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Why Chapter 13 Is Less Common than Chapter 7 Bankruptcy in Mankato, MN

If you’re considering filing for bankruptcy, you’re not alone. Over 700,000 individuals file for bankruptcy each year in the United States. While those numbers have decreased significantly since the 2008 market crash, they still show that anyone can struggle financially in the face of many different factors. Filing for bankruptcy is a process designed to treat personal and business debts with a legal, federal court-administered relief program. However, filing for bankruptcy can also be a highly complex, nuanced system to navigate. The help of an expert bankruptcy attorney can turn a difficult case into a successful one with long-term debt relief. Behm Law Group Ltd. attorneys have the knowledge, skills, and experience to guide you through a Chapter 13 or Chapter 7 bankruptcy in Mankato, MN.

 

The two most frequently filed types of individual bankruptcies are Chapter 13 and Chapter 7. Chapter 13 bankruptcy works to reorganize your debts into a manageable repayment plan suited to your income. This plan lasts three to five years depending on your income in comparison to the state average income of a similarly sized household. Chapter 7, on the other hand, works to liquidate your non-exempt assets in exchange for the discharge of your debts.

 

While both Chapter 7 and Chapter 13 are common bankruptcies for individuals, Chapter 7 bankruptcy is filed for much more frequently than Chapter 13. From 2006 to 2017, the ratio of Chapter 13 to Chapter 7 cases filed was on average 30% versus 70%. These ratios range from 75.09% of Chapter 7 bankruptcies versus 24.85% Chapter 13 bankruptcies in 2006, and 61.50% versus 31.94% in 2017 with fluctuations between. Historically, in the United States, every year’s total of cases shows more Chapter 7 bankruptcies than other type, and for good reason.

 

Bankruptcy isn’t something that people choose to go through if they can help it. Those who file for bankruptcy are truly struggling with debts and have other financial hardships, and they turn to bankruptcy as the best choice for help in resolving those issues. If you are considering filing for bankruptcy, you can understand the legal, mental, and general stress that those who file experience. On top of this, the most common cause of bankruptcy is unemployment. The stress of financial burdens and a typically lower income means that filers will more frequently qualify for Chapter 7 bankruptcy.

 

Chapter 13 bankruptcy is a highly effective process for those with steady incomes. While you are more unlikely to have a significant amount of debt when you have a steady income, it’s completely possible to find yourself with heavy debts and a steady income. Typically, however, a low income is a primary cause of burdensome debt and leads to a Chapter 7 bankruptcy case more often than not.

 

If you are struggling financially for any reason, filing for bankruptcy may be the best step to take for long-term debt relief. To learn more about Chapter 13 and Chapter 7 bankruptcy relief in Mankato, MN, contact Behm Law Group Ltd. at (507) 387-7200 today.

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Finishing Your Repayment Plan and What Happens after Chapter 13 Bankruptcy in Redwood Falls, MN

There are many reasons why individuals might accumulate debt that they find unmanageable with their current income. Debt from even the most common sources such as credit cards, medical bills, mortgages, and car loans can escalate with little warning. If you are finding it impossible to meet every debt payment on time each month, or if your budget has been pushed to extremes, it may be time to consider bankruptcy as a debt relief possibility. With the help of Behm Law Group Ltd., you can build a strong and successful case for Chapter 13 bankruptcy in Redwood Falls, MN, and receive long-term, effective debt relief.

 

Chapter 13 bankruptcy works to reorganize your debts into a manageable three- to five-year repayment plan that is suited to your income and overall financial situation. With the guidance of a Behm attorney, you’ll create a repayment plan proposal with attention to your income and in fairness to your creditors.

 

When this repayment plan is accepted by the court, you’ll begin your repayment period, which means you’ll make monthly payments to your bankruptcy trustee (who is assigned to your case at the beginning of your petition). Your repayment plan may be adjusted at any point during that period based on income changes, such as a new job. Any significant changes to your income status must be reported to your trustee and to your attorney or you risk having your case dismissed.

 

But what happens when your repayment plan period ends and you’ve paid back the debt your plan requires? The process afterward involves basic confirmation and lots of paperwork, but luckily you, as a filer, won’t have many responsibilities during this time.

 

  1. Trustee Review: First, your trustee reviews your case to confirm that you’ve met the “Order Confirming the Chapter 13 Case” requirements listed in your repayment plan proposal. This can take up to 90 days, depending on the complexity of the case. Once confirmed, the trustee creates a report.
  2. Trustee Report: The trustee report causes the court to issue you a “Certification of Eligibility for Chapter 13 Discharge,” which you must return signed. This form allows for the discharge of any remaining debts and allows for the closure of your case.

 

In order for the court to finalize your case, you’ll have to complete a financial management course in a timely fashion (learn more about the course you must take here). Once the review and report have been completed and the certificate has been signed, your Chapter 13 bankruptcy case is finished, and you begin your life free of the debts involved in your case.

 

To learn more about filing for Chapter 13 bankruptcy in Redwood Falls, MN, contact Behm Law Group Ltd. today at (507) 387-7200.

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Reduced Pay for Educators Increases Cases of Chapter 13 Bankruptcy in Fairmont, MN

Across Minnesota, K-12 school budgets are dropping, and funding for private colleges is also suffering in several departments. This trend has had a marked effect on students, teachers, and administrators alike. For teachers and professors, the effect can be immediate or gradual. Specifically, those employed as educators at all levels have experienced an overall reduction in salaries, meaning their finances have changed for the worse. This shift has been a large part of why we’ve seen increased cases of educators filing for Chapter 13 bankruptcy in Fairmont, MN, and across the state. If you are an educator struggling to meet debt payments, Behm Law Group Ltd. can provide the guidance and assistance you need to file a successful case and find long-term debt relief.

 

Chapter 13 Bankruptcy for Educators

If you have made the decision to file for bankruptcy as an employed educator, you are most likely restricted to filing for Chapter 13 bankruptcy. While lowered salaries may be what brought you to the point of filing for bankruptcy, the fact remains that you still have an income. This means you won’t qualify for Chapter 7 liquidation bankruptcy unless your debts significantly outweigh your income.

 

On the bright side, Chapter 13 bankruptcy is often more desirable for those who want to keep their home and other possessions. Instead of liquidating your non-exempt assets in exchange for debt discharge like Chapter 7, Chapter 13 works to reorganize your debts into a reasonable monthly payment that you make to a chapter 13 trustee.

 

The reorganization process structures your debts into a repayment plan that lasts three to five years, depending on your income. If your income is lower than the median Minnesota income for a household of your size, your plan will last only three years. If your income is higher than the state median income for a household of your size, your plan is must last five years. In our experience, educator incomes do not typically exceed the median, even when filing jointly with their spouses. This means you can typically expect to have a three year repayment plan and pay a lower percentage of many types of debt.

 

How Chapter 13 Handles Debt

A Chapter 13 reorganization plan handles debt in several ways. First, you generally will continue to make your monthly payments to most of your secured debts, such as mortgage loans and vehicle loans, directly to those creditors.  Sometimes, however, if you have become delinquent with your mortgage payments or vehicle payments, any pre-petition or pre-bankruptcy filing delinquencies can be paid or “cured” through your chapter 13 plan.  For instance, if you have become $5,000.00 delinquent with your mortgage payments, this amount can be paid to the creditor by the chapter 13 trustee through your chapter 13 plan over the duration (36 to 60 months) of your plan.  You must, however, be able to make the ongoing, regular post-petition mortgage payments that come due after your case has been filed.  Second, priority debts such as certain tax debts, alimony and child support arrearages or even criminal fines, must be paid in full. Third, general unsecured creditors, such as credit card debts, medical debts, etc., do not receive interest, late charges or service fees.  Any amounts that are paid to those creditors go against the principal that you owed those creditors when your bankruptcy case was filed.  Typically, unsecured creditors are only paid a percentage of the total you owed them when your case was filed.

 

When the debt amounts are calculated and structured into your plan, you’ll be able to see the amount required to be paid monthly to your bankruptcy trustee. You can rest assured this amount will fit your income, though keep in mind your discretionary income will depend on a budget relating to your reasonable and necessary living expenses and your disposable income (income over and above what is necessary to cover your monthly reasonable and necessary living expenses) must be paid to unsecured creditors through your plan. This monthly payment may change if your monthly income and monthly reasonable and necessary living expenses change.

 

To learn more about filing for Chapter 13 bankruptcy in Fairmont, MN, as an educator, contact Behm Law Group Ltd. at (507) 387-7200 today.

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Filing for Chapter 13 Bankruptcy in St. Peter, MN, When Self-employed

Self-employment is often a rewarding way to create income for you and your family. However, self-employment doesn’t always guarantee a regular income, especially if you work in an industry that has fluctuations in demand. If you are self-employed and have found it difficult to meet debt payments each month, you have several options for debt relief, including bankruptcy. For those with a steady self-employed income who also want to keep their home and other properties, filing for Chapter 13 bankruptcy in St. Peter, MN, is a realistic and highly effective option. With the help of Behm Law Group Ltd., self-employed filers can build a successful case and start a repayment plan that fits their financial circumstance.

Filing for bankruptcy, especially Chapter 13 bankruptcy, requires a collection of financial documents, income verification, expense reports, and much more. These documents can sometimes be difficult for some people to track down and organize, particularly for those who are self-employed.

The help of an expert bankruptcy attorney is often critical for self-employed filers to compile a case with a repayment plan proposal that the court and bankruptcy trustee can accept. Many self-employed filers are required to provide more extensive documentation of income and expenses when they file for Chapter 13.

 

Income Verification

Verifying your income received from self-employment can be tricky depending on the nature of your work. Tracking your income carefully, even if you don’t plan on filing for bankruptcy, is a good idea for those who are self-employed. This tracking can include:

  1. Check Stubs: When your clients, customers, or other parties who commissioned your work pay by check, saving those checks from the last 12 months is an excellent start to income documentation.
  2. Invoices: If you request payment in the form of invoices, filing those invoice documents (digital or physical) is also key.
  3. Contracts: Contracts are legal proof of your work with a client. Without that proof, you may have a difficult time explaining forms of payment such as checks, cash, or transfers.
  4. Tax Returns: Records of your self-employment income and the yearly taxes paid on it is also required for a Chapter 13 bankruptcy petition.
  5. Bank Statements: Deposits, withdrawals, credit card transactions, account records, interest, and most other bank statements are necessary to build a strong Chapter 13 case.
  6. Signed Statements: In many cases, unconventional, random, or odd signed statements can often also prove up a contractual agreement. These signed statements are frequently required for your bankruptcy case, and missing the information they provide might break, rather than make, your case.

 

Overall, the more financial information self-employed filers can provide their attorney and the court, the better. Every transaction you encounter that connects to your income as a self-employed individual as far back as a year may be involved in your case.

 

To learn more about gathering the necessary financial information and building a strong case for Chapter 13 bankruptcy in St. Peter, MN, contact Behm Law Group Ltd. at (507) 387-7200 today.

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Escrow Accounts and Chapter 13 Bankruptcy in Owatonna, MN

Anyone with a mortgage or other large loan either has an escrow account or knows about the function of one. Escrow accounts are set up with a third-party agent or broker who manages and distributes the money in that account. The account works as a consolidation system for a mortgagor, holding values required to make a single payment for the monthly loan, interest, taxes, and insurance. Escrow amounts will change over time based on the cost of property taxes, insurance rates, and other taxes. If you have an escrow account and you find yourself in a situation where you must file for Chapter 13 bankruptcy in Owatonna, MN, Behm Law Group Ltd. can help you understand how it will affect the account and guide you through the process of filing bankruptcy overall.

 

Chapter 13 bankruptcy works to reorganize your debts into a three- to five-year repayment plan. The reorganization plan is an extremely valuable option for those with a steady income who don’t want to work through the asset liquidation process of a Chapter 7. A repayment plan typically takes priority, secured, and unsecured debts, and rolls them into a single monthly payment made to a bankruptcy trustee.

 

While large portions of your unsecured debts are discharged in a chapter 13 repayment plan, your priority debts, such as tax debts, child support debts and alimony, and secured debts on assets that you want to retain, such as vehicles and houses, must be repaid. Because your mortgage is a secured debt, it must be paid in full but typically you will continue making the regular monthly mortgage payments directly to the mortgage lender rather than through the chapter 13 trustee. In many cases, the debt leading up to a bankruptcy and a Chapter 13 plan itself can affect mortgage escrow in two ways:

 

  1. Pre-petition arrearage: If you have been unable to meet full escrow payments even before you file for bankruptcy, you will have an escrow shortage, and therefore, be in arrears. In this case, the court will treat the shortage like a typical mortgage arrearage and require it to be repaid in full throughout the repayment period. Unlike a mortgage, however, the shortage amount does not incur interest.
  2. Post-petition arrearage: When you enter a repayment plan, you have to meet escrow payments as a part of the consolidated monthly payment that’s due. If you can’t meet this payment and you become short on escrow, you may be in danger of a case dismissal if you do not take steps to propose and work through a repayment plan adjustment.

 

The three to five years you are working through a Chapter 13 plan require you to be conscious of your finances and to maintain a strict adherence to your budget. The financial struggles that put you into the position of filing for Chapter 13 bankruptcy must be put behind you, and the court expects you to understand the responsibilities of a repayment plan.

 

That said, there will be room for adjustments to be made throughout the repayment period depending on your income and your costs of living. If you are considering filing for Chapter 13 bankruptcy in Owatonna, MN, contact Behm Law Group Ltd. at (507) 387-7200 today.

 

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Guidelines and Limitations of Chapter 13 Bankruptcy in Windom, MN

Chapter 13 bankruptcy is a format of debt reorganization most common for individuals and some types of businesses. Overseen and administered by a standing bankruptcy trustee, a Chapter 13 case takes secured, unsecured, and priority debts and alters them into a consolidated repayment plan that lasts three to five years depending on the debt amount of the filer. If you have a steady income and want to protect your assets from the liquidation that could occur in a Chapter 7 case, Chapter 13 may be the best choice for you. With the guidance of Behm Law Group, Ltd., you can successfully file for Chapter 13 bankruptcy in Windom, MN and obtain long-term debt relief.

 

While Chapter 13 is a highly effective bankruptcy option for people in a broad range of financial situations, it has limitations and guidelines like any other type of legal process. The most basic of these limitations decides who can and can’t file.

 

Who can file?

  1. Individuals:
    1. For an individual to qualify for Chapter 13 bankruptcy, they must have a steady income that allows for reasonable and necessary expenses for living to be factored out of their repayment plan while still meeting monthly payments.
    2. They must have undergone credit counseling within 180 days prior to filing.
    3. They cannot have secured debts exceeding $1,184,200 or unsecured debts exceeding $394,725.
    4. They must have filed all of their income tax returns for the past four years prior to filing.
    5. They cannot have filed a Chapter 13 case within the past two years or a Chapter 7 case within the past four years.
    6. They cannot have filed and had dismissed another bankruptcy case within the last 180 days.
  2. Spouses:
    1. Spouses can file a joint Chapter 13 case involving both of their debts and combined incomes if they have also met all the requirements listed for individual filers.
  3. Businesses:
    1. Some businesses are eligible to file for Chapter 13 bankruptcy. Specifically, those whose owners are personally liable for the business debts.
    2. This includes sole proprietorships and business partnerships.

 

Other limitations and guidelines of Chapter 13 bankruptcy outline the repayment plan itself.

What is an accepted repayment plan?

  1. For a filer’s repayment plan proposal to be accepted by their trustee and the court, it must meet specific requirements designed in fairness to creditors.
  2. In their repayment plan, a filer must be able to repay allowed secured creditors’, under adjusted loan terms/conditions, in full over a three to five-year period.
  3. Their priority debts such as tax debts, child support debts, alimony, criminal fines, etc., must be included in the plan and must be repaid in full over a three to five-year period.
  4. Unsecured debts must be repaid the value of the filer’s non-exempt assets that would have otherwise been liquidated in a Chapter 7 process.   This is informally referred to as the “Best Interests Test”.  For example, if a filer would have non-exempt assets totaling $10,000.00 in a hypothetical Chapter 7 case, the filer must pay that amount over a three to five-year period to their creditors in a Chapter 13 case.

 

While there are many guidelines to follow and limitations to adhere to in the process of Chapter 13 bankruptcy in Windom, MN, it’s undeniable that it has been an effective treatment for a wide variety of debtors. To learn more about the process or to get started, contact Behm Law Group, Ltd. at (507) 387-7200 today.

 

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Preventing Foreclosure and Keeping Your Home with Chapter 13 Bankruptcy in St. Peter, MN

Filing for bankruptcy can be a long-term solution for many financial problems, from credit card debt to car loans. Bankruptcy can also prevent and resolve the issue of a looming foreclosure. If you are struggling to meet debt payments each month, including those on your mortgage, bankruptcy might be the right choice for your household. With the help of Behm Law Group Ltd., you can file a successful case resulting in an effective repayment plan through Chapter 13 bankruptcy in St. Peter, MN. Not only will this repayment plan stop foreclosure, it will also provide a foundational solution for the rest of your debts that can be treated in the bankruptcy process.

 

If your home goes into foreclosure, it can be at least seven years before a lender will consider you for another property loan. However, it can take just two to four years after a bankruptcy before you can take out another mortgage on a home or business. Filing for bankruptcy is also a better option to keep your home and find additional resolutions for your other debts.

 

Automatic Stay

As soon as you file for bankruptcy, the court will automatically place a stay on your creditors’ right to collect any debts from you. This means you will be given relief from any mortgage foreclosure actions as well as collection actions for your other debts until the outcome of your case is resolved. If you file for Chapter 13 bankruptcy, the ideal outcome of your case will be a comprehensive three- to five-year repayment plan that is suited to your income and your reasonable and necessary living expenses.

 

Property Protection

In a Chapter 13 bankruptcy repayment plan, you won’t have to go through the same process you would in a Chapter 7 plan. This means your property will be protected from liquidation sales, but it also means you will still be responsible for paying debts on property, such as your house or vehicle, that you may want to keep.  Post-petition (after the bankruptcy filing) payments on any debts that are secured by such physical property, must continue to be paid throughout the duration of a Chapter 13 plan. If you want to keep your home, you must pay the ongoing, post-petition regular mortgage payments.  Any delinquency that you may have on the mortgage before your case is filed will be paid by the chapter 13 trustee through your chapter 13 payment plan.  However, you would still be required to make the regular mortgage payments that come due after the filing of your case and you would continue to make those payments directly to the mortgage creditor.

 

The benefit of filing for bankruptcy in this scenario is that your payment plan is structured, monitored, and enforced by the court and the bankruptcy trustee. Your Chapter 13 repayment plan is highly mutable based on your current income situation. For example, if your income drops beyond a point where you can meet your payments for a three-year plan, the court can alter your repayment plan into a five-year structure with lower monthly payments instead of the original proposal.

 

To learn more about filing for Chapter 13 bankruptcy in St. Peter, MN, and other bankruptcy options, contact Behm Law Group Ltd. today at (507) 387-7200.

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Living with Success on a Repayment Plan Budget after Chapter 13 Bankruptcy in Mankato, MN

March is the time when determination for New Year’s resolutions start to waver. If you’ve made your New Year’s resolution based on your budget, that wavering can significantly damage your financial well-being. Those who have filed for Chapter 13 bankruptcy in the past know they don’t have any other option than to adhere to the budget outlined in their repayment plan. If you’re struggling with your budget, filing for Chapter 13 might mean long-term debt relief and better spending practices. With the help of Behm Law Group Ltd., you can file for Chapter 13 bankruptcy in Mankato, MN, and structure a repayment plan that will set you up for success.

Chapter 13 reorganizes your debts into a three- to five-year repayment plan. This is a great option for those with a steady income who want to receive court-approved debt relief with a structured budget for the repayment plan period. With a Chapter 13 bankruptcy, filers will have to repay their priority debts, like amounts owed for taxes, criminal fines, child support and alimony, in full, but most can receive a debt reduction up to 100% on unsecured debts.  Even secured debts, like vehicle loans and mortgage delinquencies, can be paid under different and more favorable terms.

 

After you file, you have the opportunity to restructure your debts into a plan proposal. The plan lasts three or five years depending on your income. When the court approves your plan, you will make monthly payments to a chapter 13 bankruptcy trustee.

 

Although the concept of a Chapter 13 repayment plan is highly attractive, some might find it difficult to adhere to that plan, especially if a wavering budget sent them into bankruptcy in the first place. Sticking to your repayment plan means you have to take some things into consideration:

 

  1. Your plan is structured around your income, so any income changes (a new job, for example) must be reported immediately to your bankruptcy trustee or your plan may be dismissed for lack of good faith.
  2. Because your plan is structured around your income, it also takes in the fact that you have monthly expenses for food, travel, utilities, rent, and more. The money you will have to spend to live each month is accounted for in your plan.
  3. While your necessary spending is taken into account in your repayment plan, your unnecessary spending is not. All of your disposable income (any money left over after reasonable and necessary monthly expenses) will have to be paid to the chapter 13 trustee for your unsecured creditors involved in your repayment plan.  You and your lawyer can work with the chapter 13 trustee on your budget to determine your reasonable and necessary expenses.  While the chapter 13 trustee is a fiduciary for your creditors, the trustee is not intransigent or inflexible in this process.
  4. Sudden income sources like tax refunds, bonuses and commissions may or may not have to be paid to the chapter 13 trustee and into your repayment plan. This is something that can be negotiated at the time it occurs.

 

It is completely possible to live month to month during a Chapter 13 repayment period. In fact, the entire goal of reorganization bankruptcy is to allow filers to live their lives as normally as possible while they repay debt. If you are considering filing for Chapter 13 bankruptcy in Mankato, MN, and are concerned about sticking to a tight budget, contact Behm Law Group Ltd. at (507) 387-7200 for more information today.

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How to Use Your Tax Refund While Filing for Bankruptcy in Redwood Falls, MN

As tax season approaches, everyone filing has to take time to look at their finances in more detail than usual. For many individuals and businesses, a financial overview may show just how much they are struggling with the weight of debt. For those with too much debt than they know what to do with, tax season may be the perfect time to consider a long-term solution. At Behm Law Group, Ltd., we’ve found that there are many cases where tax season was the most effective time for those considering filing for bankruptcy in Redwood Falls, MN to take the next step forward.

 

Whether you have credit card debt, mortgages, or most other forms of debt, filing for bankruptcy can act as a recovery system that helps you resolve those debts under government protection. For most with a steady income that overbalances their debt-to-income ratio, the process of Chapter 13 bankruptcy is the most effective as it restructures your debts into a three- to five-year repayment plan suited to your own financial situation.

 

Because of the demand that a Chapter 13 plan puts on all your disposable income, you will most likely have to forfeit some of your yearly tax refunds you receive to your trustee for the repayment of your unsecured debts. While your trustee may allot some of that refund for you to spend or save, you will not be able to retain all of it.  To get the most use out of your tax refund if you plan to file for bankruptcy, you should plan to use it before you file your petition.

 

If you use your tax refund prior to filing for bankruptcy, you will have to spend it all or you may have to surrender some of your tax refund to the trustee. To get full use of your refund without being at fault when the time comes to file, you should expect to only use the refund for:

 

  • food and prescription medicine
  • mortgage or rent
  • home maintenance and repairs
  • utilities
  • education costs
  • clothing
  • insurance
  • medical or dental costs
  • car payments, repairs, and maintenance
  • homeowners association fees

 

The best use of your tax refund if you plan on filing for bankruptcy is for it to go to these expenses. When you use your refund for these purposes, it’s also critical to keep accurate and legitimate records of all your spending. With the help of a Behm attorney, you can record and collect necessary information and documents that will fully demonstrate your use of your tax refund for these expenses rather than other debt payments. Your trustee will most likely require a tax return for the year prior to and the year you file for bankruptcy on top of the additional bankruptcy petition documents.

 Find Professional Help When Filing for Bankruptcy

To learn more about how to use your tax refund before filing for bankruptcy in Redwood Falls, MN, contact Behm Law Group, Ltd. at (507) 387-7200 today.

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Handling Consumer Debts Gained after You File Your Petition for Chapter 13 Bankruptcy in St. Peter, MN

With the decline that our economy has seen over the past six months, it’s not surprising that many individuals and businesses have had to take on more debt or have had difficulties meeting their debt payments. If you have been struggling to make monthly ends meet, and have been for some time, it may be beneficial for you to consider the debt relief filing for bankruptcy can provide. For those with stable incomes who want to retain their properties, Chapter 13 bankruptcy is a valuable option. Behm Law Group, Ltd., provides legal advice and assistance for individual consumers and business owners who want to take full advantage of filing for Chapter 13 bankruptcy in St. Peter, MN.

Because Chapter 13 bankruptcy works as a reorganization process, it restructures your debts into a repayment plan with scheduled monthly payments lasting three to five years. This repayment plan is designed to fit your budget and can effectively resolve the majority of your debts without you having to lose any of your property.

Although Chapter 13 bankruptcy is supposed to fit your financial circumstances while allowing you to operate on a daily basis, it can make your spending limitations extremely tight. Sometimes it may be necessary to incur even more debt during the three to five years you spend within a Chapter 13 plan. Fortunately, it’s possible you can roll these new debts into your current repayment plan, allowing for a more manageable structure in the payment of all your debts together.

 

Post-Petition Debt Types

The debts you are allowed to incur while in a Chapter 13 plan that won’t force your case to be dismissed are tax debts and consumer debts.

  • Tax debts may be treated as priority debts (and must be repaid in full) if your creditors petition for priority claim status.
  • Consumer debts are only allowed as post-petition spending if you receive court approval. The court often approves post-petition debts if they are incurred on behalf of your household well-being (not for your business).

If you fail to get court approval to incur a post-petition debt, you will be required to pay it outside of your Chapter 13 repayment plan. If you do get court approval, however, you can later request to have the debt rolled into your repayment plan as a priority, secured, or unsecured debt depending on the type of agreement between you and the creditor. To have the debt included in your plan, your creditor and trustee must each accept your request, and your creditor must submit a proof of claim and a statement of agreement.

 

If you are considering filing for Chapter 13 bankruptcy in St. Peter, MN, and want to learn more about post-petition debts or how a repayment plan is structured, contact Behm Law Group, Ltd., at (507) 387-7200 today.