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How to Enjoy the Holidays While Working Through a Chapter 13 Bankruptcy

During the holidays, many households struggle with the financial expectations of gifts, decorations, and fancy foods. If you are one of the many individuals having a hard time meeting debt payments, it may be time to take action for permanent debt relief.

 

While there are options for debt relief outside of bankruptcy, such as debt settlement or debt consolidation these options are rife with fraud and full of bad actors who are only interested in taking your money, have no legal authority to make your creditors do anything and will not provide permanent debt relief.  At Behm Law Group, Ltd., we can guide you through the process of filing for Chapter 7 or Chapter 13 bankruptcy in Pipestone, MN and the surrounding area to receive immediate, effective and permanent debt relief.

 

Those who are already in the process of working through a three to five-year long Chapter 13 bankruptcy repayment plan can still enjoy the Holiday Season as they would any other year outside of the bankruptcy process. While it’s true that some income must be paid to the chapter 13 trustee to meet monthly repayment plan requirements, one can still purchase gifts for friends and relatives, spend money entertaining friends and relatives and plan and take trips to visit friends and relatives as one would normally do outside of the bankruptcy process.

 

Discretionary Income

When you enter into a Chapter 13 bankruptcy repayment plan, your income will be broken into disposable and discretionary categories. Your disposable income is what’s left after all reasonable and necessary living expenses are paid. Utility bills, food, gas, taxes, and all other household financial needs are considered reasonable and necessary living expenses that you can use any amount of your discretionary income to pay. What’s left of your income after reasonable and necessary living expenses are paid is called disposable income. For the full period of your Chapter 13 bankruptcy, your disposable income will be used to make your chapter 13 plan payments to the chapter 13 trustee and the chapter 13 trustee will divide those monthly payments among your unsecured creditors.  Christmas presents, decorations, and luxury foods are all things that you can use your discretionary income to purchase during the Holiday Season. Being in a Chapter 13 bankruptcy simply means that you and your attorney and the chapter 13 trustee will draft a monthly budget to help you spend your discretionary income more efficiently to cover your reasonable and necessary living expenses, including recreational expenses and charitable contributions.

 

Budgeting

Even with your disposable income being used to repay unsecured creditors through your chapter 13 plan, you can still enjoy the Holiday Season as you always have enjoyed it. One significant resource you can rely upon is part of your yearly income tax refunds. Although your yearly tax refunds technically constitute disposable income that should be used to repay unsecured creditors, the chapter 13 trustee will only require you to pay over a portion of your yearly tax refunds and permit you to use the rest as you wish. You could also request an adjustment to your repayment plan for the months during the Holiday Season.  Most chapter 13 trustees will allow a temporary change in your plan.

 

If you are facing serious debt problems this year, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com to learn more about filing for Chapter 7 or Chapter 13 bankruptcy in Pipestone, MN.

 

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Different Types of Bankruptcy in Redwood Falls, MN

Because the current time is full of uncertainties, any growing financial worries can add a tremendous amount of stress on a household. Whether you’re an individual, a family breadwinner, or a business owner, you can rest assured that when worst comes to worst, you will always have the option to file for bankruptcy if your financial circumstances call for it. Bankruptcy often gets a negative image cast over it, but the truth is that it’s a system designed to protect debtors, creditors, and the economic system overall with fair and just treatment to every party involved. If you are finding it impossible, or even just difficult, to meet debt payments each month, you can join thousands of other U.S. citizens who filed for bankruptcy and received permanent debt relief. With the help of Behm Law Group Ltd., you can build a strong case for Chapter 13 or Chapter 7 or Chapter 12 bankruptcy in Redwood Falls, MN, and start down your own road to a debt-free life.

At Behm Law Group, we work with individuals or joint-filing spouses going through Chapter 7 or Chapter 13 bankruptcies. We also work with Minnesota family farmers and fishers to help them file for Chapter 12 relief. The different chapters/types of bankruptcy outlined in the code include:

  • Chapter 7: This process is for individuals or businesses of any size. It works to liquidate non-exempt assets in exchange for the discharge of debts. With most individual cases, the exemptions provided by the bankruptcy code protect one’s property from liquidation and all one loses are one’s debts.
  • Chapter 13: This bankruptcy is primarily for individuals, but sole proprietorship businesses can file by combining personal and business debts into one case. This process works to reorganize debts into a manageable repayment plan lasting three to five years that is tailored to one’s monthly income and reasonable and necessary monthly living expenses.
  • Chapter 12: This works like Chapter 13, but it is exclusively designed for family farmers and fishers who derive 50% of their yearly income from their farming/fishing operations.
  • Chapter 11: This is another reorganization bankruptcy, but it’s typically available to very large businesses that aren’t sole proprietorships or partnerships and to individuals who have a lot of property and have more than $419,275 of unsecured debts and more than $1,257,850 of secured debts. Chapter 11 typically costs more, takes longer, and involves more debts than the other reorganization bankruptcies.
  • Chapter 9: This bankruptcy process is for cities, towns, and other municipalities. The process protects the filing municipality from its creditors while a debt reorganization plan is drafted.
  • Chapter 15: This chapter applies to bankruptcies that cause cross-border insolvencies and is used when a filer has debts in the United States and in another country.

This is a brief explanation of the general chapters in the U.S. bankruptcy code. To learn more about bankruptcy law or to file for bankruptcy relief in Redwood Falls, MN, today, call Behm Law Group Ltd. at (507) 387-7200 or email at stephen@mankatobankruptcy.com.

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Why Small Businesses Aren’t Filing for Bankruptcy Now

Since the end of March and the height of the coronavirus shutdowns, small businesses and beyond have struggled to stay afloat. The benefits of stimulus packages and federal loans have helped many individuals and businesses keep their heads above water and even make a profit during months of decreased income. Unfortunately, most of the effects of the stimulus bills came to an end, and small businesses now need to decide what steps to take to protect themselves given current economic conditions. If you own a sole proprietorship or partnership business, you can use Chapter 13 bankruptcy to resolve debts without losing your business. With the help of Behm Law Group Ltd., you can work through that type of reorganization bankruptcy in New Ulm, MN, and the surrounding areas to file a successful case that will resolve your debts without liquidating your business operations.

Although sole proprietorship and partnership businesses can file for bankruptcy by rolling business debt into the owner’s personal debts, many other small businesses are not able to file because they would be restricted to Chapter 11 reorganization as they may have large amounts of debt and assets with significant values.

Both Chapter 13 and Chapter 11 function similarly to reorganize debts into a repayment plan. Filers will slowly repay debts included in the plan over several years. Many debts will be paid in full but under different terms as denoted in the plan. Other debts will receive payment for a finite period of time and only be partially paid. The remaining balances of those debts at the conclusion of the bankruptcy case would be discharged. While those businesses that qualify for Chapter 13 bankruptcy are more likely to file during this time, if it’s the correct choice given their current finances, businesses that only qualify for Chapter 11 bankruptcy still might not be able to file.

The situation for small businesses right now is complicated. Big business bankruptcy cases have increased by almost 120% in the past 8 months, largely due to the effects of COVID-19, but many smaller businesses have been left unable to file for bankruptcy simply because the costs of filing can be significant. These smaller businesses are operating on shoestring budgets, and once stimulus aid comes to a full stop, they will likely be left with little to no resources.

Because small businesses will be (or already have been) operating on such low incomes, they will literally not be able to afford to file for Chapter 11 bankruptcy. The cost of an attorney and the filing fees involved in a Chapter 11 bankruptcy case are often upward of $10,000 for many small to medium businesses. Most struggling to meet debt payments will just keep operations running until a third party intervenes rather than put time and money into Chapter 11 bankruptcy reorganization plans.

With PPP (payroll protection) loans and stimulus support still helping some small businesses and other businesses with incomes too low to cover bankruptcy fees and costs, small business bankruptcies are down by about 14% from last year.

If you are able to fund a Chapter 13 bankruptcy in New Ulm, MN, or the local area, Behm Law Group Ltd. can help you build a repayment plan for long-term debt relief. Contact us at (507) 387-7200 or stephen@mankatobankruptcy.com today.

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

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

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

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

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

What to consider:

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

Don’t Try to Navigate Chapter 13 Bankruptcy Alone

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

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Understanding the Elements of a Chapter 13 Bankruptcy Repayment Plan

If you are in a difficult financial situation that will benefit greatly from a bankruptcy case, you have two primary potential options as an individual consumer. Depending on your financial circumstances, you can either file for Chapter 7 or Chapter 13 bankruptcy. For those with a debt-to-income ratios higher than the state median or average income of a similar household, Chapter 7 bankruptcy is not an option. If you don’t qualify for Chapter 7 based on your income, you may find your situation is better suited to filing for Chapter 13 bankruptcy. Those considering filing for Chapter 13 bankruptcy in Owatonna, MN, can put together a strong case with the legal protection and guidance of a Behm Law Group Ltd. attorney.

 

Chapter 13 bankruptcy works to restructure your debts into a repayment plan with monthly payments suited to your current income. This plan will last three to five years, depending on your income level. During this time, any material changes in your monthly income and monthly living expenses will be reflected by slight adjustments to your repayment plan. Because the filer and filer’s attorney must work together to create a repayment plan proposal to submit to the trustee, you should make a point of understanding the basic components of a typical Chapter 13 repayment plan.

 

Included in your plan:

  1. Bankruptcy and administrative fees, including your filing fee, trustee’s fee of 3%-10% of each monthly payment, and attorney fees. You will pay 100% of these fees in your plan.
  2. Priority debts, including child support, most tax debts, criminal fines and penalties, alimony, wages owed to people you may have employed, and others. You will pay 100% of these debts in your plan but these debts will not be paid interest.
  3. Secured debts, including mortgages, car loans, and any other debts tied to real estate and items of personal property. You will pay most of these debts in your plan under different/adjusted terms that are more compatible with your regular monthly income and your regular reasonable and necessary monthly living expenses.
  4. Unsecured debts, including credit card debts, medical bills, and any other debts not tied to a property or protected with a lien. You will pay only a percentage of these debts.  Generally, these debts will not be paid in full and they will not be paid interest.  The amount you’ll repay depends on your disposable income (remaining monthly income after your reasonable and necessary monthly living expenses are paid) that will be paid monthly in the repayment plan and on how many months your plan will last.

 

You now are aware of the basic components of a typical Chapter 13 bankruptcy repayment plan. With the help of a skilled bankruptcy attorney, you can easily craft a reasonable repayment plan proposal that fits your current monthly income and other financial circumstances and restrictions.

 

To learn about other, more complex components of a chapter 13 repayment plan or to file for Chapter 13 bankruptcy in Owatonna, MN, contact Behm Law Group Ltd. at (507) 387-7200 or stephen@mankatobankruptcy.com.

 

 

 

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How the CARES Act Affects Mortgage Forbearances for Those in a Chapter 13 Bankruptcy

Since the beginning of 2020, and for the foreseeable future, everyone in the United States and across the world is dealing with some serious difficulties in the face of COVID-19. One of the most prominent issues many in the United States are struggling with is a lack of income due to shelter-in-place orders and nonessential business shutdowns. Combined with layoffs and other factors, the situation is worse for those who struggled with finances even before the outbreak of the virus. These people are having to take actions to protect themselves and they are working with creditors, banks, and other loan providers to come up with a sound financial plan.

 

The CARES Act was put into place this past March to provide relief to U.S. citizens and businesses through various means. For many, one of the most helpful parts of the CARES Act is the allowance of a mortgage forbearance for up to six months. However, for those working through a Chapter 13 repayment plan, the CARES Act may affect a mortgage forbearance differently than for other individuals. If you are considering filing a Chapter 13 bankruptcy in Waseca, MN, or the surrounding area during this time, Behm Law Group Ltd. can help you understand how the CARES Act could change a mortgage forbearance and other aspects of your finances.

 

For those not in a Chapter 13 bankruptcy, the CARES Act allows individuals to request a forbearance on their mortgage lasting up to six months. There may also be an option to delay making payments on mortgages through forbearance of an additional six months. Requesting this forbearance for those in a Chapter 13 bankruptcy, however, becomes a bit more complicated.

 

For any changes in a Chapter 13 repayment plan, including a mortgage forbearance, all parties involved must be notified. While requesting a mortgage forbearance on the bankruptcy filer’s end is almost the same as for individuals outside of a bankruptcy, the passing of information among the loan services, trustee, and bankruptcy attorney can be complicated. Because the COVID-19 pandemic is an unprecedented situation, the bankruptcy code doesn’t have in-place guidelines to handle issues related to it. Consequently, the reporting of mortgage forbearance requests to parties involved in a Chapter 13 bankruptcy depends on a local district bankruptcy court’s regulations.

 

To properly provide a temporary mortgage forbearance notification in a chapter 13 bankruptcy, the National Association of Chapter 13 Trustees has established a few basic ways mortgage lenders can provide forbearance information to parties involved in a bankruptcy proceeding.

 

  1. General notice: Mortgage lenders can file a general notice with the bankruptcy court outlining the forbearance terms in the court docket for a particular bankruptcy case.
  2. Claims register: Mortgage lenders can also file a claim on the claims register, which is typically more directly linked to the chapter 13 trustee’s system.
  3. Mail a letter: Mortgage lenders can send a physical letter to the bankruptcy filer, the chapter 13 trustee and all interested parties detailing the mortgage forbearance terms.
  4. Notice of payment change: Finally, mortgage lenders can file a notice of payment modification in the bankruptcy court claims register for a particular bankruptcy case.

 

All of these options have their advantages and disadvantages, depending on the locality. Mortgage lenders should be working through whichever process is best for each bankruptcy judicial district.

 

To learn more about mortgage forbearance in a Chapter 13 bankruptcy in Waseca, MN, contact Behm Law Group Ltd. at (507) 387-7200 or stephen@mankatobankruptcy.com today.

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Making Chapter 13 Bankruptcy Work for Your Small Business

Owning a small business is a difficult endeavor with hundreds of obstacles to overcome in order to turn a profit. Because it’s so difficult to maintain a successful business, many business owners find themselves in poor financial circumstances. If you are struggling to keep making payments on your business and/or personal debts, it may be time to consider taking action for debt relief. For many businesses and individuals, filing for bankruptcy is an effective way to receive long-term debt relief for many common debts. If you are considering filing for bankruptcy, but want to keep your business running, you may be able to use Chapter 13 bankruptcy in Mankato, MN, to find debt relief with the help of Behm Law Group Ltd.

 

Chapter 13 bankruptcy is a reorganization/repayment type of bankruptcy that is typically only reserved for individuals. However, there are circumstances that may allow for a business owner to file Chapter 13 and include business debts along with personal debts in the case.

 

Specifically, your business debts can be included in a Chapter 13 bankruptcy if you own the business as a sole proprietor or a partnership. If this is your situation, you can include business debts in your repayment plan as personal debts including business tax debts.

 

Including your business debts into your Chapter 13 repayment plan means they will be rolled into your personal debts and repaid within a three- to five-year period. Secured and unsecured business debts are handled in the same ways your personal secured and unsecured debts might be. This means your secured business and personal debts will be repaid in full, often under adjusted contractual terms that are more favorable to you and your business, and your business and personal unsecured debts will be repaid in amounts between 0% and 100%, depending on the value of your assets. The percentage is determined, in part, by the amount that your unsecured creditors (creditors without security or collateral) would receive if you had filed for a Chapter 7, liquidation type bankruptcy.

 

If you own a business in a partnership, you may not be able to file for Chapter 13 bankruptcy if the trustee determines that your creditors will receive more back on their claims if you file for a Chapter 7 bankruptcy instead and close down your business. Some cases of one partner filing for Chapter 13 bankruptcy and repaying the business debts without the help of the other partner, however, have occurred.

 

In a Chapter 13 bankruptcy, you can generally keep your business assets and keep your business operating as long as you continue to meet your Chapter 13 plan payment obligations each month.

 

If you are considering filing for Chapter 13 bankruptcy in Mankato, MN, as a business owner or as an individual, Behm Law Group Ltd. can guide you through the process and help you understand your case options. To learn more about bankruptcy, contact Behm Law Group Ltd. at (507) 387-7200 or stephen@mankatobankruptcy.com.

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What Happens to Your Car in Chapter 13 Bankruptcy

Chapter 13 bankruptcy is a common type of individual consumer debt relief that allows filers to restructure their debts into a three to five-year repayment plan suited to their income. Unlike Chapter 7 liquidation bankruptcy, Chapter 13 is often a better fit for filers with a steady income who want to keep the properties they have a secured debt on. If you’re considering filing to receive debt relief, Behm Law Group, Ltd. can help you put together a strong petition for Chapter 7 or Chapter 13 bankruptcy in Mankato, MN.

 

When you file for Chapter 13 bankruptcy, several different things will happen to your debts depending on the type of debt, the amount owed, and other circumstances. For example, your unsecured debts will be only partially paid through your repayment plan. While your secured debts can be included in your chapter 13 plan to be paid in full, they can oftentimes be paid under adjusted terms that are very favorable to you.  A secured debt is a debt tied to a property or other asset that serves as collateral/guarantee.  In other words, if you don’t pay the debt, the creditor can take/repossess the asset that serves as security or collateral for the debt.

 

If you own a car you haven’t paid off the loan for yet, several things can happen to that vehicle when you file for Chapter 13:

 

  1. Keep It: If you’re caught up or current on your car loan, you can specify in your repayment plan that you intend to continue making the regular payments directly to the creditor rather than making your payments to the chapter 13 trustee and then having the chapter 13 trustee make the payments to the creditor. To do this, you must meet the Best Efforts requirement by demonstrating not only that the value of the vehicle is at least as much as the amount of the debt against it but also that interest rate on the loan is reasonable (in the 5% to 7% range) and not unduly high (in the 8% to 20% range).

    2.  

  2. Repossession: Filing for Chapter 13 will stop the repossession of your car with the power of automatic stay. The automatic stay legally halts any creditors’ attempts to collect debt payments or repossess properties. The stay applies throughout your bankruptcy case, and if you include your loan in your repayment plan, your creditors will no longer be able to repossess your car.

    3.  

  3. Surrendering: If you don’t want to include your loan in your repayment plan, you can surrender your car to the bank you received the auto loan from. This typically occurs if the filer cannot afford to repay the loan or the car is unreliable.  The creditor will be able to take the vehicle, sell it, retain the sale proceeds and apply the sale proceeds against the debt but the creditor will not be able to demand further payment from you.  Whatever debt or claim is left following the sale of the vehicle will be paid by the chapter 13 trustee as a general unsecured claim like credit card debt, medical debt, etc.

    4.  

  4. Arrearage: If you are behind on payments on your car loan, you can include the past due payments you owe in your repayment plan and continue making the regular payments.   For example, if you’re $2,000.00 behind on your vehicle loan and your regular monthly vehicle payment is $400.00, you would be five (5) months in arrears with your vehicle loan payments.  You could include the $2,000.00 arrearage in your chapter 13 plan and the trustee would pay it back.  However, you would be required to continue making your regular, monthly vehicle payments of $400.00 directly to the creditor going forward and you would be required to remain current or up to date with your ongoing vehicle payments.

    5.  

  5. Loan Reduction: If the value of your car is less than the amount you owe on your loan or if the interest rate on the vehicle loan is unduly high, you might be able to reduce the amount you owe and reduce the interest rate and pay off the loan through your chapter 13 plan. This process, called cramdown, is common when it comes to car loans because car values quickly depreciate. You still owe the amount that is reduced, but it is paid under adjusted terms that are favorable to you.  In order to cramdown the amount of the debt to the present value of the vehicle, the subject vehicle loan must be more than 910 days old.  In other words, you must have incurred that debt more than 910 days before you filed for bankruptcy relief.  For these kinds of loans, you will be able to cramdown both the amount of debt down to the present value of the vehicle and the subject interest rate.  For example, presume that you have a vehicle that you owe $10,000.00 on and that the vehicle is presently worth $5,000.00 and further presume that you took out the loan on December 1, 2015.  Further, presume that the interest rate on the loan is 18%.  Presume even further that you filed for bankruptcy relief on December 1, 2019.  This loan would have been incurred or taken out more than 910 days before your bankruptcy case was filed.  With this sort of loan, you would be able to cramdown the debt from $10,000.00 to $5,000.00 and you would be able to cramdown the interest rate from 18% to 5% or 6% in your chapter 13 plan.  Instead of making your vehicle payments directly to the creditor, you would make them to the chapter 13 trustee and the chapter 13 trustee would pay the creditor the $5,000.00 at 5% or 6% interest.  The other $5,000.00 worth of debt that exceeded the value of the vehicle and was crammed down would be paid by the trustee as a general unsecured claim like a credit card debt or a medical debt.

 

With regard to vehicle loans that were incurred or taken out less than 910 days before you filed for bankruptcy relief, you would not be able to cramdown the amount of the debt to the present value of the vehicle.  However, you would still be able to cramdown the interest rate if the interest rate were unduly high.  For example, presume that you purchased a vehicle on December 1, 2018 and that you filed for bankruptcy relief on December 1, 2019.  Presume further that you owe $10,000.00 on the vehicle but that it is presently worth only $5,000.00.  Presume further that the interest rate on the vehicle loan is 18%.  This type of vehicle loan can still be included in your chapter 13 bankruptcy plan but you would not be able to cramdown the $10,000.00 debt to the $5,000.00 value of the vehicle.  However, you would still be able to cramdown the interest rate from 18% to 5% or 6%.  It may still be quite advantageous for you to have the vehicle loan paid by the chapter 13 trustee through your chapter 13 plan because the interest rate could be significantly reduced.

 

If you’re planning on filing for Chapter 13 bankruptcy in Mankato, MN and want to know more about how your debts and properties will be handled, contact Behm Law Group, Ltd. today at (507) 387-7200 or via email at stephen@mankatobankruptcy.com.

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Frequently Asked Questions about Chapter 13 Bankruptcy

If you are finding your quality of life compromised due to the difficulty you have meeting monthly debt payments, it may be time for you to consider seeking debt relief. While there are many forms of debt relief available to individuals, the most effective option for long-term, permanent debt relief is bankruptcy. Bankruptcy is a system that has long been put into place by the government to protect debtors from destitution, provide fair treatment to creditors, and promote a healthy economy overall. If you are considering bankruptcy, Behm Law Group Ltd. attorneys can help you file a strong case for Chapter 7 or Chapter 13 bankruptcy in Pipestone, MN.

 

Both Chapter 7 and Chapter 13 are the most frequently filed types individual consumers. While Chapter 7 provides liquidation of non-exempt assets in exchange for debt discharge, it’s not a chapter that most wage-earning debtors can qualify for because their incomes are often too high.

 

Chapter 13 bankruptcy, on the other hand, offers a way to restructure your debts into a manageable repayment plan lasting three to five years. Although Chapter 13 is a common bankruptcy format, there are still many frequently asked questions we receive including:

 

  1. How much of my debt will I have to repay?
    1. You will have to pay all of your secured debts (i.e., mortgages and auto loans) that you want to retain in full, but the payment arrangements may be under different and under more friendly terms.
    2. You will have to pay priority debt (i.e., child support and tax debt) in full.
    3. You will most likely have all or much of your unsecured debt (i.e., credit card debt and medical bills) discharged after your chapter 13 plan is concluded. The amount you will pay depends on how much your monthly income exceeds your monthly reasonable and necessary living expenses and how much you would be able to repay creditors with the value of your non-exempt, liquidated assets in hypothetical Chapter 7 bankruptcy case.
  2. How long will my plan last?
    1. Your plan will last three years if your income is below the state median income of a similar household size.
    2. Your plan will last five years if your income is above the state median income of a similar household size.
  3. Will I have any income for personal use?
    1. The remainder of your income after you meet payment requirements for your secured and priority debts will be split into two types, disposable and discretionary.
    2. Your disposable income will go to your household needs, including income tax, utilities, food, and gas.
    3. Your discretionary income is yours to spend as you see fit.
  4. What happens if my income changes?
    1. Fluctuations in income and expense obligations are taken into account throughout the duration of your repayment plan. Three to five years is a long time, and your trustee will understand if changes occur.
    2. If you do have a job change or other significant life event that might affect your plan, notify your attorney and the trustee right away so your monthly plan payment can be altered accordingly.

 

Filing for bankruptcy is a complex process without the assistance of a trained professional no matter what chapter you file. Contact Behm Law Group Ltd. at (507) 387-7200 or via email at stephen@mankatobankruptcy.com for help getting started with Chapter 13 bankruptcy in Pipestone, MN, today.

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Overview of the Basic Differences between Chapter 7 and Chapter 13 Bankruptcy

In the United States, there are two main types of bankruptcy available to individuals and businesses alike: Chapter 7 and Chapter 13. While both types provide government-administered debt relief, the two chapters work very differently. Both are valuable options for debtors, and the more suitable one depends on the financial and personal circumstances of any given filer. If you are considering bankruptcy but don’t know where to start, Behm Law Group Ltd. can help. We can work with you to determine which chapter is right for you, and we can guide and protect you throughout your case. Filing for bankruptcy in St. Peter, MN, isn’t the impossible process it might seem to be, and our expert attorneys can help you see that every step of the way.

The main differences between Chapter 7 and Chapter 13 lie in how the debts are handled and how long the cases take.

Debt Handling

  • Chapter 7 is a liquidation process. This means your non-exempt assets/properties are liquidated/sold, and the amount realized from that sale is given to your creditors. This payment to your creditors allows any debts tied to those sold properties to be discharged. Your unsecured debts, such as credit card or medical debt, will also be discharged in the Chapter 7 process.
  • Chapter 13 is a reorganization process. This means that you will take your debts and reorganize them into a repayment plan customized to your income. The repayment plan requires one lump monthly payment until your plan is complete. You may be able to repay your secured debts in full under different terms, but your unsecured debts will be fully discharged after your chapter 13 plan has concluded.

Time

  • Chapter 7 takes between three to four months to complete. The time period varies depending on how quickly you complete the pre-bankruptcy credit counseling and other requirements, how long it takes your trustee to liquidate any non-exempt assets, and whether there are any judgment claims in your case that need to be expunged. 
  • Chapter 13 takes three to five years to complete. Your repayment plan will either be a three-year or a five-year period. If your income is lower than the state median of a similar household, it will be a three-year plan. If it’s higher, then your plan will be five years.

There are other differences between Chapter 7 and Chapter 13 as both are nuanced processes that vary case by case. Another major difference, for example, is that you can only qualify for Chapter 7 if you pass the state Means Test. This test measures your income-to-debt ratio. You’ll only be eligible for Chapter 7 if that ratio is lower than the state median of a similar household.

To learn more about the differences between the two chapters or to begin filing for bankruptcy in St. Peter, MN, contact Behm Law Group Ltd. at (507) 387-7200 or via email at stephen@mankatobankruptcy.com today.