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Bankruptcy in Owatonna, MN, Since 2005

As with all departments of US legislation, bankruptcy is an ever-changing legal process. Because the status of finances and the economy are rapidly transforming with the development of new technology, new energy, and new ways to spend, save, and make money, the laws that govern how debt is handled must change accordingly. Since 2005 the laws, standards, and procedures of bankruptcy have changed significantly. If you’re considering filing for bankruptcy in Owatonna, MN, it’s important to understand how bankruptcy law works today. Behm Law Group, Ltd. provides the legal advice and assistance necessary to successfully navigate bankruptcy.

The most recent changes made to bankruptcy law came in 2005 when Congress amended the bankruptcy code for purposes of determining how consumer households file for Chapter 7 bankruptcy and how Chapter 13 repayment plans are structured. These changes included the following.

Means Test and Income Measurement

 Before the 2005 overhaul, individual filers could choose the type of bankruptcy that worked best with their situation (in their or their lawyer’s opinion). This allowed filers with high incomes to benefit from Chapter 7 bankruptcy in a way that was perceived to be unfair to creditors.  Namely, Congress believed that people with higher incomes could enter into a Chapter 13 repayment plan and pay at least something to their unsecured creditors. Today, all filers are required to take the Means Test to analyze their income for the 6 month period prior to the month in which their bankruptcy petition is filed. The bankruptcy code requires an attorney to add up all of a filer’s gross income for the pre-bankruptcy filing 6 month period and then determine an average.  Then, the bankruptcy code requires an attorney to multiply the average by 12 to determine what a filer’s yearly projected income is and analyze it against the state average income for a household of the filer’s size.  If the filer’s income is in excess of the state average income for a household of the filer’s size, then the person would probably have to file a Chapter 13 instead of a Chapter 7.  For instance, presume a single person needs to file for bankruptcy relief and that he or she earned gross monthly income of $5,000.00.  Presume further that the state average income for a household of 1 in Minnesota is $52,785.00.  The bankruptcy code would require the attorney to add up the $5,000.00 for the preceding 6 months which would be $30,000.00.  Then, the bankruptcy code would require the attorney to determine the monthly average which would be $5,000.00 ($30,000.00 divided by 6).

Next, the bankruptcy code would require the attorney to multiply that average by 12 which would be $60,000.00 to determine the filer’s yearly projected income.  Since the $60,000.00 would exceed the state average income for a household of 1 in Minnesota of $52,785.00, the filer would probably be required to file a Chapter 13 bankruptcy because he or she would not have passed the Means Test.  The monthly income average is measured against some expenses and payments of some debts, so it’s still possible for filers with a high income to qualify for Chapter 7. If a filer doesn’t qualify for Chapter 7 and must instead file for Chapter 13, the expenses of a household are still subtracted in the total of disposable income that must be used to repay creditors through a Chapter 13 repayment plan.

Credit Counseling

Another notable change made with the 2005 bankruptcy overhaul was the requirement of all filers to undergo credit counseling before a petition is filed. The United States Trustee office must also approve the counselors who offer this service. This is necessary requirement irrespective of whether you file for Chapter 7 or Chapter 13 bankruptcy. A counselor may offer an advisable repayment plan in cases of Chapter 13 bankruptcy, but filers are not obligated to follow those plans.

These changes made in 2005 were also accompanied by several other minor details but overall, they were designed to create a situation of fairness for all parties involved in a bankruptcy case. For more information about the changes made or for help with filing for bankruptcy in Owatonna, MN, contact Behm Law Group, Ltd. at (507) 387-7200 today.

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How Your Trustee Benefits When You File for Bankruptcy in Luverne, MN

Understanding government and legal positions is a complicated business. The role of an employee and how they are compensated varies widely from position to position and department to department. Bankruptcy trustees are not employed by the United States Department of Justice.  However, they are private attorney’s appointed by the United States Department of Justice and assigned to bankruptcy cases through the United States Trustee Program.  Working with the bankruptcy trustee assigned to a particular bankruptcy case can often be nuanced. Behm Law Group, Ltd. works with both our clients and the bankruptcy trustees to successfully handle bankruptcy cases in Luverne, MN.

The help of a bankruptcy firm and attorneys such as those here at Behm Law Group, Ltd. is often key to meeting the optimal outcome in a bankruptcy case. Your bankruptcy trustee is responsible for administering your bankruptcy estate.  The bankruptcy estate is a legal entity separate and distinct from the person filing for bankruptcy relief.  It consists of any property that you are not able to keep or exempt in your bankruptcy case.  In chapter 7 cases, trustees sell or liquidate any non-exempt assets and use the proceeds to pay something to your various creditors.  Not only do they work to distribute any liquidated assets in a Chapter 7 case to your creditors, they also work with you and your creditors in a Chapter 13 case.  In a Chapter 13 case, you make one monthly payment (a payment that you can afford that is determined with the supervision of the trustee) to the chapter 13 trustee, pursuant to a restructured debt payment plan, every month for 36 to 60 months.   The chapter 13 trustee then splits that payment up among your various creditors each month for 36 to 60 months.

Additional responsibilities of a trustee are numerous, but in short, they work to oversee your case, detect fraudulent behavior with all parties involved, and ensure accuracy.

A trustee’s compensation can depend on several situations within a bankruptcy case.

Chapter 7: In a Chapter 7 case, your bankruptcy trustee takes a $60.00 fee from the $335.00 filing fee you pay to the court. If you have no assets, that’s all your trustee will receive from your case. If you do have assets, your trustee receives percentage from the collected amount after non-exempt assets are liquidated and before anything is paid to your creditors. The amount taken is determined by a sliding scale, under 11 U.S.C. §326. For the first $5,000.00 collected by a trustee, the trustee will take 25%. For the next $45,000 the trustee will take 10%, and for the following $950,000 the trustee will take 5%. For anything collected by the trustee that exceeds $1 million dollars, the trustee would take 3%. Trustees can also recover costs from the bankruptcy estate with court approval.

Chapter 13: In a Chapter 13 case, your repayment plan decides the amount of your trustee’s compensation. In all cases, your trustee cannot take more than 10% of all total payments in your plan. For instance, if your chapter 13 plan payment is $500.00, the trustee would receive $50.00 of every payment you make.  Most trustees handling Chapter 13 cases are also paid a yearly salary through the federal government.

It’s important to understand the function and duties of a trustee.  Having an attorney on your side can help you understand this. If you’re considering filing for bankruptcy in Luverne, MN, contact Behm Law Group, Ltd. at (507) 387-7200 today.

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The Difference Between Disposable Income and Discretionary Income During Your Repayment Plan With Chapter 13 Bankruptcy in Windom, MN

A common misconception about bankruptcy is that it’s a financial endgame, halting aspects of your economic and personal life.  With Chapter 7, however, your finances are given a fresh start, free from most debts you faced before filing. With Chapter 13 your options are even broader to keep your life as unaffected as possible throughout the case. When you file for Chapter 13 bankruptcy in Windom, MN, especially with the help of Behm Law Group, Ltd., you can easily integrate your bankruptcy case and repayment plan into your everyday finances.

Chapter 13 bankruptcy is designed to offer you a fresh way to handle your debts while keeping the situation fair to you and your creditors alike. With the system of reorganizing your debts that Chapter 13 provides, you can keep your financial situation manageable and still provide your creditors with the debts they are owed. During the structuring of a Chapter 13 repayment plan, your income is broken down into two basic types: discretionary and disposable.

Disposable Income

With any household, certain amounts of the total income from wages are taken automatically from paychecks and salaries as income taxes. After income tax requirements are met, remaining net income values are considered disposable income. This income can be used for any household necessities and payment obligations such as loan installments and rent.

Discretionary Income

After all household necessities and financial obligations outside of income taxes are met, the remaining income amount is considered discretionary income. This amount can be used to save, spend, or invest based on the household choices.

For example, if you make a salary of $85,000 and you file “Married Joint” on your tax forms, you will have an income tax percentage of 7.85% in the state of Minnesota. That means you will have a disposable income amount of $78,327.50. If you take 75% of that to pay bills, purchase food, fill your gas tank, and meet any other debts and tax requirements, you will have a remaining discretionary income of $19,581.87. You can choose to save, spend, or invest that amount as you wish.

Discretionary vs. Disposable in a Repayment Plan

These described options for disposable incomes and discretionary incomes are viable in a household that is not currently filing for Chapter 13 bankruptcy. How these incomes are treated in a household working through a Chapter 13 repayment plan period are very different. After income taxes and basic household necessities are met, your discretionary income is considered your only disposable income. In a Chapter 13 repayment plan, you must dedicate all your remaining disposable income to paying back your unsecured creditors.

To determine what your disposable income amount may be and to find out more information about the structure of repayment plans with Chapter 13 bankruptcy in Windom, MN, contact Behm Law Group, Ltd. at (507) 387-7200 today.

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Benefits of Filing for Chapter 13 Bankruptcy in Marshall, MN, Over Chapter 11 Bankruptcy for Small Businesses

At Behm Law Group, Ltd., we work with individuals and small businesses filing for bankruptcy. Our experienced bankruptcy attorneys specialize in providing legal advice and assistance for Chapter 13, Chapter 7, and Chapter 12 bankruptcy. For small businesses struggling with debts and difficult financial obligations, bankruptcy might be a beneficial option. Behm Law Group, Ltd. can help local small businesses eligible to file for debt reorganization with Chapter 13 in Marshall, MN.

For any small business wrestling with financial problems, bankruptcy offers four options:

  • Chapter 12, which works as a system of debt reorganization but is only applicable to family farmers and fishermen
  • Chapter 7, which works as a system of debt discharge and asset liquidation
  • Chapter 11, which works as a system of debt reorganization and for which most businesses are eligible
  • Chapter 13, which works as a system of debt reorganization as well, but for which most businesses do not qualify

For most small businesses looking to restructure their debts, Chapter 11 is a common and viable option. However, if your small business qualifies for Chapter 13, it may be more effective to file for that form of debt reorganization instead of Chapter 11 for several reasons.

Why Chapter 13?

Chapter 13 works as a bankruptcy plan for individuals with regular income that own and operate their business with sole ownership. If your situation matches the requirements for Chapter 13 business bankruptcy, you can file a petition for yourself. This is beneficial because Chapter 13 acts more quickly than Chapter 11. For small businesses struggling with meeting current debt payments, using Chapter 13 allows them to immediately restructure those debt payments in a new repayment plan. The commitment period for repaying those debts cannot be longer than five years with a Chapter 13 plan. Debts must be restructured to fit in that time period, meaning the amount to be repaid will often be less than the amount in a Chapter 11 plan. There’s also a greater range in types of debts that can be discharged in a Chapter 13 plan than in a Chapter 11 plan.

 If you’re struggling with accumulated debts and financial obligations for your small business, filing for reorganization bankruptcy is often a helpful option. To find out more information about how to qualify for Chapter 13 bankruptcy in Marshall, MN, contact Behm Law Group, Ltd. at (507) 387-7200 today.

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Doubling Exemptions With Chapter 7 and Chapter 13 Bankruptcy In Windom, MN

Many of the Chapter 13 and Chapter 7 cases we work with are either individuals or households filing for bankruptcy. For those struggling financially with debts accumulated over the years, bankruptcy is often a beneficial option. When it comes to a family in need of bankruptcy help, it can actually be a good thing for married couples to own joint property. Owning property with your spouse plays a big role in a household’s ability to double exemptions. Behm Law Group, Ltd. provides expert legal advice and assistance to help a household work with exemptions and petitioning for bankruptcy in Windom, MN.

Exemptions

Exemptions are allotted amounts that depend on variables like federal or state regulations and the total of a debt. You may apply exemptions to certain properties during the bankruptcy process to prevent some or all of the value of those properties to be used for debt repayment.

Using your exemptions during a Chapter 7 case can significantly increase the amount of your property you may keep. In Chapter 13, more exemptions equal less paid back to unsecured creditors during your repayment plan.

 Doubling

If you’re married, you might have the option of filing for joint bankruptcy with your spouse. A joint case, however, is only applicable if you have debts that are in both of your names, meaning you jointly owe a debt such as jointly obligated on a house mortgage. If you and your spouse both have your names on the assets that would be subject to the bankruptcy process, you can then double your exemptions on those joint assets.

Doubling your exemptions in a joint case means you and your spouse are each able to claim the amount you would claim as an individual filer. In Minnesota, filers are able to choose between federal exemptions and state exemptions, depending on their debt amounts and abilities to double an exemption.

For example: The Minnesota Motor Vehicle Exemption allows up to $4,600 of an for people who own motor vehicles. If you and your spouse are both listed on the title of a vehicle worth $9,200, you both have an ownership interest in and to that vehicle.  In order to protect and keep it in a bankruptcy proceeding each of you could assert your independent $4,600 exemptions and stack them together ($4,600 x 2 = $9,200) and protect the entire $9,200 value of the vehicle.

If you and your spouse are considering filing for bankruptcy in Windom, MN, keep in mind that you can jointly file and, if you both own the subject property/assets, double or stack your bankruptcy exemptions. For more information about your options with joint bankruptcy, contact Behm Law Group, Ltd. at (507) 387-7200.

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When and Why Your Plan Might Be Rejected for Chapter 13 Bankruptcy in Waseca, MN

Bankruptcy is one of those things in life, like so many other legal processes, that’s easier said than done. It’s a complex process with many opportunities for misstep, yet little room for error. If you’re considering filing for bankruptcy with a high income and a desire to keep many of your assets, Chapter 13 is your best option. However, because the process is so nuanced, there are many ways things could go wrong. Behm Law Group, Ltd. provides the help you need to successfully file for Chapter 13 bankruptcy in Waseca, MN.

A major part of filing for Chapter 13 bankruptcy involves creating a repayment plan that your bankruptcy trustee will approve. This can be a difficult task, and without the help of a knowledgeable legal aide, your plan might be rejected for any number of reasons.

Plan Rejection

Your bankruptcy trustee will—in no uncertain circumstances—reject your Chapter 13 repayment plan if any of the following points are true to your situation:

  1. You don’t have a high enough income to continue meeting your monthly repayment installments.
  2. Your plan period isn’t the correct length to match your income. If your income is lower than the Minnesota median, you’ll have a three year plan. If your income is higher than the Minnesota median, you’ll have a five year plan.
  3. Your plan doesn’t include complete payments to debts you’re required to pay back, such as your priority debts.
  4. Your plan doesn’t include the dedication of all your disposable income to your unsecured creditors.
  5. Your plan doesn’t pass the Best Interest of Creditors test.
  6. Your plan isn’t considered in Good Faith by your trustee or the courts.
  7. You haven’t given all of the documents that decide your debt repayment requirements.
  8. You’ve missed payments on a previously-approved plan.

If your plan is rejected, you’ll have the opportunity to fix your errors and file again, or you can attempt to negotiate the reasons for rejection with your trustee. Of course, if you choose to work with the experienced bankruptcy attorneys at Behm Law Group, Ltd., it’s highly unlikely your plan will be rejected.

For more information about rejected plans and filing for Chapter 13 bankruptcy in Waseca, MN, contact us at (507) 387-7200 today.

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Meeting the Best Interest of Creditors in Chapter 13 Bankruptcy in Fairmont, MN

Bankruptcy in the U.S. is designed to give debtors methods of working through their financial obligations in a way that offers more leniency and payment options when repaying accumulated debt. Whether you file for reorganization or liquidation types of bankruptcy, you’ll be given a set of options that will help solve your debt case. However beneficial bankruptcy is to the filer, the process must also be equitable to the creditors involved. Behm Law Group, Ltd. offers legal advice and assistance that will help you navigate through your petition for Chapter 7 or Chapter 13 bankruptcy in Fairmont, MN.

If you file for reorganization bankruptcy, it’s likely you’ll be filing for Chapter 13. In this case, you’ll be working with a bankruptcy trustee to establish a repayment plan. The results of this plan will allow you to reorganize how you repay your debts, changing the amount that must be repaid and the time period in which it’s repaid. Your plan can make your debts vastly more manageable given your financial situation, but it’s required to also meet the best interest of your creditors.

Whether your repayment plan is fair to your creditors or not is a status determined by the Best Interest of Creditors Test.

Best Interest of Creditors Test

In a nutshell, you must repay priority debt creditors, such as tax creditors or child support creditors, the full amount you owe. This is a standard for all Chapter 13 cases. What varies from case to case is the amount you’ll repay to your non priority unsecured creditors, such as medical debts and credit card debts. This is where the Best Interest of Creditors Test comes into play. What the test measures is how much you’re repaying to your creditors, and if that amount is fair. The bottom line is that your repayment plan must repay, at minimum, the amount that creditors would have received from your liquidated assets if you had filed for Chapter 7 instead. This in turn depends on your property values and the exemptions you can claim.

Not only does the test decide whether you’re meeting your creditors’ best interests, but it also partially determines how much you’ll pay to priority unsecured creditors in your repayment plan.

The Best Interest of Creditors Test is most effective in determining if you’re meeting the minimum requirement for amounts repaid to nonpriority unsecured creditors. It doesn’t take your disposable income into account, but that amount will be considered outside of the test to determine the maximum amount you must repay. For legal help with your repayment plan and working through filing for Chapter 13 bankruptcy in Fairmont, MN, contact Behm Law Group, Ltd.at (507) 387-7200 today.

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Using Charitable Contribution Deductions and Avoiding Fraudulent Transfers With Chapter 13 Bankruptcy in Redwood Falls, MN

If you file for Chapter 13 bankruptcy and reach an approved petition and repayment plan, it’s guaranteed that you must use all of your disposable monthly income to meet your monthly debt repayment requirements. Before you file your petition, however, there are approved ways to lower your monthly requirements by lowering the amount categorized as disposable income. Working with a bankruptcy attorney during this time is important to ensure your safety against accidental fraud associated with transferring incomes. Behm Law Group LTD. provides the legal advice and assistance you need throughout the process of filing for Chapter 13 bankruptcy in Redwood Falls, MN

One way to decrease your monthly payments by lowering your disposable income is by dedicating some of that income to charitable donations.

Charitable Deductions:

In order to reduce your disposable income with charitable donations, your donation expenses have to meet certain standards set by the US Bankruptcy Courts. First, the charity of your choice must be qualified under the tax code as a legitimate, government-approved religious or charitable organization. You can also donate to the government for public use of your funds, to your church, or to tax-exempt 501(c)(3) charities. Second, the donations must come from your own disposable income and not through other means under your control, such as your business or trust fund. Additionally, the donation must be monetary and the organization can’t be politically involved in legislative affairs or candidacies.

Fraudulent Transfer:

You may deduct up to 15% of your gross annual income for charitable donations to reduce the disposable income and lower monthly payment requirements in a Chapter 13 repayment plan. Any amounts over that 15% donated prior to filing for Chapter 13 bankruptcy can be considered as breaking the fraudulent transfer law. This means that your bankruptcy trustee can take back the amount over 15% from the charity you chose for those donations. You will also have to prove you’ve been making regular donations to an approved charity to have the full amount of your expenses deducted from your disposable income.

In the months leading up to your petitioning for Chapter 13 bankruptcy in Redwood Falls, MN, you can do a lot to optimize your repayment plan. With our bankruptcy attorneys advising you along the way, you can keep your petition legitimate as well as getting the most out of what Chapter 13 bankruptcy has to offer. For more information, contact Behm Law Group LTD. at (507) 387-7200.

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Working With the Best Effort Requirement When Filing for Chapter 13 Bankruptcy in Fairmont, MN

If you’re considering filing for bankruptcy, you’ve probably started to do some research of your own and learning about your options. If you think you may qualify for Chapter 13 bankruptcy, you might have already discovered that a long road of meeting financial and legal obligations set by the U.S. Bankruptcy Courts, your bankruptcy trustee, and your creditors is ahead of you. Navigating these requirements is crucial to successfully working through a Chapter 13 petition and completing a repayment plan, but it can be a difficult process without the help of a well-versed professional. Behm Law Group, LTD. can provide that help with our experienced bankruptcy lawyers in Fairmont, MN

One stipulation you must continue to meet if you’re about to begin your repayment plan is the Best Effort requirement.

What is “Best Effort?”

Essentially, the Best Effort requirement demands that you must be able to prove you will use the entirety of your disposable income—any income you do not spend on taxes, household needs, transportation, or other debt payments—on meeting your monthly repayment plan installments. Specifically, your disposable income must be used to make payments to nonpriority unsecured creditors in your repayment plan.

Nonpriority Unsecured Debts

Your nonpriority unsecured debts (such as credit card debt, personal loans, and medical bills) may not always be paid back in full like your priority debts. The amount you pay back to your nonpriority unsecured creditors is again determined by your average income. If your income average over the six months prior to filing for bankruptcy falls below the Minnesota median income, the length of time you have to repay your nonpriority unsecured debts back can be as short as 36 months or 3 years; your creditors, accordingly, would receive lesser amounts. If your income is higher than state median, the length of time you have to repay your creditors must be 60 months or 5 years. In such a case, your creditors would receive larger amounts.

With the right guidance it’s easy to meet the Best Effort requirement and still have deduction options for your disposable income. Behm Law Group, LTD. can provide that guidance in the months leading up to your petition and throughout the process of filing for Chapter 13 bankruptcy. For more information about how our experienced bankruptcy lawyers in Fairmont, MN can give you the best legal advice and assistance with your bankruptcy case, contact us at (507) 387-7200 today.

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Good Faith and Debt Repayment Plans With Chapter 13 Bankruptcy in St. Peter, MN

Your disposable income plays a large part in determining your path when it comes to filing for bankruptcy as an individual. This income is taken into consideration with your debts and the value of your assets and properties. The result decides whether you qualify for Chapter 7 or Chapter 13 bankruptcy. If your results don’t pass the Means Test, you may opt to work with a bankruptcy trustee to build a repayment plan and file for Chapter 13 bankruptcy. If you’re considering filing for Chapter 13 bankruptcy in St. Peter, MN, Behm Law Group, Ltd.  can provide legal assistance with your repayment plan and your petition.

A debt repayment plan with Chapter 13 bankruptcy is designed to reorganize your standing debts while keeping things balanced and fair between you and your creditors. You can’t propose a repayment plan to your trustee and the courts, however, if you don’t prove your good faith in repaying debts in full within a five-year period.

Good Faith:

Filing your petition for Chapter 13 bankruptcy covers most of the required information, forms, and schedules for the process, but you must also provide your proposal for a repayment plan. The outline of your plan proposal describes your monthly payments towards priority debts, secured debts, and unsecured debts, and the term in which the selected amount of those debts will be repaid. This is where your “good faith” comes in.

In order for your petition to be fully-approved by U.S. Bankruptcy Courts, your bankruptcy trustee must be able to approve your good faith in using all your disposable income to meet your monthly repayment requirements.

Lacking Good Faith:

There are several reasons why your bankruptcy trustee may determine that you’re not in good faith for your repayment plan. Most of the time, if you’re lacking good faith, there will be some inconsistencies with your income, deductions, or petition. For example, if your current monthly income is subject to change during your repayment period and you do not notify the courts, your plan may be denied. If you’re found lacking in good faith, you may respond with an explanation, and your trustee may reexamine your standing.

Behm Law Group, Ltd. can help you navigate the process of determining a repayment plan and holding a good faith standing when you file your petition for Chapter 13 bankruptcy in St. Peter, MN. If you’re considering bankruptcy contact us at (507) 387-7200 today.