ways. For example, you may have restructured your mortgage or modified the payments with your mortgage lender. Unfortunately, if your mortgage debt is forgiven before you file for bankruptcy relief, you still may have to pay taxes on such forgiven mortgage debt because mortgage debt that has been cancelled or forgiven may be considered income. That means you may be paying income tax on the amount you “gained” from debt forgiveness.

The Good Stuff

 Though the default for forgiven debts in your taxes is to treat them as income, there are some ways you can get out of paying that income tax. In 2007, Congress established an act that allows those with forgiven debts to avoid paying high income taxes. The two catches, however, with The Mortgage Forgiveness Debt Relief Act of 2007 are that it only covers debts gained in 2014 or earlier, and it only covers up to $2 million of a forgiven debt.

 The Mortgage Forgiveness Debt Relief Act of 2007

To qualify for getting out of paying income tax on some or all of your forgiven mortgage debt under the 2007 debt relief act, your situation must meet the following stipulations:

  1. Your mortgage debt was forgiven within 2007 to 2014 (calendar years).
  2. Your forgiven debt was principally used to buy or modify your home (not a home you rent to others nor a vacation home).
  3. Your debt was cancelled, forgiven, or reduced because of a change with your lender, or it was cancelled through foreclosure.
  4. None of the money gained in a refinanced mortgage was used outside of home improvement (no outside purchases or bills).

Mortgage debts that qualify for the debt relief act of 2007 can have up to $2 million taken out of the income tax bracket. For many, this means their entire forgiven mortgage will be excluded from their taxes, making the Mortgage Forgiveness Debt Relief Act of 2007 one of the saving graces for those who have filed for bankruptcy.

For more information about debt forgiveness in Mankato, MN, and how it affects your bankruptcy and taxes, contact Behm Law Group, Ltd. at (507) 387-7200.

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Doubling Exemptions With Chapter 7 and Chapter 13 Bankruptcy In Windom, MN

Many of the Chapter 13 and Chapter 7 cases we work with are either individuals or households filing for bankruptcy. For those struggling financially with debts accumulated over the years, bankruptcy is often a beneficial option. When it comes to a family in need of bankruptcy help, it can actually be a good thing for married couples to own joint property. Owning property with your spouse plays a big role in a household’s ability to double exemptions. Behm Law Group, Ltd. provides expert legal advice and assistance to help a household work with exemptions and petitioning for bankruptcy in Windom, MN.

Exemptions

Exemptions are allotted amounts that depend on variables like federal or state regulations and the total of a debt. You may apply exemptions to certain properties during the bankruptcy process to prevent some or all of the value of those properties to be used for debt repayment.

Using your exemptions during a Chapter 7 case can significantly increase the amount of your property you may keep. In Chapter 13, more exemptions equal less paid back to unsecured creditors during your repayment plan.

 Doubling

If you’re married, you might have the option of filing for joint bankruptcy with your spouse. A joint case, however, is only applicable if you have debts that are in both of your names, meaning you jointly owe a debt such as jointly obligated on a house mortgage. If you and your spouse both have your names on the assets that would be subject to the bankruptcy process, you can then double your exemptions on those joint assets.

Doubling your exemptions in a joint case means you and your spouse are each able to claim the amount you would claim as an individual filer. In Minnesota, filers are able to choose between federal exemptions and state exemptions, depending on their debt amounts and abilities to double an exemption.

For example: The Minnesota Motor Vehicle Exemption allows up to $4,600 of an for people who own motor vehicles. If you and your spouse are both listed on the title of a vehicle worth $9,200, you both have an ownership interest in and to that vehicle.  In order to protect and keep it in a bankruptcy proceeding each of you could assert your independent $4,600 exemptions and stack them together ($4,600 x 2 = $9,200) and protect the entire $9,200 value of the vehicle.

If you and your spouse are considering filing for bankruptcy in Windom, MN, keep in mind that you can jointly file and, if you both own the subject property/assets, double or stack your bankruptcy exemptions. For more information about your options with joint bankruptcy, contact Behm Law Group, Ltd. at (507) 387-7200.

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Cramming Down Secured Debt With Chapter 12 Bankruptcy in Mankato, MN

Today, the food industry is largely industrialized across the country, but there are some farming and fishing families still thriving today. However, because farming and fishing are some of the most difficult trades with which to support a household and maintain a healthy business, there are also a large number of financially struggling family farmers and family fishermen. For these family businesses, bankruptcy might be the best path to take. While our attorneys often handle cases for individuals working through Chapter 7 or Chapter 13 bankruptcy, Behm Law Group, Ltd. also offers legal advice and assistance to family farmers and family fishermen filing for Chapter 12 bankruptcy in Mankato, MN.

Chapter 12 works in many similar ways to Chapter 13, but is specifically designed to serve family farmers and family fishermen rather than a household or individual. Chapter 12 filers will work with their bankruptcy trustee to establish a 3 to 5-year repayment plan for their debts, where they must pay back 100% of their priority debts and to be determined portion of their other debts. The amount a family farmer or family fisherman must repay of non-priority debts is determined by their average income received within the 6 months prior to filing for bankruptcy.

There are ways, however, to reduce the amount of your secured debts as a family farmer or family fisherman filing for Chapter 12 bankruptcy. By effectively “cramming down” secured debts, you can lower your owed debt and pay less in the long run.

Cram Down: The cram down method is a way of bringing your debts back in time. This means you can reduce certain debts (for example boat loans, business mortgages, and farm equipment debts) to the present market value of the property. This method is effective on “upside down” loans where you owe more debt than the base value of the property. If you owe $4,000 on a loan after the accumulation of missed payments and interest and the collateral for the loan is worth $2,000.00, you can reduce that debt down to the base value, and you would not have to pay more than $2,000. In Chapter 13, cram downs are limited in many ways, but in a Chapter 12 case, the court can authorize the cram reduction of almost all secured debts, including your home mortgage and car loans.

Cramming down secured debts can often give a family farmer or family fisherman the ability to meet Chapter 12repayment plan requirements. For more information about cram downs and the process of filing for Chapter 12 bankruptcy in Mankato, MN, contact Behm Law Group, Ltd. at (507) 387-7200 today.