Comparing Debt Management Options

Despite many best efforts from national and local governments, banks, and other financial support providers, the global economy is struggling in the current recession caused by COVID-19. If you’re seeing the effects of this recession, you are not alone. Unemployment funds provide some support, but for many, that income doesn’t fill every budget need. Those who are finding it difficult to meet monthly debt payments have several options available to them. With the help of Behm Law Group Ltd., you can learn how bankruptcy and other options of debt management in Mankato, MN, are valuable tools you can use to your advantage during times of financial stress.

 

While filing for bankruptcy may be one of the most legally dramatic options available to you in comparison with many other methods of debt management, it may also be the most effective because it is permanent and binding. Bankruptcy helps thousands of U.S. citizens and businesses recover from moderate to severe debt each year. If you file for bankruptcy, you will either have:

 

  • Your debts discharged in exchange for the liquidation of non-exempt assets, or
  • Your debts reorganized into a three to five-year repayment plan suited to your income and providing more favorable payment terms.

 

Both of these bankruptcy options are effective in their own ways, depending on the situation of the filer. If you aren’t ready to file for bankruptcy, or if it doesn’t make sense for your debts, there are other ways you can manage your debts and find relief. Some common methods include:

 

Loan modifications

Unlike many other ways of working out debts with your lender, loan modifications are a permanent change to debt terms. If you are able to work out a loan modification with your creditor, there will be one or more requirements altered in your payment plan. Your creditor may allow an interest rate reduction or convert a variable rate to a fixed rate. A creditor might also forbear a portion of the principal amount. This means that amount will be set aside before the monthly payment rate is calculated, which lowers the per-payment rate, but does not reduce the loan total.

Non-bankruptcy repayment plans

If you have been unable to make a debt payment for some time, you may be able to work out a repayment plan with your lender for the delinquent amount you owe. This repayment plan will likely spread the amount you owe from past payments evenly over future payments. Typical repayment plans only span three to six months, however.  Lenders very rarely extend payment plans beyond three to six months.

Forbearance agreements

Forbearance agreements are similar to both loan modifications and repayment plans, but they typically occur before you are delinquent on a loan. You can request a reduction or pause on payments for a short time and work out a way to repay the amount you owe from that time.

 

All these options of debt management in Mankato, MN, are short-term. If the recession continues, and you still cannot meet debt payments, bankruptcy is always an available and permanent option. To learn more about bankruptcy, contact Behm Law Group Ltd. at (507) 387-7200 or stephen@mankatobankruptcy.com.

Getting Through a Recession as a Small Business Owner with Debt Relief

There is no denying the impact the COVID-19 outbreak is having on the worldwide economy. As we all reel around a difficult financial time in this recession, many small business owners are asking how they can work through the devastating effects on the economy and come out on the other side as a still functioning operation. Many businesses may have even gone through the 2008 recession and found that there are some tricks to staying solvent. One option that’s always available to sole proprietorships and partnerships is debt relief through Chapter 13 bankruptcy. If you are struggling to meet debt payments in Pipestone, MN, during this time, Behm Law Group Ltd. can help you work through a Chapter 13 reorganization case to receive long-term debt relief that will likely support you to the end of this recession.

Even though we are at the beginning of what will likely be a long recession, it’s not too early to think about your options for debt relief, especially if you already have a difficult time meeting monthly financial requirements. While there are ways to protect your income and business operations during this time—protecting cash flow, limiting purchases, restricting your budget, and formatting marketing plans around the crisis—these actions are sometimes not enough. Many industries will be significantly impacted by the effects of the COVID-19 shutdowns, and amid such long-term desperation, filing for bankruptcy can be a rational, intelligent choice.

Chapter 13 bankruptcy can be filed if you or you and your business partner are personally responsible for business debts. This is often the case with small businesses because the cost of becoming incorporated typically outweighs the protection it provides. When you file for Chapter 13, your business debts and personal debts will be included together in a repayment plan lasting three to five years. This repayment plan will be overseen by a chapter 13 trustee and organized to fit your current financial situation.

If you are personally liable for your business debts, the only way you can keep that business running through a bankruptcy is to file Chapter 13. This process requires you to repay your priority and secured debts under adjusted terms that are more favorable to you.  Also, your unsecured debts will generally not receive any interest and will typically only be paid a percentage of what you owed when your case was filed. While some might consider filing for bankruptcy to be a dramatic decision, the fact is that Chapter 13 bankruptcy helped thousands of small businesses weather the 2008 recession and emerge with their businesses still intact. Thanks to the help of Chapter 13 repayment plans, small businesses can work through this difficult time just as successfully as in the 2008 recession.

You don’t have to be one of the many small businesses that will sadly have to close doors within the next few years due to the financial stress of the coronavirus. Resolve your debts with Behm Law Group Ltd. today. Contact us at (507) 387-7200 or stephen@mankatobankruptcy.com for more information about Chapter 13 debt relief in Pipestone, MN.

Finding Business Debt Relief in the Aftermath of the COVID-19 Outbreak

Bankruptcy is not for everyone and anyone who practices bankruptcy law responsibly and ethically will not try to “sell” someone on the process.  It is appropriately viewed as a last resort.  It is not something to be afraid of but it needs to be approached with a degree of healthy respect.  There is, however, no denying the significant impact the COVID-19 outbreak is having on global, national, and local economies. With the dramatic rise and fall in demand of various goods and services, the temporary closure of many operations, travel bans, trade constriction, and the detriment of the virus itself, the economy may be looking at numbers even worse than the housing crisis of 2008.

Many economic experts projected from the beginning of March that businesses of all shapes and sizes would be impacted by the damages wrought during the COVID-19 outbreak. If you are a local business, you may not be alone if you’re considering filing bankruptcy to find debt relief. With the help of Behm Law Group, Ltd., you can find protection and long-term debt relief in Waseca, MN through Chapter 7 or Chapter 13 bankruptcy.

Whether you file for Chapter 7 or Chapter 13 will depend on several things. First, only sole proprietors or partnership companies in which the owners are personally responsible for business debt may file for Chapter 13 reorganization bankruptcy. The process of Chapter 13 bankruptcy restructures business and personal debts together into a manageable repayment plan lasting a three- to five-year period depending on your debt and income. If you qualify for Chapter 13, you can maintain business operations and slowly repay your debts on terms that are more favorable to you.

If you don’t qualify for Chapter 13 or if you can accept that your business may have to be closed down, you have the option to file for Chapter 7 bankruptcy.  This process will liquidate your non-exempt assets in exchange for the discharge of debts. While you might not be able to keep your business running, you will likely be able to protect and retain things like your home and car and other necessary assets from liquidation.  In chapter 7 bankruptcy, the exemptions allowing you to protect and retain assets are quite generous.  In the vast majority of cases, people are able to keep all of their assets and the only things that they lose are their debts.

A comprehensive outlining of what is happening to the economy throughout the COVID-19 outbreak was done by the Center for Strategic & International Studies (CSIS). This informational article describes the impact COVID-19 has had through the very beginnings of the global outbreak on the economy including the drop in exports out of China, the fall of tourism, the demand for sanitary products, and much more. If you’re seeing an impact on your business operations due to the coronavirus and trickle-down global effects, you’re walking a fine line with practically every other business in the world. Relief from that impact can be found in bankruptcy.

To learn more about finding debt relief in Waseca, MN through bankruptcy, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.

How Legal Aid Offices Can Offer Bankruptcy Assistance

If you’re struggling with a heavy debt load or an income that doesn’t make ends meet every month, you aren’t alone. Many individuals like you can find debt relief and can resolve troublesome financial issues for the long term with the help of bankruptcy. The two main chapters of bankruptcy, Chapter 7 and Chapter 13, offer debt relief options in the form of debt discharge in exchange for asset liquidation of non-exempt assets or as a reorganization of debts into a repayment plan. To determine if filing bankruptcy is the right choice for you, and to decide which chapter you should file under, Behm Law Group Ltd. offers expert legal guidance and comprehensive bankruptcy assistance in Redwood Falls, MN.

 

Bankruptcy is a highly complex and nuanced legal process that can be very difficult to navigate without the right knowledge and tools. Because of this, filing for bankruptcy with the support of an attorney is the best possible option for any filer. However, many filers have difficulty finding the money to hire a lawyer and they, sometimes, must find their own way through the filing process. In the scenario of helping to find an attorney who may agree to accept lower attorney’s fees, one of the best resources you can use is your local legal aid office.

 

Legal aid offices provide public, and sometimes free, legal information and support services. You can find a legal aid office/legal clinic near you through the American Legal Services Corporation. Legal aid offices are set up as a nonprofit, being largely donation- and volunteer-based programs. Participating lawyers and other legal professionals, as well as counselors and social workers, establish a system that can provide protection in some ways for those unable to completely afford legal representation, but primarily the organization operates as a resource of legal information.

 

If you plan to file for bankruptcy and you’re having trouble finding the money to hire an experienced bankruptcy attorney, you can turn to a local legal aid office for some direction.  Because bankruptcy can be a highly nuanced and complicated process, most legal aid offices do not have attorneys who handle bankruptcy cases.  However, many private attorneys may be affiliated with a legal aid office.  Attorneys who are affiliated with legal aid offices may agree to accept lower fee amounts for people who seek assistance through the legal aid office.  In order to possibly qualify for lower fees, you may have to undergo a screening process with the legal aid office and with an affiliated bankruptcy attorney.  In order to obtain assistance with the attorney’s fees, you really must, in good faith, not have any other options.  If you receive tax refunds or have a relative who can financially assist you, or have a life insurance policy or a 401(k) plan that you can borrow against, you typically will not qualify for lower bankruptcy attorneys’ fees through the legal aid office.  Generally, all of the basic information you’ll need to file a bankruptcy case can be available through the legal aid office, including information about:

 

  1. Pre-bankruptcy requirements
  2. Documents included in your petition
  3. How to find and fill out all the necessary paperwork
  4. How to pay and/or waive bankruptcy fees
  5. What debts you can have discharged or reorganized
  6. What assets you can protect from liquidation
  7. Post-petition requirements
  8. Overall court process

 

Certain more unusual or complex information may also be available, but you may find it difficult to know what to ask for that will be relevant to your specific situation.

 

If you are able to afford legal representation, it is generally recommended that you do so. Legal aid offices cannot always give information that will be helpful in the face of changes in your case. Each bankruptcy case is unique, and certain circumstances may cause unforeseen difficulties after you file a petition. Additionally, legal aid offices cannot protect you from creditor judgments or other obstacles that may arise throughout your case, whereas such assistance is available with the help of an experienced bankruptcy attorney.

 

To learn more about legal aid offices and bankruptcy assistance in Redwood Falls, MN, contact Behm Law Group Ltd. at (507) 387-7200 or stephen@mankatobankruptcy.com.

Part 2: How the 2020 CARES Can Affect Your Debt Relief

In the first part of this blog, we covered what debt relief options the 2020 CARES Act (Coronavirus Aid, Relief, and Economic Security Act) offers for mortgages, student loans, car loans, and property tax debts. This CARES Act, put into place on March 27th, 2020 in response to the novel coronavirus pandemic, establishes several rules and options for individuals facing extreme difficulties concerning income, debts, and state lockdowns.

 

As we work through this global recession, it’s important to remember that there are many options available to you for debt relief. One tool that is always available to you is to file bankruptcy. While this may seem like a drastic move, Behm Law Group, Ltd. has seen many clients use bankruptcy as a positive way for debt relief in Luverne, MN, especially in trying times like these.

 

During the period the CARES Act will be in place, there are additional options for debt relief on top of bankruptcy.

 

CARES Act Provisions, Continued

 

  • Credit Card Debt: Most major credit card providers are offering relief for their customers during this time. This includes credit line extensions, payment skipping, and forbearances. Talk to your bank to see how they can work with you if you’re unable to make credit card payments. Many banks and credit unions are also offering financial aid resources and loans for individuals and businesses while we get through this recession. This includes help for local businesses offered through the U.S. Small Business Administration (SBA).
  • Utilities and Others: More and more states are beginning to put suspensions on utility shutdowns and waive late fees. If you’re unable to make utility payments on time, the CARES Act and your state government’s own orders may protect you from late fees and from having your water, gas, and electricity cut off. On top of this, most phone and internet providers are waiving late fees and/or postponing shut offs due to missed payments. Some internet providers are also supplying free services to new customers or unlimited periods for existing customers.
  • Stimulus Check: The most direct source of assistance the CARES Act will provide is a stimulus check for each eligible citizen. Individuals with an incomes under $75,000 will receive a check of $1,200. Taxpaying families will receive an additional $500 per dependent under the age of 17. Spouses who file joint tax returns will receive $2,400. Individuals with incomes over $75,000 will receive smaller checks, reduced by 5% of their income over $75,000 (e.g.  income of $80,000 = stimulus check of $950).

 

The stimulus check and other relief options that the CARES Act puts into place during this trying time are established with the goal of protecting U.S. citizens from severe debt and the hopes that our economy will be cushioned in some ways from the worsening of the current recession.

 

To learn more about your options for debt relief in Luverne, MN, and filing for bankruptcy, contact Behm Law Group, Ltd. at (507) 387-7200 today or stephen@mankatobankruptcy.com.

Part 1: How the 2020 CARES Act Can Affect Your Debt Relief

In the face of the deadly coronavirus contagion and the significant effects that the spread will continue to have on the global economy, the U.S. government took some extreme cautionary measures. In addition to declaring a national emergency and deploying Federal Emergency Management Agency (FEMA) and National Guard relief, the federal government passed the CARES Act (the Coronavirus Aid, Relief, and Economic Security Act) on March 27. This act provides financial support to individuals struggling with little to no income during these uncertain times. The act may help to an extent, but the longer the pandemic continues, the harder it will be for many to keep making ends meet. If you are unable to make debt payments each month, you can find other sources of debt relief in Marshall, MN. With the help of Behm Law Group Ltd., you can use bankruptcy as one option to secure debt relief and long-term financial stability.

 

Bankruptcy can seem like a drastic option, even for those struggling significantly, but it’s a government-sanctioned process that has helped countless millions of individuals and businesses find their way through a recession like the one we, as a country, are working through now. The CARES Act offers some more immediate options for debt relief to all individuals as we continue to work through state lock-downs.

 

CARES Act Provisions

 

  • Mortgages: Anyone struggling to meet monthly mortgage payments has options for relief. Many homeowners are eligible for forbearances that provide short-term relief of their mortgage debt. This means you may skip some payments and spread the amount skipped throughout future payments. You may also be able to make a lump sum payment on missed payments later. In addition, many major mortgage providers—including Freddie Mac, Fannie Mae, VA-guaranteed, FHA-insured, and some federally backed lenders—have an imposed 60-day moratorium on foreclosures.
  • Student Loans: The CARES Act effectively suspended all collection activities and interest accrual on federal student loans for the next six months (until September 30, 2020), and these suspensions will be applied automatically. This act also suspends the reporting of negative credit information on credit reports, wage garnishments, and other collection actions on behalf of student loans during the national emergency.
  • Auto Loans: While there are no official federal rules with the CARES Act, many auto lenders are providing leniency to debtors. If you are struggling to make payments on your car loan, contact your loan provider. There is a good chance you’ll be able to delay payments or make other debt payment modifications.
  • Property Tax: Those with property tax debt or who are facing foreclosure because tax debt delinquency might be able to take advantage of a moratorium many counties are implementing. That moratorium varies by county, so check with your county treasurer’s office for more information.

 

In the second part of this blog, we’ll cover the additional resources the CARES Act offers for debt relief in Marshall, MN, during the coronavirus pandemic. To learn more about the options bankruptcy provides, contact Behm Law Group Ltd. at (507) 387-7200 or stephen@mankatobankruptcy.com.

 

 

 

Receiving Debt Relief as a Personal Guarantor

In 2008, the housing crisis changed a lot about how mortgages and other loans are handed out. Credit and income requirements are much higher, and many borrowers need another person or entity to sign as a personal guarantor in order to receive a loan.

 

Establishing a personal guarantee on a loan means you’ll be required to repay that debt in the event the primary borrower cannot. If you’re left to pay a debt and find yourself in a situation where you also cannot repay it, filing for bankruptcy may be the best solution depending on the type of debt involved and your additional financial circumstances. With the help of Behm Law Group, Ltd. you can file a successful bankruptcy case and receive long-term debt relief in Fairmont, MN.

 

Bankruptcy is a highly effective legal process that treats many types of debt. While there are some debts, such as child support, alimony and some tax debts, that are typically not included in a bankruptcy discharge, the majority of common individual consumer or business debts will be discharged. Some of the most prevalent debts for a typical person are mortgages, car loans, and credit card debts. All of these can be discharged through bankruptcy, and this is also true for personal guarantors that are responsible for another person’s or business’s mortgage, car loan, credit card debt, or any other debts.

 

When you sign as a personal guarantor, you’re accepting the fact that you could be asked to make payments on that debt if the primary borrower defaults by missing a payment. If the primary borrower defaults for an extended period of time, the continued debt payments owed could accumulate to an amount that you yourself are unable to pay. If you file for bankruptcy, this debt will be discharged in a Chapter 7 case or included in a repayment plan in a Chapter 13 case.

 

Many people or other parties could find themselves in this situation. Almost anyone can sign as a personal guarantor including friends and family, businesses, or other parties with good financial standings. Personal guarantors help borrowers receive loans, reduce interest rates, and get better financing options overall.

 

If you’ve been asked to sign as a personal guarantor, it’s important to take several things into account about the primary borrower’s and your current and future financial situations. Take into consideration if your credit score will be affected and how and why the bank is requiring a guarantor.  Also, consider if you have the funds to repay the debt if the primary borrower defaults, what might happen to your credit if the primary borrower defaults, and your relationship with the primary borrower.

 

If you feel comfortable signing as a personal guarantor after taking into account your options and situation, remember that you can most likely discharge that debt if needed through a bankruptcy proceeding. To learn more about personal guarantees and how to receive debt relief in Fairmont, MN through bankruptcy, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com

Understanding Co-debtor Roles in Bankruptcy

When an individual is in a financial situation ripe to be resolved with a bankruptcy case, it’s likely they have a lot of debt they can’t repay and may even have one or more co-debtors. Debt accumulation over time usually shows a bread crumb trail of having to take on more debt to cover debts already owed. For instance, many debtors open new lines of credit to pay off an auto loan or a mortgage, and that tends to snowball into more credit card debt with interest rates quickly increasing the amount owed.

If your debt has become overwhelming, Behm Law Group, Ltd. can guide and protect you throughout the process of individual consumer bankruptcy in St. Peter, MN.

Bankruptcy can be a complex legal process, and it can be very different from case to case. The bankruptcy code has many specific rules that may or may not apply depending on individual financial circumstances. One example of this is the co-debtor role and the laws that apply to this in a bankruptcy case.

 

What Happens in Bankruptcy

There are two exactly opposite things that happen to a co-debtor depending on which chapter you file. In Chapter 7, you may have the debt discharged, but the co-debtor will still be responsible for repaying the full debt. However, in Chapter 13, you assume responsibility for the debt in a three- to five-year repayment plan, and thus your co-debtor may only be partially obligated on it.   For instance, if you have a $5,000.00 Discover credit card debt and only $3,000.00 of it is paid through your chapter 13 plan, the co-debtor would be liable to pay the remaining $2,000.00.

 

Who Is a Co-debtor?

Any person that has legally agreed to pay the debt owed in the event that you can’t repay it is a co-debtor. Co-debtors include:

    • Spouse: Even if your spouse is not filing for joint bankruptcy with you, they can be responsible for the debt if they signed the lending paperwork. Common examples of this are mortgages, credit cards, and car loans.

 

    • Co-signer: If your relative, friend, or other individual co-signs a loan, rental, or other borrowed value with you, they become your co-debtor if you default on repaying that debt. This commonly happens if you don’t have sufficient credit or a lengthy borrowing history to take out a loan, rent a property, or open an account.

 

    • Personal Guarantor: If you provided a personal guarantee to a lender on behalf of a small business or a start-up, you are considered a co-debtor for the loan that the business receives. If the business files for bankruptcy, you may still be liable for that debt.

 

  • Community Property State Resident: If you and your spouse lived in a community property state in the eight years prior to filing for bankruptcy, your spouse is your co-debtor even if they don’t file a joint petition. Community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.

 

To learn more about your co-debtor’s roles or to start filing for bankruptcy in St. Peter, MN, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.

How a Bankruptcy Insider Affects Debt Relief

Bankruptcy is a legal process that provides debt relief to thousands of individuals and businesses across the United States. If you’re struggling to meet debt payments each month and you feel like your quality of life is significantly affected by this, it may be beneficial for you to consider filing for bankruptcy. Not only does bankruptcy discharge common debts like credit cards and medical bills, it also addresses debts that are tied to properties, including mortgages and car loans. This means some of the most common debt types in America are resolved with a bankruptcy case. If you want to receive debt relief in Redwood Falls, MN, through bankruptcy, Behm Law Group Ltd. can guide you through the system, help you build a strong case, and protect you in the nuanced system of bankruptcy.

 

For the typical individual consumer, there are two types of bankruptcy that can provide debt relief in different ways: Chapter 7 or Chapter 13.

 

Chapter 7 is more suited to people with low incomes who will not be able to repay their debts. It works to liquidate non-exempt assets in exchange for discharge of one’s debts. For example, the trustee administering your case may sell a snowmobile that you may not be able to protect with your bankruptcy exemptions and pay that value to your unsecured creditors.  This is the exception, however, rather than the rule.  However, the bankruptcy exemptions are quite generous.  In the vast majority of chapter 7 cases, one’s bankruptcy exemptions will be sufficient to protect all of one’s assets.

 

Chapter 13 is best for those who don’t want non-exempt assets liquidated and have a steady, stable income. This filing works to restructure or reorganize the filer’s debts into a three- to five-year long repayment plan. Secured debts (debts tied to a property) will be repaid over that time but they are usually repaid under adjusted terms that are more favorable than the original loan terms.  Unsecured debts will be paid only a percentage of what they were owed before the bankruptcy case was filed.

 

When you file for bankruptcy, people and agencies considered “bankruptcy insiders” are taken into account and may affect your case. Bankruptcy insiders include relatives, friends, partners, partner’s relatives, or a company in which the filer has some control/involvement, or business individuals such as directors, business partners, or other business individuals who have a special or close relationship the filer in some way.

 

The court considers bankruptcy insiders in the determination of preferential payments and fraud. For example, if the debtor owed his or her mother $1,000.00 and paid the mother off within one year before he or she filed for bankruptcy relief, the bankruptcy trustee administering the bankruptcy case could demand that the mother pay the $1,000.00 back to the trustee.  The trustee would then divide that $1,000.00 among all of the debtor’s unsecured creditors.  Additionally, if the filer sold some property at below market value to the insider before filing, the entire transaction could be undone or reversed by the bankruptcy trustee.  For instance, if a filer sold a vehicle that was worth $10,000.00 to his or her mother for $1,000.00, the bankruptcy trustee could undo or reverse the transaction because fair value was not given for the vehicle.  The trustee could demand that the vehicle be turned over.  The trustee could then sell the vehicle for fair market value.  The trustee would then divide up the sale proceeds among the filer’s unsecured creditors.

 

To start your bankruptcy process today and receive debt relief in Redwood Falls, MN, or to learn more about bankruptcy insiders, contact Behm Law Group Ltd. at (507) 387-7200 or stephen@mankatobankruptcy.com.

Why the 180-Day Inheritance Rule in Chapter 7 Bankruptcy Exists

One common misconception about bankruptcy is the idea that it will leave the filer with little to their name and damage their credit beyond repair. In reality, bankruptcy is an extremely helpful process for ridding individuals and businesses of debts they would otherwise not be able to repay.

 

Bankruptcy is a legal process administered through the bankruptcy court system. While bankruptcy does affect the filer’s credit and some could lose certain non-exempt properties in liquidation-type bankruptcies, the overall benefits can greatly outweigh the negatives. If you are considering filing for Chapter 13 or Chapter 7 bankruptcy in Jackson, MN, Behm Law Group, Ltd. can help you build a strong, successful case.

 

If you qualify for Chapter 7 bankruptcy by passing the Minnesota Means Test, you will have the majority of your debts discharged. The majority of common debts like credit card debt, medical bills, mortgages, and car loans are discharged in Chapter 7. When it comes to unsecured debts (debts not tied to a property/collateral), the discharge has no side effects. On the other hand, the discharge of secured debts may mean you’ll lose the property tied to that debt in the liquidation process if there is no equity or value in excess of the debt against the property that you can assert an exemption claim to. Exemptions protect important properties like your home, vehicle, furniture, etc.

 

Some properties that are only established as a money value, such as your retirement fund, trust fund, or an inheritance, may also be subject to the liquidation process, though there are generous exemptions for tax qualified retirement accounts such as an IRA, 401(k), 403(b), etc.  For inheritances in particular, such as those received through a will or a life insurance policy, there are special rules in place to prevent bankruptcy abuse and maximize the potential benefit/return to one’s creditors:

 

  • If your relative is still alive, your inheritance is safe from the liquidation process because you don’t own it yet.
  • If you received your inheritance more than 180 days after the date you filed your petition – meaning your relative passed away more than 180 days after the date you filed your case – it’s not considered part of your estate and it will be safe from liquidation.
  • If you receive your inheritance within 180 days of filing for bankruptcy (specifically, your relative passed away within 180 days after you filed your bankruptcy case), your case may be amended, and any inheritance could be at risk of being liquidated.  If you cannot use your available bankruptcy exemptions to protect some of the inheritance, whatever amount is not exempted will be liquidated by the bankruptcy trustee and paid over to your creditors.

 

This 180-day inheritance rule was established to prevent debtors from filing for bankruptcy to rid themselves of debt with the knowledge that they will soon receive a large sum from the death of a family member. Filing for Chapter 7 bankruptcy with that knowledge shows that you wanted a way around repaying your debts honestly with the money gained from your inheritance.

 

To learn more about inheritances or other assets and what happens to them when you file for Chapter 7 bankruptcy in Jackson, MN, contact Behm Law Group, Ltd. today at (507) 387-7200 or via email at stephen@mankatobankruptcy.com.