Cancellation and Charging-Off vs Debt Discharge in Bankruptcy in Marshall, MN

When you enter into a loan agreement, it’s implied and expected you’ll repay the debt in full with interest. However, nobody is perfect. There are many life events that can affect your ability to meet debt obligations, especially when you accumulate several debts over time. If you find yourself unable to make monthly loan payments, you and your creditors are faced with how to resolve that. There are several ways creditors can try to continue collecting a debt and there are several ways for you to relieve that debt. With the help of Behm Law Group, Ltd., filing for bankruptcy in Marshall, MN, can be a viable way to resolve debt issues.

 

The three primary ways a debt issue can be resolved is to cancel a debt, charge-off a debt, or discharge a debt. Debt discharge occurs through the bankruptcy process, but certain types of debt can be cancelled or charged-off. The process of charging-off or cancelling a debt is most often done outside of bankruptcy, but it can be accomplished during a case without significantly affecting the proceedings.

 

Debt Cancellation

 

If you’re unable to repay a debt, a creditor may choose to cancel/write it off. You can negotiate with your creditors to convince them to cancel debts even while you’re in the process of filing for bankruptcy. However, you will be taxed for the amount you owed on the debt because the cancellation of the debt is considered income for tax purposes. For example, if you owed $1,000 on a debt at the time of its cancellation, you will be taxed for that amount. The exception to this is if the debt amount was $600 or less.

 

Charging-Off Debt

 

Creditors can also choose to charge-off a debt if you’re unable to repay it. In this case, the debt record is removed from the creditor’s records and the creditor can either attempt collections in-house or sell the debt to a debt buyer. By selling the debt to a debt buyer, the creditor is able to claim a tax exemption.  You still have the obligation to repay the debt but your obligation is to pay the new debt purchaser instead of the original creditor.

 

Debt Discharge

Choosing to file for bankruptcy may be a difficult decision to make, but the benefits are many. Discharging your debts through bankruptcy is the most effective way to permanently end your repayment obligations without any tax liability. If you have your debts discharged through bankruptcy, you are not taxed on any debt so discharged.   In any event, there is a specific IRS form to be excused from having to file taxes on debt discharged in bankruptcy.

 

Filing for bankruptcy gets a negative reputation, but it’s an effective legal process designed to provide debt relief to individuals and businesses struggling with overwhelming financial burdens. Cancellations and charge-offs both have many catches and will still follow you to tax season.

 

With the help of a quality lawyer, you can file for bankruptcy and successfully discharge debts for good. If you’re considering filing for bankruptcy in Marshall, MN, contact Behm Law Group, Ltd. at (507) 387-7200 for more information about working with our quality bankruptcy attorneys.

Possible Plan Outcomes with Chapter 12 Bankruptcy in Jackson, MN

The seasons of winter and spring in Minnesota are the most difficult times for farmers who support their households with income from agricultural sources. In fact, it’s a time when bankruptcies filed by family farmers spike across the country. In 1987, Chapter 12 bankruptcy was added to the bankruptcy code to help family farmers recover from extreme financial difficulties through the process of debt restructuring and debt consolidation. Behm Law Group, Ltd. offers legal advice and assistance for farmers who are considering filing for Chapter 12 bankruptcy in Jackson, MN.

The process of Chapter 12 bankruptcy is similar to that of Chapter 13 reorganization bankruptcy, but offers specific benefits tailored to fit the financial circumstances of a family farming household. The process of Chapter 12 takes a filer’s debts and restructures them to create a new payment plan that can last 3 to 5 years. This plan requires a full repayment of priority unsecured debts, such as tax debts, and, generally, a specific percentage (0%-100%) repayment of all other debts.

The outcome of a Chapter 12 bankruptcy case can be decided in one of five ways:

  1. Converted: If your household income is low enough to pass the Means Test and you have either failed to propose a repayment plan or your proposed plan was not confirmed by the bankruptcy court, you can have your case converted to a Chapter 7 liquidation case.

 

  1. Confirmed without discharge: If your repayment plan proposal is accepted, your plan will be confirmed or approved by the bankruptcy court. Depending on the amounts you owe and the types of debts you have, you may not actually receive a discharge of your debts and you may only need the assistance of a chapter 12 bankruptcy proceeding to simply restructure or consolidate your debts.

 

  1. Confirmed with discharge: The most common outcome for approved Chapter 12 cases includes a repayment plan that is confirmed by the bankruptcy court and provides for the restructuring or consolidation of some debts and for the discharge or other debts. Debts that are often discharged in a Chapter 12 bankruptcy include medical bills and credit card debts. This is the optimal outcome of a Chapter 12 case.

 

  1. Dismissed before confirmation: If your Chapter 12 case is filed in bad faith, or if you have engaged in other fraudulent behavior either before or after your case is filed, your bankruptcy case could be dismissed before you begin the chapter 12 plan confirmation process.

 

  1. Dismissed after filing: If you engage in fraudulent behavior within the 3 to 5-year repayment plan period, your plan can be dismissed, even after you successfully get the bankruptcy court to approve or confirm your chapter 12 plan. This can result from a number of different circumstances, for example, if you hide additional income or attempt to convert your case to Chapter 7 in bad faith.

 

If you’re a local family farmer and struggling to meet debt payments and daily financial obligations, Chapter 12 bankruptcy might be a way to recover. Contact Behm Law Group, Ltd. at (507) 387-7200 today for more information about filing for Chapter 12 bankruptcy in Jackson, MN.

Benefits of Chapter 12 Over Chapter 13 for Farmers and Fishermen Considering Bankruptcy in Redwood Falls, MN

For most households, filing for bankruptcy without liquidating assets involves Chapter 13 bankruptcy, a process that effectively reorganizes debts and alters amounts to be repaid along with the overall repayment period. While most consumer households and individuals should opt for Chapter 13 if their goal is to retain much of their property through bankruptcy, there’s a better option for family farmers and fishermen filing for bankruptcy in Redwood Falls, MN. If you’re a farmer or fisherman struggling financially, filing for Chapter 12 reorganization bankruptcy is most likely the right choice for you. Behm Law Group, Ltd. can give you the help you need throughout your petition.

Because Chapter 12 was specifically designed to address the debts of family farmers and fishermen, it’s reasonable that it’s more beneficial to filers of that status to choose Chapter 12 over Chapter 13. The details of those benefits include the following:

  1. You can have more debt than a Chapter 13 filer. In Chapter 13, filers aren’t eligible if their secured debts are greater than $1,184,200 or if their unsecured debts exceed $394,725. However, for farmers and fishermen with the much greater debts that often come with owning and operating a farm or fishing venture, the debt ceiling for Chapter 12 peaks at $4,153,150.
  2. You have more wiggle room with repaying secured debts. If your secured debts are so high that repaying them will take longer than your repayment plan period, it’s possible that you will not have to repay those debts in full during the plan period. You’ll still have to repay those debts completely, but you may adjust your plan so that you make reasonable payments throughout the plan period and continue to pay those installments after the plan is completed until your debts are repaid in full. This gives you more room to breathe within your repayment plan.
  3. You have more wiggle room with repayment installments. In a Chapter 12 plan farmers and fishermen are allowed to base the frequency of their payment installments around the production cycle of their crop or catch migration and population. In Chapter 13, on the other hand, the filer must make monthly payments regardless of income patterns.
  4. You have more cramdown options. In Chapter 13 and Chapter 12, you have some options to “cramdown” your debts, meaning you can reduce a debt to the present value. For example, if your car was worth $5,000 at the time of the filing of your bankruptcy petition, but your debt on the car was $8,000 at that time, you can cram the debt you owe down to the $5,000. In Chapter 13, you can only use cramdowns on certain debts, but Chapter 12 allows more extensive uses of cramdowns, including home mortgages and motor vehicle loans.

Overall, Chapter 12 offers a lot more to family farmers and fishermen than Chapter 13. If you think you’re eligible to file for Chapter 12 bankruptcy in Redwood Falls, MN, contact Behm Law Group, Ltd. at (507) 387-7200 today.