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Understanding the Predischarge Debtor Education Requirement for Bankruptcy in Luverne, MN

Whether you file for liquidation or debt reorganization bankruptcy, it’s likely that one or more of your debts will be discharged in the process. Discharging debts in Chapter 7 serves to simultaneously relieve debtors of unmanageable financial hardship and allow fair treatment of creditors despite a lack of full repayment. In a Chapter 13 case, certain debts can be discharged through a repayment plan. Foreseeing which debts will be discharged can be difficult, and organizing your case without the help of a professional may change that outcome. Behm Law Group, Ltd. offers legal advice and assistance if you choose to file for bankruptcy in Luverne, MN.

In addition to the many requirements involved in bankruptcy cases, filers who will have debts discharged must undergo predischarge debtor education before the bankruptcy process can be completed and before the bankruptcy court can issue a discharge order.

Predischarge Education

The predischarge debtor education requirement was established with the purpose of advising those who’ve fallen into debt and filed for bankruptcy on how to better manage their finances. This course is different from the credit counseling requirement which debtors must undergo prior to filing a bankruptcy petition. Instead, debtors must go through a predischarge education course after their petition is filed but before they’re granted a discharge on any debts.

The financial management education course must be provided by a court-approved agency within a forty-five day period after the meeting of the creditors. The course lasts around two hours and covers materials that teach debtors how to improve their financial situation after bankruptcy. Topics include effective budgeting practices, handling taxes sensibly, and other court-required material.

You’ll certify your fulfillment of the predischarge debtor education requirement with bankruptcy Form 423, and if you file a joint bankruptcy petition, you and your spouse must both take the course. Additionally, the agencies that provide the necessary predischarge debtor education course don’t have to follow the same non-profit regulations as credit counseling providers. This means you may have to pay a fee to take the required course.

If you’re contemplating filing for bankruptcy, it’s important to consider fees for requirements like predischarge debtor education and other milestones in your case before you begin. Behm Law Group, Ltd. offers assistance at every step whether you file for Chapter 7 or Chapter 13 bankruptcy in Luverne, MN. Contact us at (507) 387-7200 today for more information.

 

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Repayment Plan Periods and Their Role in Chapter 13 Bankruptcy in Pipestone, MN

As an individual consumer, you have two options if you choose to file for bankruptcy. You can—if your income fits the requirements of the Means Test—file for Chapter 7 bankruptcy and have many of your debts discharged in the process. However, if you do not pass the Means Test, your second option is to file for Chapter 13 bankruptcy. In this case, your debts are restructured into a new payment plan that better suits your financial situation. Because the process of Chapter 7 liquidates most nonexempt property and because it can be difficult to pass the Means Test, many debtors opt to file for Chapter 13. If you plan to file for bankruptcy in Pipestone, MN, Behm Law Group, Ltd. can help you navigate the complexities of a Chapter 13 or Chapter 7 case.

Because the conditions of each filer are unique, each Chapter 13 case is different in its own way. These differences depend largely on the types of debts a filer owes. These debts determine how a repayment plan will be structured. Another aspect of the filer’s situation that determines the repayment plan is one’s income.

Income plays a key role in determining the length of time a repayment plan period will last. In Chapter 13 bankruptcy, repayment plans can last three to five years.

Three-Year Plan

Simply put, if your monthly income when you file your bankruptcy petition is lower than the median income of a Minnesota household the same size as yours, your Chapter 13 repayment plan can last either three years or up to five years. While one would most likely choose the three-year time period because one would complete one’s plan, get one’s discharge and exit bankruptcy sooner, one could voluntarily choose a time period longer than three years, but not longer than five years, if one needs a longer time period to pay off tax debts or mortgage delinquency debt.  Chapter 13 bankruptcy is designed to keep people with low incomes from continuing the same financial struggles they faced before filing for bankruptcy.

Five-Year Plan

If a three-year plan is based on income lower than the state median, the opposite determines a five-year plan. When your current monthly income is higher than the median income of a similar Minnesota household, your Chapter 13 repayment plan must be five years. The five year commitment period is mandatory.  This plan period was designed by the drafters of the bankruptcy code as a compromise regarding the debts of a higher-earning filer and the fair treatment of creditors.  The rationale is that higher-earning debtors should have the ability to pay proportionately more to their creditors than lower-earning debtors.  Additionally, the rationale is that higher-earning debtors probably incurred higher levels of debt prior to a bankruptcy filing and, therefore, they should be compelled to pay more back to their creditors.

Current Monthly Income

Your current monthly income includes all income from your wages or salary and it also includes all other sources like pensions, annuities, and tax returns. Additionally, it’s based on the income of the most current month, which may vary from your average income over the past 12 months. This means that if your income changes significantly while you are in bankruptcy, your three-year plan could be extended if you experience an income increase or your five-year plan period could possibly be shortened if you experience an income decrease.

For more information about repayment plans and filing for Chapter 13 bankruptcy in Pipestone, MN, contact Behm Law Group, Ltd. today at (507) 387-7200.

 

 

 

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Limitations of the Automatic Stay When You File for Bankruptcy in Windom, MN

Whether you file for Chapter 7 liquidation bankruptcy or Chapter 13 debt reorganization bankruptcy, you benefit from the immediate action of the automatic stay as soon as your bankruptcy petition is filed. The automatic stay is a wonderful tool designed to prevent creditors from collecting on debts that may be discharged or restructured during the bankruptcy process. It also prevents collections and blocks harassment from your creditors during the period of your bankruptcy case. If you’re struggling financially, the short-term effects of the automatic stay and the long-term effects of bankruptcy as a whole might be a viable option for recovery. Behm Law Group, Ltd. offers legal advice and assistance when you file for bankruptcy in Windom, MN.

The automatic stay provides a wide range of advantages (link to blog post “The Power of Automatic Stay When You File Bankruptcy in Fairmont, MN”) along with its ability to prevent your creditors from collecting debt payments during the stay period. In addition to the many ways the automatic stay can help you, however, there are some things it cannot do, including:

1. Halting certain lawsuits.

Lawsuits that affect minors (i.e. children of the parties involved) are protected against most financial proceedings, including bankruptcy. For example, the automatic stay cannot stop a lawsuit that involves paternity or child custody tests, nor can it stop a lawsuit that attempts to modify, collect, or confirm child support payments.

2. Halting certain tax requirements.

The automatic stay can’t alter or prevent IRS tax audits or issues regarding tax deficiency. Additionally, the automatic stay cannot prevent the IRS from demanding your tax returns and demanding payment for taxes owed.

3. Halting wage garnishment for pension loan repayment.

If you took out a loan from your retirement pension, the automatic stay doesn’t stop the garnishment of your income (including wages, salary, commissions, bonuses, and any other sources of income) for the repayment of that loan. This is the only condition where the automatic stay is not effective in preventing wage garnishment.

4. Halting criminal sentence proceedings.

If you’re in the process of undergoing criminal proceedings involving debt, or otherwise, the automatic stay is only able to impact the conditions of your sentence that involve debt repayment. The automatic stay does not change the parts of your sentence that involve community service, therapy, jail time, or other requirements.

Despite the many advantages of the automatic stay, these situations remain unchanged during the stay period when you file for bankruptcy. Additionally, if you’ve filed for bankruptcy the previous year, the automatic stay period will end after 30 days, unless you can prove the need for an extension.

If you’re considering filing for bankruptcy in Windom, MN, and want to learn more about how the automatic stay can apply to your situation, contact Behm Law Group, Ltd., at (507) 387-7200 today for more information.

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Getting Through the Holidays During Chapter 13 Bankruptcy in Redwood Falls, MN

From October to January, national spending on holiday decorations, parties, and gifts increases by an average of $500 to $1,000 per person. This extra spending during the holidays is a luxury that many consumers may take for granted. Families living below the poverty line often struggle to make ends meet during the holiday season more than any other time of year, and households working through Chapter 13 bankruptcy have fairly strict options for spending during the holidays. If you’re considering filing for bankruptcy in Redwood Falls, MN, or if you’re working through a Chapter 13 repayment plan during the holiday season, Behm Law Group, Ltd. can help.

Chapter 13 bankruptcy is designed to restructure your debts into a manageable repayment plan, and it can be a highly effective process for resolving debts without crippling the debtor. When it comes to extra spending, however, the budget of a Chapter 13 plan can make things difficult.

Spending Limits

The problem with a Chapter 13 repayment plan during the holiday season is the limitation on disposable income. When you propose a repayment plan to the U.S. Bankruptcy Court, you disclose all of your debts, expenses, and income.

Your income is broken into categories of discretionary and disposable. The income you would normally spend during the holidays is a part of your disposable income, but during a Chapter 13 repayment period, most of that income must be used to repay your unsecured creditors.

Repayment plans last three to five years, and despite the rise in national spending during the holidays, your budget must be built around the requirements of your plan. Your budget in a chapter 13 case will have some cushion such that you will be able to use some of your disposable income to purchase gifts, etc. during the Holiday Season.  However, during a chapter 13 case there’s naturally going be to less room for spending money on gifts, decorations, or any other holiday luxuries than would be the case if one were not in a bankruptcy proceeding.  Most of your disposable income still must be applied to the benefit of your unsecured creditors.

Ways to Spend

There are some options that make it possible for your household to have holiday spending money during a Chapter 13 plan:

  • You can modify your repayment plan for a month or two and use the excess money on holiday festivities
  • You can borrow certain amounts from your 401(k) and resolve to replace that amount when your repayment plan period ends
  • When you receive your tax refund, your trustee will take most of that income since it’s considered disposable income, but will often leave a decent part of it for you to save or spend. If you plan ahead, this saved money can be used during the holidays

While these options may not be advisable during any other time of the year, it might be worth having holiday cheer to take advantage of these options.

If you’re considering filing for Chapter 13 bankruptcy in Redwood Falls, MN, Behm Law Group, Ltd. can help you throughout the process and offer legal advice and support for spending options during the holidays. Contact us at (507) 387-7200 today for more information.

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Cross-Collateralization and Bankruptcy in Jackson, MN

If you are considering filing for bankruptcy, your debts will be categorized as those securing purchased properties (secured debts) and those that do not involve tangible property (unsecured debts). Your creditors will also be categorized similarly, depending on which type of debt you owe to each. In the case of debt owed to a bank or credit union, categorization varies based on “collateral.” Behm Law Group, Ltd. works to determine how collateral may affect you when you file for bankruptcy in Jackson, MN.

Collateral

When you take out a loan through your bank or credit union, you give a security interest to that creditor. In the case that you fail to make payments on your loan, your bank or credit union can seize the property in which it has a security interest and sell it to satisfy the debt owed. In such a situation, such property is called “collateral”.

Collateral and Credit Unions

Banks and credit unions have two marked differences. First, credit unions do not operate for profit as banks do, and second, credit unions offer borrowing services that may include cross-collateralization clauses. Essentially, a cross-collateralization clause states that the security interest and a particular item of collateral may be connected to all your debts through your credit union.

This means that you may be able to take out a loan on a car from your credit union and you may also have credit card debt through your credit union card provider. A cross-collateralization clause may be attached to one of those debts tying the two together. Even if you pay back the full debt on your car loan, that car may still be sold as collateral if you stop making payments on your credit union credit card.

Debt Categorization and Cross-Collateralization

Cross-collateralization through a credit union can change the way your debts are categorized, which will, in turn, change the way those debts are handled in a bankruptcy case. For example, if you take out a loan through your bank to purchase a car, that debt is a secured debt because it is tied to and secured by the car. If you have credit card debt through that same bank, it is considered an unsecured debt because it is not secured by or connected to the car. In a Chapter 7 case, unsecured debts like credit card debts are discharged completely, and in a Chapter 13 case, you will only have to repay portions of those debts. However, if your car loan and credit card debt are taken out through a credit union and the credit union has a cross-collateralization clause, they both are considered secured debts. This means you will be required to repay both debts if you want to keep your car in a Chapter 7 case and to repay both debts in a Chapter 13 case.

If you are considering filing for bankruptcy in Jackson, MN, and have multiple loans through a credit union, you may have a situation where a cross-collateralization clause is involved. Contact Behm Law Group, Ltd. at (507) 387-7200 today for expert advice and legal assistance in your bankruptcy case.

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Number Breakdown: Exemptions When Filing for Bankruptcy in Marshall, MN

Whether you choose to file for Chapter 7 or Chapter 13 bankruptcy, the properties you own and the debts you owe will be subject to the bankruptcy process. In the case of Chapter 7, this means your properties (assets) can be liquidated in order to repay your creditors’ claims unless you use your bankruptcy exemptions to protect your property from liquidation. In a Chapter 13 case, the risk of losing assets to liquidation isn’t as significant like in Chapter 7, but your exemptions come into play to determine the amount you must pay back in a restructured payment plan. Behm Law Group, Ltd. can help you navigate the complicated process of claiming exemptions when you file for bankruptcy in Marshall, MN.

In both Chapter 7 and Chapter 13, the exemptions you can claim are the same. The amount of each exemption you claim regarding a particular asset depends on the amount of debt you owe against that asset. Depending on the value of the asset and the amount of debt against it, you can protect equity (the value of the asset that exceeds the debt against it) in the asset from liquidation in a Chapter 7 case and keep the property involved.  Of course, you must still pay the underlying debt against that asset.  In a Chapter 13 case, you can use exemption amounts to determine the minimum amount you must pay in your repayment plan.

In Minnesota, a filer may choose to use state or federal exemptions in one’s case depending on which is most beneficial. The limits for the most commonly claimed Minnesota exemptions include:

Homestead: Exemptions on standard residences and land up to a maximum of $390,000, and exemptions on agricultural land spanning up to 160 acres up to a maximum of $975,000.

Motor Vehicle: You may exempt a maximum of $4,600 for your motor vehicle or up to $46,000 for a vehicle modified for disabilities.

Insurance: You can claim up to $46,000 on insurance benefits from the death of a spouse or a parent, including another $11,500 for each of your dependents.

Employee Benefits: A maximum of $69,000 of present and future employee payments can be exempted in your bankruptcy case, including wages, stocks, pensions, or IRAs.

Personal Property: You may automatically exempt essential items including clothing, food, utensils, and one watch. You may also exempt up to $10,350 on appliances and furniture, up to $2,817.50 on wedding rings, up to $11,500 on your tools of trade, and up to $13,000 on farm equipment.

Wages: Your wages during a bankruptcy case and full repayment plan period are protected up to 75% or 40 times the federal hourly minimum wage. Whichever of these values is greater is the amount that will be exempt in your bankruptcy case.

The exemptions you can claim in any type of bankruptcy case can impact the outcome for both you and your creditors. If you have questions about how exemptions can work for you or to learn more about the different types of bankruptcy in Marshall, MN, contact Behm Law Group, Ltd. today at (507) 387-7200.

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Trustee Compensation in Cases of Chapter 13 Bankruptcy in Owatonna, MN

If you are considering filing for bankruptcy, you must prepare to work with a bankruptcy trustee for the entirety of your case. Your trustee will oversee your case at each stage, acting as an administrator for legal procedures and a communicator between all parties involved. If you qualify for Chapter 7, your case will likely only last a few months. However, if Chapter 13 is your best option for filing for bankruptcy, your plan will last three to five years, and you will work with your bankruptcy trustee throughout that period. Behm Law Group, Ltd. can help you throughout the process of filing for Chapter 13 bankruptcy in Owatonna, MN, as well as provide information about the role of your trustee.

Your trustee is a government-appointed administrator for your bankruptcy case, and the trustee is compensated for his or her work in your case in a number of ways. In a Chapter 7 case, a trustee is compensated with a combination of fees and asset sales. With reorganization bankruptcy, the trustee cannot rely on asset sales, and because a Chapter 13 case lasts several years, the trustee must find compensation from other sources.

Plan Payment

The primary source of compensation for a standing trustee in a Chapter 13 case is through the repayment plan. A certain percentage of the monthly payments you make for your repayment plan go to compensate the trustee handling your case. This percentage is limited to a maximum of 10% of any plan payment amount. In certain cases, 10% of a monthly plan payment is a hefty sum; however, the trustee’s salary is currently limited to $145,000 a year, and the percentage of monthly compensation is adjusted to remain within this limitation.

The costs of operating a trustee’s office, the costs of any parties the trustee hires within your case, and any other costs incurred in your case are covered by the compensation paid to the trustee from your monthly plan payments and the plan payments from other chapter13 cases that the trustee is administering.  A trustee may have thousands of cases to administer.

Operating Budgets

At the start of your case and throughout the period of your Chapter 13 repayment plan, your trustee must file operating budget proposals to the Office of the United States Trustee. These proposals give budget information that includes all costs incurred during not only your repayment plan period but also the repayment plan periods of other cases the trustee may be administering. When the trustee’s operating budget is approved, the trustee is given permission to take a percentage of your monthly payments that will serve as total trustee compensation. This percentage may change if the budget changes throughout your 3 to 5 year-long plan.

If you are considering filing for Chapter 13 bankruptcy in Owatonna, MN, and would like to learn more about the process and the roles of your trustee and attorney, contact Behm Law Group, Ltd. at (507) 387-7200 today.

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Handling Medical Bills During Chapter 13 Bankruptcy in St. Peter, MN

The individuals that file for bankruptcy in the U.S. often choose this option to relieve several kinds of accumulated debts. Most consumers hold the five common types of debt handled in a bankruptcy case, including credit card debt, mortgage debt, car loans, tax debt, and medical bills. Those struggling with the financial obligation of repaying these debts may be overwhelmed with the cost of those payments in addition to the demands of necessary living expenses. The restructuring of your debts when you file for reorganization bankruptcy might be your answer if you’re having difficulties meeting loan payments. Behm Law Group, Ltd. offers legal advice and assistance throughout your case when you file for Chapter 13 bankruptcy in St. Peter, MN.

While medical bills are often one of the main reasons those with accumulated debts file for bankruptcy, they’re also one of the most effectively-treated types of debt in bankruptcy, even in a Chapter 13 case.

Medical Expenses and Debt

Because medical bills are often unexpected and expensive financial obligations, they can be the tipping point for those on the brink of filing for bankruptcy. In fact, many attribute medical bills as a primary factor for bankruptcy filings in the U.S. The good news is that even if you don’t qualify for Chapter 7 bankruptcy, your medical bills can still be effectively alleviated with Chapter 13 bankruptcy.

Chapter 13 and Medical Bills

When you file for Chapter 13 bankruptcy, your debts are divided into two basic categories. Debts involving assets that serve as collateral are considered secured debts, and you either have to repay these debts in your repayment plan or surrender the assets that serve as collateral or security for those debts (for example, your mortgage and your car loans). Debts that do not have any assets that serve as security or collateral are considered unsecured debts.

Unless you pledged property as collateral regarding the payment of a medical expense, your medical bills are considered unsecured debts, and they’ll be handled just like your credit card debt, unsecured personal loans, and all other unsecured debts. After your chapter 13 bankruptcy plan is concluded, the remaining balances of your medical debts will be fully discharged.  How your medical bills are handled in your Chapter 13 case varies depending on your situation, but because bankruptcy is designed to restore your financial wellbeing, the result will help you back onto your feet.

If you feel overwhelmed in debts and financial obligation, yet maintain a steady income, filing for Chapter 13 bankruptcy in St. Peter, MN might be the right choice for you. Contact Behm Law Group, Ltd. at (507) 387-7200 today for more information about how bankruptcy can help you.

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Case Dismissal With or Without Prejudice When Filing for Bankruptcy in Windom, MN

In the U.S., bankruptcy is an option for individual consumers and small businesses alike. Despite the access that all parties have to the bankruptcy code, today’s bankruptcy laws have many precautions to prevent filers from taking advantage of the system. Whether you commit fraudulent behavior purposefully or accidentally during your case doesn’t matter to the court when it comes to a case dismissal. Avoiding difficulties during your case can be as simple as taking advantage of the services a trained bankruptcy lawyer provides. At Behm Law Group, Ltd., we offer expert legal advice and we can be of assistance to you when you file for bankruptcy in Pipestone, MN.

The differences between mistakes and fraud are not always considered in the outcome if the court decides to dismiss your bankruptcy case, but there are still two standing descriptions of how your case can be dismissed: “with prejudice” and “without prejudice.”

Dismissal with Prejudice

If you’ve displayed willfully fraudulent behavior or purposefully disobeyed court orders, your case may be dismissed with prejudice. Your case could also be dismissed and you would be prohibited from filing for bankruptcy relief again for 180 days if you requested a dismissal of your bankruptcy case after a creditor filed for relief from the automatic stay.  Learn more about dismissal with prejudice here.

Dismissal without Prejudice

While your case is still dismissed, you land yourself in a slightly better situation if it’s dismissed without prejudice. The biggest difference between dismissal with prejudice versus dismissal without prejudice is that you can file a bankruptcy case again immediately if your previous bankruptcy case was dismissed without prejudice. However, there may be limitations set on the automatic stay when you choose to file for bankruptcy relief again.

You may have your case dismissed without prejudice if you made a mistake on your petition such as a missing or incorrect form, missing pay stubs and other supporting documents, not paying court fees, and not attending a credit counseling course or other mandatory meetings. You can also have your case dismissed without prejudice if you stop making payments on a Chapter 13 repayment plan or if you’re not eligible for any form of bankruptcy.

Because filing for bankruptcy is such a complex legal process, it’s generally in your best interests to make use of the services qualified legal professionals offer. For the help our experienced attorneys provide when you file for bankruptcy in Pipestone, MN, contact Behm Law Group, Ltd. at (507) 387-7200 today.

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Stripping Secured Liens on Property During Chapter 13 Bankruptcy in Waseca, MN

While Chapter 7 bankruptcy is designed to help individuals and small businesses with low incomes and dischargeable debts, Chapter 13 is more beneficial to those who may have higher incomes yet still struggle with financial obligations. Because in most cases you cannot qualify for Chapter 7 bankruptcy with an income higher than the Minnesota median income level, Chapter 13 can be your saving grace for relieving debt and restructuring your finances in a manner that is suited to your income. If you’re considering filing for Chapter 13 bankruptcy in Waseca, MN, Behm Law Group, Ltd. can offer legal advice and assistance throughout the process.

The process of debt reorganization that takes place during a Chapter 13 case requires the examination of your different debts to determine how they can be handled. One aspect of your debts and your property that is analyzed is the subject of liens your creditors may have on your house, vehicle or other property.  Creditors with such liens have debts that are secured or collateralized by your property.  If you don’t pay the creditors, they can take their collateral, sell it and use the sale proceeds to retire the debts you owe them.

If your creditors have a secured liens on your property, you’ll have to continue repaying those debts directly to those creditors during your Chapter 13 repayment plan. However, there are some ways you can strip secured liens from the property serving as collateral, thereby turning them into unsecured debts. In most Chapter 13 repayment plans, only small percentages of unsecured debts are paid back.

Strippable Liens

 If there is a “junior” lien on an asset you own, you may remove that lien and turn the secured debt into unsecured debt.  A common example of a junior lien is a second or third mortgage on your house.  For example, if you own a house that has a market value of $150,000.00 and there is a first mortgage with Creditor A in the amount of $155,000.00, a second mortgage with Creditor B in the amount of $25,000.00 and a third mortgage with Creditor C in the amount of $10,000.00, you have total mortgage debt in the amount of $190,000.00 against an asset that is worth $150,000.00.  The house is collateral for all three mortgages.  However, the mortgages with Creditor B and Creditor Care junior liens to the mortgage held by Creditor A.  They are lower in priority with regard to foreclosure rights or collection rights to the property.  The mortgages with Creditor B and Creditor C are wholly unsecured mortgages because the entire market value of the house is less than the amount of the mortgage held by Creditor A.  If Creditor A were to foreclose its mortgage on the house, Creditor B and Creditor C would get nothing because the entire foreclosure sale proceeds would be extinguished through payment on the mortgage held by Creditor A.

When you have wholly unsecured junior mortgages or junior liens on your house, such liens can be stripped off of your house through the Chapter 13 bankruptcy process.  When a junior lien is stripped, the subject mortgage debt, is treated as an unsecured debt.  It is no different than a credit card debt or a medical debt.  This means that you do not have to fully repay the debt.  It will be completely discharged when your chapter 13 bankruptcy is concluded.

Understanding when you can and cannot strip a junior lien can be difficult without the guidance of a qualified legal professional. Take advantage of the expert counsel our bankruptcy attorneys provide for your bankruptcy case. Contact Behm Law Group, Ltd. at (507) 387-7200 today for more information about filing for Chapter 13 bankruptcy in Waseca, MN.