The Meaning of Debt Discharge in Chapter 7 Bankruptcy

Common law bankruptcy was established centuries ago to handle debtors that couldn’t repay their debts. In a successful economy, the best way to handle debts that can’t be paid by the borrower is with a bankruptcy system that stabilizes that debt load, returning consumers to the trade of goods and services while remaining fair to creditors with some form of repayment. Today, that foundational system is still in place with modern bankruptcy law. Contemporary bankruptcy systems can be highly complex, and because of this, it is highly recommended bankruptcy filers take advantage of the guidance an attorney can provide. At Behm Law Group, Ltd., our expert attorneys can help you work through a Chapter 13, Chapter 12 or Chapter 7 bankruptcy in New Ulm, MN or the surrounding areas.

 

The U.S. bankruptcy code offers relief for the debtor and, sometimes, provides a return of some payment to creditors in two general ways: liquidation and discharge or reorganization and repayment. Chapter 13 and Chapter 11 were developed for individual and business debtors respectively to offer a restructuring of debts into a repayment plan that fits the filer’s income. Creditors are repaid but under different repayment terms that are more beneficial to the bankruptcy filer.

 

Chapter 7 bankruptcy, on the other hand, is reserved for filers who don’t have disposable income every month – surplus income after necessary living expenses are paid – and wouldn’t be able to work through a chapter 13 repayment plan.  Chapter 7 bankruptcy is also intended for those whose household incomes are below the state median income for a household of their size. Instead, Chapter 7 bankruptcy provides debt discharge by liquidating the filer’s non-exempt assets and providing that value to creditors. Filers will no longer be legally, contractually responsible in any way for a debt once it’s officially discharged by the court.  In the vast majority of chapter 7 bankruptcy cases, however, people are able to retain all of their property and all they lose are their debts.

 

When does discharge happen?

Discharge happens at the end of your Chapter 7 bankruptcy case, but only after you’ve met court requirements including:

 

  1. filing all the necessary paperwork and schedules with your bankruptcy petition
  2. given the court a correct and accurate documentation detailing your finances
  3. paid the bankruptcy court filing fee
  4. attended the meeting of creditors with the trustee
  5. attended court-approved credit counseling and financial management courses

 

When you’ve met these requirements, the court will issue an order of discharge. While this order discharges your legal responsibility to pay your debts, the issuance of the discharge order doesn’t always mean that your case will be closed right away.  Sometimes, a bankruptcy case must remain open to allow the bankruptcy trustee to sell non-exempt assets (assets that you can’t retain) and disburse the resulting sale proceeds among your creditors. Additionally, in the event an adversary proceeding was filed, your case will remain open until the adversary proceeding has concluded.

 

The discharge order discharging your debts will be issued by the bankruptcy court about three to four months after your bankruptcy case is filed. The discharge order won’t list each debt that is discharged, but instead provides general information about the debts that are discharged and the debts that you may still have to pay, such as tax debts, child support debts, debts related to alimony, some student loans, etc.

 

Keep in mind that the court can revoke or deny a discharge if you are untruthful or did not correctly file your paperwork. To get the most out of your debt discharge and file a successful and accurate case for Chapter 7 bankruptcy in New Ulm, MN, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.

Credit Card Debt and Chapter 7 Bankruptcy

The United States bankruptcy code is in place to discharge many different types of individual consumer and business debts.  However, some debts are more difficult to have discharged and some debts are not discharged in bankruptcy at all.  For example, there is a common misperception that student loans cannot be discharged in bankruptcy.  While student loans are typically exempted from the general discharge a bankruptcy court grants a filer at the conclusion of a typical bankruptcy case, one can formally request the bankruptcy court to discharge student loans.  The process can be protracted and expensive, however, because one must hire a bankruptcy attorney to start a lawsuit against a student loan creditor in bankruptcy court.  The burden of proof is on the filer who is asking the bankruptcy court to discharge the student loan.  A filer must show that the student loan could cause the filer to experience an undue financial hardship going forward.  Common types of debt that are often not discharged through the bankruptcy process include alimony, child support, most tax debts, and debts resulting from personal injuries that someone may have caused while driving under the influence of alcohol or drugs. Though there are whispers of changes to make it easier to discharge student loans in bankruptcy, the other aforementioned debts will likely remain excluded from discharge in any bankruptcy case. However, some of the more common debts that the majority of filers use bankruptcy to resolve include medical bills, mortgages, car loans, and credit card debts. At Behm Law Group Ltd., our attorneys can help you build a successful case for Chapter 7 bankruptcy in Fairmont, MN, and the surrounding region. Behm lawyers will work with you from start to finish to help get your debts discharged and find long-term financial stability through the Chapter 7 bankruptcy process.

Most individual consumers in Minnesota have credit card debt. The average amount of credit card debt across the state since 2019 is around $6,000 to $30,000, but those who file for Chapter 7 bankruptcy can have anywhere between $3,000 and upward of $100,000. Since there is no debt limit in Chapter 7, filing for Chapter 7 bankruptcy is the most effective solution for those with serious amounts of unsecured debts like credit card and medical debts.

The Chapter 7 bankruptcy process works to liquidate your non-exempt assets in exchange the discharge of your debts.  A discharge will vary on a case by case basis depending on debt types, but overall, credit card debt and other unsecured debts are discharged in full. In order to find out if you qualify for Chapter 7 bankruptcy, you need to take the Means Test, which determines whether your income is under or over the state median/average income for a household of similar size. If your income is lower, you qualify for Chapter 7 and you can start your bankruptcy petition.

Once you have made the decision to seek debt relief through the Chapter 7 bankruptcy process, it is not advisable for you to make further payments to most of your creditors because any debts to those creditors will be fully discharged. As soon as you find out that you qualify to file a Chapter 7 case and you’ve gotten the go-ahead from your lawyer, stop paying your credit card and other debts that you don’t want to keep. If you continue payments past that point, it will simply put you in a worse financial situation because you could be using that money for other, more productive purposes.

When you file your petition, an automatic stay under 11 U.S.C. § 362 is imposed upon your creditors preventing them from initiating or continuing any collection actions against you. This means that those creditors will not be able to impose additional late fees against you as your case continues.  It also means that your creditors cannot harass or sue you. If any creditors start or continue collection actions against you, Behm Law Group bankruptcy attorneys are here to protect you and hold those creditors accountable in court by formally asking the court to hold them in contempt.

Thousands of Americans resolve their credit card and other debts through the  bankruptcy process. To learn more about filing for Chapter 7 bankruptcy in Fairmont, MN with the help of a skilled attorney, call Behm Law Group Ltd. at (507) 387-7200 or email stephen@mankatobankruptcy.com.

 

 

 

 

 

Actions to Consider Before Filing a Chapter 7 Bankruptcy Case

The process of Chapter 7 bankruptcy works to liquidate the filer’s non-exempt assets, distribute the value to creditors, and provide a discharge of debts to the filer. In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act established stricter regulations for Chapter 7 cases. These regulations were intended to make it more difficult to commit bankruptcy fraud without repercussions when filing a Chapter 7 case.

Qualifying for Chapter 7 bankruptcy today means passing the Means Test, completing pre-bankruptcy requirements, and filing a bankruptcy petition that accurately represents your financial situation. With the help of Behm Law Group, Ltd., you can build a strong, successful case for Chapter 7 bankruptcy in Redwood Falls, MN and the surrounding area.

When you file for Chapter 7 bankruptcy, the bankruptcy trustee assigned to your case will review your financial records, both to cross-check the representations made on your bankruptcy documents and to determine if you qualify for bankruptcy relief. Because some of your financial records will be under review and because bankruptcy debt relief is intended to benefit only an honest and forthright filer, there are several actions to avoid before you file for Chapter 7 bankruptcy:

  • Favoring a creditor: Choosing to pay more to one creditor over another is considered a “preferential transfer”.  It could result in the trustee suing that creditor, recovering what you paid the creditor and evenly splitting that amount between all of your creditors. Generally, you want to show that you have acted with fairness to all of your creditors and that you have done everything you can do to repay your debts in an ordinary fashion.
  • Transferring assets: If you transfer any asset out of your name to someone else before filing for bankruptcy relief and then don’t disclose that transfer in your bankruptcy paperwork you will be deemed to have committed a “fraudulent transfer”, even if you made the transfer without any bad intent. While such a “fraudulent transfer” generally won’t be considered a criminal act in most cases, it could result in the denial of a bankruptcy discharge and the trustee could sue the person you transferred the asset to in order to undo the “fraudulent transfer” and recover the asset.
  • Credit card purchases: Credit card debt is included in your bankruptcy case, and is almost always fully discharged in a Chapter 7 bankruptcy. If you are using your credit card for anything not considered a necessity (food, gas, etc.) before filing, however, you could be deemed to be acting with fraudulent intent by purposefully adding to the debts you know will be discharged. A good example of this would be charging a vacation to Europe or Hawaii on a credit card and then filing for bankruptcy relief a month later.  Under such a scenario, the credit card company could sue you in bankruptcy court and ask the bankruptcy court to except or exclude the debt from the discharge granted to you at the end of your case.
  • Receive future payments: If you are aware that you will receive future payments while your case is still open, you will have to report those future payments and such future payments could be seized by the chapter 7 trustee and used to pay your creditors.  A good example of this is if someone passes away within 180 days of the filing of your bankruptcy case and you inherit money or property.   If this happens you must report it to the bankruptcy trustee and to your attorney.  If you fail to report it, the trustee could ask the bankruptcy court to revoke or deny any debt relief that you would otherwise receive.
  • Sue someone: If you have the right to sue someone for personal injury or property damage, (vehicle accident, someone else’s tree falling on your house etc.) you will have to disclose any such claims in your bankruptcy petition.  Sometimes, the trustee will assist you and your attorney in resolving the claims.  Sometimes, any settlement proceeds will be able to be fully protected/retained.  Sometimes, some of the settlement proceeds will have to go to the trustee for the benefit of your creditors.  If you have the right to sue someone, it is essential that you disclose this to your bankruptcy attorney before   your bankruptcy case is filed so that you and your attorney can determine how to properly disclose and prosecute the claim and protect as much of the resulting settlement proceeds as possible.

To learn more about filing for Chapter 7 bankruptcy in Redwood Falls, MN, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.

Things to Consider as a Retiree Filing for Chapter 7 Bankruptcy

Financial struggles can happen at any age, whether you’re in your 20s living paycheck to paycheck at an entry level job or a senior citizen surviving on a retirement fund. No matter your age, chapter 7 bankruptcy is the only form of permanent, reliable and court enforceable debt relief available.

Filing for bankruptcy can turn around an individual’s life at any age and help them maintain long-term financial stability debt free. If you’re considering filing for bankruptcy as a retiree, there are several things to take into account that might affect you differently than a similarly situated younger person. At Behm Law Group, Ltd. we provide expert legal guidance and protection throughout the process of filing for Chapter 7 bankruptcy in Jackson, MN and the surrounding area.

Chapter 7 bankruptcy is called “liquidation bankruptcy”. Quite simply, a filer’s non-exempt assets are liquidated or sold by a chapter 7 trustee and the proceeds are used to make some sort of payment to one’s creditors. The vast majority of one’s debts are completely discharged in 90 to 120 days. However, in the vast majority of cases, the bankruptcy exemptions provided by the bankruptcy code are quite generous and are more than sufficient to protect all of a person’s property and the only things a person loses are one’s debts.

If you plan to file for Chapter 7 bankruptcy as a retiree, there are some things to consider before you file a bankruptcy petition that are specific to your age and situation:

• Retirement funds: In Chapter 7 bankruptcy cases, retirement funds are exempt from the liquidation process. The bankruptcy exemptions protect 401(k) and 403(b) accounts, as well as profit sharing accounts and certain other types of IRAs and retirement funds from liquidation. However, if you’re living off income from those accounts as a retiree, keep in mind that you might not qualify for Chapter 7 bankruptcy if the monthly retirement income causes your income to exceed the state median income for a household of your size. Fortunately, other income from Social Security benefits, veterans’ disability assistance and COVID-19 relief/stimulus will not affect whether you qualify for chapter 7 bankruptcy relief.
• Home equity: Most retirees have paid off their mortgages and fully own their homes. This means they have built up a significant amount of home equity or value. If you do have a lot of equity in your home and plan to use that value to support you financially in the coming years, under the Minnesota state bankruptcy exemptions, you will be able to protect that value or equity up to $420,000 if your homestead is not used for agricultural purposes or up to $1,050,000 if your homestead is used for agricultural purposes.
• Medical bills: The majority of senior citizens and even younger retirees face health issues as the years pass. Because of this, it’s common for medical bill debt to become a significant factor in the decision to file for Chapter 7 bankruptcy. If you have severe medical debt, filing for Chapter 7 bankruptcy is the most effective way to find relief from medical bills and other unsecured debts. In fact, medical debt is sometimes the only reason retirees file Chapter 7 bankruptcy.

To learn more about filing for Chapter 7 bankruptcy in Jackson, MN as a retiree, contact Behm Law Group, Ltd. at (507) 387-7200 or stephen@mankatobankruptcy.com.

The Timeline of a Chapter 7 Bankruptcy

In the United States, the bankruptcy system was put into place to help balance the economy in times of a depression, support individuals and businesses who will never be able to repay their debts, and provide creditors with some form of possible compensation. If you are struggling to meet debt payments each month, you may want to consider bankruptcy as a viable option for permanent debt relief. Behm Law Group Ltd. can provide you with important legal support and guidance through a Chapter 13, Chapter 12 or Chapter 7 bankruptcy in Windom, MN, and the surrounding area.

 

Chapter 7 bankruptcy is the most commonly filed type of individual bankruptcy case in the United States. The process of Chapter 7 bankruptcy works to liquidate the filer’s non-exempt assets in exchange for the discharge of one’s various debts. Credit card debts and medical bills are often the most common debts involved in an individual Chapter 7 bankruptcy, but other debts like mortgages and car loans can also be involved in many cases.

 

The process of filing for Chapter 7 bankruptcy is relatively straightforward, but each step must be done properly and in a timely manner or your case could be at risk of being dismissed. Generally speaking, the steps of a Chapter 7 bankruptcy include the following:

 

  1. Consultation: An initial consultation with a bankruptcy attorney is the first step in any case. Behm attorneys help you determine if Chapter 7 is right for your financial situation and where to go from there.
  2. Scheduling payments: After the initial consultation, we work with you to plan a payment schedule of our attorney costs and the court fees.
  3. Petition: Once we’ve determined a payment schedule that fits your income, we guide you in completing the necessary paperwork involved in your petition. This information includes comprehensive debt and income details, your tax returns, bank statements, and any other relevant financial documentation.
  4. Credit counseling: Part of qualifying for Chapter 7 bankruptcy is taking a court-approved credit counseling course. This course can be completed online and takes about 60 to 90 minutes to complete.  It is available at minimal cost.
  5. Case preparation: Once you submit your financial information to our attorneys, we review your paperwork and forms to ensure everything is correct. We also spend time pinpointing potential issues that might arise with creditors or the trustee, and we work to eliminate or mitigate any potential problems.
  6. The 341 hearing: The 341 hearing (or Meeting of the Creditors) is another requirement that must be completed before you receive your discharge and before your case can be closed. This typically involves a short meeting with the trustee to answer relevant questions to verify, under oath, the information in your bankruptcy petition. Creditors can attend, but they frequently don’t find it necessary to do so.
  7. Financial Management/Debtor Education:  Before you are eligible to receive a bankruptcy discharge, you must complete a second course called “Financial Management” or “Debtor Education”.  This course provides various tips and techniques to help one budget one’s finances more efficiently and manage one’s debts more effectively going forward.  Like the credit counseling course, this course can also be completed online and it takes about 2 hours to complete.  It also is available at minimal cost.
  8. Debt discharge: Once your petition is submitted to the court and your 341 hearing has been conducted and you’ve fulfilled all of the other bankruptcy code requirements, your debts are discharged and all of your creditors receive a copy of the discharge order issued by the bankruptcy court.  The discharge order permanently prevents your creditors from pursuing you for any debts that you owed them.  It also operates as a warning to your creditors that they could be sued and severely sanctioned by the bankruptcy court if they continue collection activities against you.
  9. Trustee administration: Finally, the trustee goes through the process of selling any non-exempt assets and distributing the sale proceeds to creditors. This is the last step in your case before it’s closed.  However, in most cases all one loses are one’s debts.  The bankruptcy code exemptions, which are used to protect property, are quite generous and they are normally sufficient to protect all of one’s property.

 

To learn more about the details of filing for Chapter 7 bankruptcy in Windom, MN, contact Behm Law Group Ltd. by calling (507) 387-7200 or emailing stephen@mankatobankruptcy.com.

Different Types of Bankruptcy in Redwood Falls, MN

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

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

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

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

Income-to-Debt Ratio and What It Means for Liquidation Bankruptcy

Many people have been struggling financially during 2020 because of the countless destructive economic impacts of the coronavirus pandemic. Even those with a stable income may be finding it difficult to meet debt payments each month.

 

If your finances are out of balance, no matter the cause, you always have the option to file for bankruptcy and receive long-term debt relief. At Behm Law Group, Ltd. we help clients work through reorganization chapter 13 or liquidation chapter 7 bankruptcy in Windom, MN, offering legal protection and guidance from start to finish.

 

One of the aspects of your finances that’s considered for any type of bankruptcy, but especially for liquidation bankruptcy (Chapter 7), is your income-to-debt ratio. This ratio measures your net surplus income after all debts are paid, and the ratio is a percentage of that value. For example, if your income is $35,000 before taxes and other deductions are removed and your total annual debt amount is $14,000, your income-to-debt ratio is 40%. When mortgage lenders or landlords take a look at your finances to see if you are eligible for a contract or loan, they typically measure your income-to-debt ratio on a monthly basis. For most lenders, a minimum income-to-debt ratio allowance is 43%.

 

When it comes to Chapter 7 liquidation bankruptcy, the income-to-debt ratio determines if a filer is eligible for that process. Chapter 7 bankruptcy works to discharge debts in exchange for the liquidation or sale of non-exempt assets.  In most cases, the bankruptcy code exemptions allowing one to protect one’s property are more than adequate to protect all of a person’s property from liquidation, however.  To prevent abuse of this system, filers are required to pass a legal mathematical threshold called the Means Test.

 

The Means Test asks a series of questions and requests the submission of some financial documents. It essentially determines your income-to-debt ratio and decides whether that ratio is below or above the state median or average income for a household of a similar size. If your income-to-debt ratio is lower than the state median or average, you qualify for chapter 7 bankruptcy.

 

The reason your income-to-debt ratio is considered rather than just your gross monthly income is because the debt load of each household can vary so greatly. You might have a low income but very little debt, and that combination could be a deterrence for filing Chapter 7. Likewise, a very high-income household might also have very high debt that renders an income-debt-ratio that is appropriate for the filing of a chapter 7 bankruptcy.

 

Income-to-debt ratio is also used to calculate certain aspects of your repayment plan in a Chapter 13 case if you’re ineligible for Chapter 7 or if you simply don’t wish to file chapter 7. Mainly, this ratio helps determine how much you will pay to the trustee every month for distribution among your creditors during your Chapter 13 repayment plan period.

 

If you are considering filing for bankruptcy or would like to learn more about chapter 7 bankruptcy in Windom, MN, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.

 

Why Chapter 7 Bankruptcy Is Essential

Because the United States is currently in a financial crisis due to the economic shutdowns taking place during the coronavirus pandemic, many people are now struggling to meet monthly debt payments. If you are among the many individuals fighting against debt and unstable finances, you may need to take positive action for debt relief. One debt relief option that is available to all individuals and businesses is the process of filing for bankruptcy. At Behm Law Group Ltd., we work with clients to support and guide them through filing for Chapter 13, Chapter 12 and Chapter 7 bankruptcy in Mankato, MN.

 

Bankruptcy is often incorrectly viewed negatively or as some kind of bail-out tool for big businesses. The truth is that bankruptcy is a highly important legal process that protects the economy from failure in many ways. Chapter 7 bankruptcy, in particular, is an essential process for sustaining and invigorating the U.S. economy.

 

Especially during these financially challenging times, Chapter 7 bankruptcy is important to both individuals and businesses.

 

  1. Individual consumers: Chapter 7 bankruptcy is a powerful debt resolution tool for individuals. This type of bankruptcy works to liquidate filers’ non-exempt assets in exchange for the discharge of certain debts. In most cases, however, the bankruptcy exemption laws are more than adequate to protect all property and all people lose are their debts.  With the help of Chapter 7, filers are rid of debts that they would never be able to repay, such as high credit card debt and medical bills. Creditors are also protected in this process as they are paid in part from the value gained in the possible liquidation/sale of non-exempt assets. The ability to help both debtors and creditors is key in preventing economic impediments. Chapter 7 bankruptcy allows both parties to re-enter the economy and continue participating in that system more efficiently.
  2. Businesses: Chapter 7 bankruptcy is also important for business debt relief. When businesses file for Chapter 7, the process is similar to when individuals file. Business assets are liquidated in exchange for the discharge of all business debts. The major differences between business and individual Chapter 7 bankruptcies is that businesses usually close operations when they file and businesses do not have bankruptcy exemptions with which to protect assets/property. The closures of businesses that file for bankruptcy relief serve to eliminate continually failing companies from the economic network. The fact that businesses only file for Chapter 7 when they have absolutely no other options shows that it’s critical to have that bankruptcy process available when no other solution works. If a business cannot be revived, it is best for the economy to have it closed and have creditors paid as much as possible.

 

Chapter 7 bankruptcy is a powerful and essential tool that many people have used to receive relief from severe financial burdens. If you are finding it impossible to meet individual or business debt payments, consider whether filing bankruptcy might be right for you. Contact Behm Law Group Ltd. at (507) 387-7200 or stephen@mankatobankruptcy.com to learn more about filing for Chapter 7 bankruptcy in Mankato, MN.

 

 

When and Why You Should Redeem Property in Chapter 7 Bankruptcy

If you’re struggling with a low income and looming debts, it may be time to start thinking about taking positive actions for relief that keeps your finances stabilized in the long term. One of the most effective resources available to you for debt relief is bankruptcy. Specifically, if you’re facing a severe imbalance between debt and income, you’ll likely benefit most from a liquidation type of bankruptcy that discharges your debts. The U.S. bankruptcy code outlines Chapter 7 as a liquidation bankruptcy for individuals and businesses alike. Behm Law Group, Ltd. attorneys have helped many clients file successful cases in Chapter 7 bankruptcy and receive effective debt relief.

 

Chapter 7 bankruptcy, like all other types of bankruptcy, is still a process that must remain fair to debtors and creditors alike. This means that, though the filer will have their debts discharged, they also could lose some of their non-exempt assets to a liquidation process that returns a monetary value to creditors. Even if they’re not repaid in full on the debts you owe, creditors will sometimes not be left empty handed.  However in the vast majority of cases all of a filer’s assets can be protected from liquidation with the bankruptcy exemptions (such as the homestead or motor vehicle exemption) provided under the bankruptcy code or provided by state law.

 

While exemptions are the primary method of protecting assets, there are some other ways to save your property. One less common way to keep your property is through redemption.

 

Why to redeem: Typically speaking, you will only benefit from redeeming a property in Chapter 7 bankruptcy if you owe substantially more debt on the property than the actual value of the asset. For example, if your car is not protected by the motor vehicle exemption and it’s currently worth $2,000 but you still owe a debt of $5,000 on the loan, you can redeem that property by paying the $2,000 value of the car to the creditor.

 

When to redeem: You can only redeem an asset if certain requirements are met:

 

  1. The property is tangible, but the asset cannot be real estate or business property.
  2. The property is collateral for a secured debt.
  3. The bankruptcy trustee abandons the property.
  4. You are able to repay the value of the property in one lump sum.

 

For the most part, those who redeem property use it for vehicles because they are products that depreciate quickly in comparison with the large amounts of the debts that remain on them. Other common properties redeemed in a Chapter 7 case are household appliances, furniture, antiques, and luxury goods.

 

With our guidance, you can build a strong case for Chapter 7 bankruptcy and determine the best course of action for exemptions, redemption, and other aspects of the process. To learn more about filing, contact Behm Law Group, Ltd. at (507) 387-7200 or stephen@mankatobankruptcy.com today.

 

Understanding the Means Test Eligibility for Chapter 7 Bankruptcy

In times of financial difficulty there are many options for individual consumers to find relief from the hardship of debt. One of the most effective methods of debt relief is the process of bankruptcy. Filing for bankruptcy provides a government organized relief system that offers long-term results. The most common types of debt, such as credit card debt, medical debt and mortgages, can be treated and discharged in bankruptcy. If you’re considering filing for bankruptcy relief, Behm Law Group, Ltd. can provide guidance and protection in Chapter 13 and Chapter 7 bankruptcy in St. Peter, MN.

Both Chapter 13 and Chapter 7 bankruptcy offer debt relief in different formats. With Chapter 13, your debts will be worked into a repayment plan lasting three to five years where the terms of payment can be much more lenient and beneficial. In Chapter 7 bankruptcy, your debts will be discharged in exchange for the collection and sale of any non-exempt assets by the chapter 7 bankruptcy trustee. However, the vast majority of chapter 7 cases are “no asset” cases where there are no non-exempt assets that are collected and sold by the chapter 7 trustee and where the only things that are lost are filers’ debts. This means Chapter 7 is ideal for most filers’ situations, but without proper vetting, some might be able to abuse this type of bankruptcy. To prevent bankruptcy abuse, the court applies a method for the examination of the financial conditions of filers called the Means Test.

The Means Test works in two steps to determine if your income-to-debt ratio merits eligibility for Chapter 7 bankruptcy. Put simply, if your disposable income is equal to or lower than the state median disposable income of a similar sized household, you qualify for Chapter 7 bankruptcy relief.

• The Means Test calculates your current household disposable income. If your initial income, without taking debts into account, is lower than the state median disposable income, you qualify for Chapter 7 and can continue to file.

• If the Means Test calculates that your disposable income is higher than the state median disposable income, other steps must be performed in the examination of your financial situation. To complete this calculation, you must complete a significantly broader range of paperwork. This paperwork determines your disposable income after all reasonable and necessary living expenses are accounted for. The types and allowed amounts of these expenses (such as food, gas, and other necessities) are set forth in the bankruptcy code itself and are used to determine your disposable income. If your disposable income is equal to or higher than the median disposable income for a household of similar size, you would not be eligible for Chapter 7 bankruptcy.

If you can’t qualify for Chapter 7 bankruptcy relief after going through the Means Test, you still will most likely be eligible for Chapter 13 bankruptcy relief. If your disposable income is determined to be higher than the state median disposable income for a similar sized household, your Chapter 13 repayment plan will be scheduled for a five-year period. If your disposable income is lower than the state median disposable income as determined by the Means Test and you still choose to file for Chapter 13 bankruptcy relief, your repayment plan will be set for a three-year period.

To learn more about how the Means Test will decide the course of your Chapter 13 or Chapter 7 bankruptcy in St. Peter, MN, contact Behm Law Group, Ltd. at (507) 387-7200 today or stephen@mankatobankruptcy.com.