Category: Chapter 7 Bankruptcy

Individual consumer bankruptcy cases can resolve most types of common debt for filers, including credit card debts, medical bills, mortgages, old utility bills, bounced checks, personal loans and car loans, among others. Many people are wary of resorting to bankruptcy because of the negative hit you can take to your credit when you file. The truth is, the damage to your credit can vary from a mild decrease to about a 200-point loss, depending on how high your score is before you file. If you are in the position of needing to file for bankruptcy, it’s likely that the impact on your credit score will be greatly outweighed by the benefits of the permanent discharge of your debts.  You may find that your credit profile is quite resilient.  While a bankruptcy can generally remain on your credit profile for several years, your credit score may return to the upper 600’s or even lower 700’s within twelve to eighteen months.  In addition, you will be a very attractive credit risk to many lenders due to the “Pinocchio Effect”.  Essentially, new potential lenders will see that all or most of your previous debts were discharged in the bankruptcy proceeding.  They may conclude that they no longer must compete with those pre-existing creditors to get paid by you.  To them, like in the Pinocchio story, you will have very few “strings” tying you to previous debts.  Further, they will see that you will not be able to file for bankruptcy relief again for several years.  In short, if you fail to pay them they will have several years to pursue collection remedies against you and there will be nothing that you could do about it. That is why some people file for Chapter 7 bankruptcy.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is the most common kind of individual consumer bankruptcy filed in the U.S. The process of this kind of bankruptcy works to liquidate your non-exempt assets (properties) in exchange for the permanent discharge of your debts. With the guidance and legal support of Behm Law Group, Ltd., you can work through a Chapter 7 bankruptcy in Fairmont, MN and the surrounding area successfully.

Injunctive Mandates

When you file for Chapter 7 bankruptcy, the automatic stay injunctive mandates of 11 U.S.C. §362 are immediately put into place and most of your creditors are prevented from taking further collection actions against you until your bankruptcy case has concluded.  When your case has concluded the automatic stay mandates of 11 U.S.C. §362 become a collective permanent bar, under 11 U.S.C. §524, against most of your creditors from collecting on the debts that you listed in your bankruptcy case.  However, after your case has concluded certain creditors that you may have wanted to keep and certain creditors whose debts were excepted from the chapter 7 discharge will be permitted to interface with you again regarding payment of their claims.

What Debts are Discharged

Debts that would typically not be discharged because they are excepted from the general discharge provisions, as per 11 U.S.C. § 523 (Exceptions to Discharge), include so-called priority debts such as some tax debts, child support debts, debts related to alimony, debts related to criminal fines, debts related to personal injuries you may have caused while intoxicated and other non-priority debts such as student loans.  Therefore, creditors such as the Internal Revenue Service and the State of Minnesota could continue collection actions against you when your case has concluded.  Other creditors who have claims that you wanted to retain and for which you may have executed a reaffirmation agreement, also would be able to contact you regarding the ongoing payment of their claims.  Such creditors would include your mortgage lender, vehicle lender, etc. Creditors whose claims were discharged in the chapter 7 proceeding, however, will be barred from contacting you under 11 U.S.C. § 524.  They will be permanently prevented from taking legal action to collect on the discharged debts.  If they attempted to take legal action against you or pursue other activities to collect the debts, you could sue them and they could be punitively sanctioned quite severely by the bankruptcy court.

Chapter 7 Discharge Violations

There are times when creditors may violate the discharge order and pursue collection activities on the debts that were discharged in your bankruptcy case. Some examples of discharge violations could include:

• A creditor sells your debt to a debt buyer and that debt buyer contacts you to demand payment
• Your credit report still lists the discharged debt as “past due” or “delinquent”
• Some of your property is repossessed
• A creditor that may have either foreclosed on your house or repossessed your vehicle continues to pursue you for any remaining debt following the re-sale of the foreclosed home or repossessed vehicle

Essentially, any creditor action on a discharged debt is a violation of the discharge order. What’s important to understand is which of these actions are illegal violations and which are categorized as a mistake or a lack of knowledge. For example, if a debt buyer is sold your discharged debt but wasn’t notified of the bankruptcy discharge, the bankruptcy court may consider their effort to collect as an innocent mistake due to lack of knowledge.

If you are considering filing for Chapter 7 bankruptcy in Fairmont, MN or the local region, contact Behm Law Group, Ltd. today at (507) 387-7200 or email stephen@mankatobankruptcy.com for more information about the legal effects and benefits of the discharge order and the handling of different ebts.

Every year, the cost of living, retail prices, and many other aspects of our economy and lives change slightly. The same is true for the bankruptcy requirements and the bankruptcy code because the way bankruptcy works from case to case reflects household debts and household incomes. If you are considering filing for bankruptcy, you may qualify for Chapter 7 if you pass the Means Test. Chapter 7 bankruptcy is the most commonly filed individual consumer case, and it provides the most direct relief by completely discharging most debts in a very short period of time. Behm Law Group, Ltd. can help you determine if you’ll qualify for Chapter 7 or if you would benefit more from a Chapter 13 reorganization bankruptcy case. Our attorneys provide legal guidance and protection throughout your case, helping you find long-lasting debt relief in Worthington, MN and the local region.

Debt Relief

The Means Test is a bankruptcy code mathematical formula that determines your debt-to-income ratio. If your debt-to-income ratio is lower than the state average or median for a similarly-sized household, you will qualify for debt relief through Chapter 7 bankruptcy. Because the Means Test deals with debt and income levels, the numbers used for various household sizes change over time.

Since May of 2021, the Means Test numbers for household sizes in Minnesota are as follows:

Size of Household Monthly Income Annual Income
1     $5,214.50              $62,574.00
2    $6,873.58             $82,483.00
3    $8472.42              $101,669.00
4    $10,009.17          $120,110.00
5    $10,759.17           $129,110.00
6    $11,509.17            $138,110.00
7    $12,259.17            $147,110.00
8    $13,009.17           $156,110.00
9    $13,759.17            $165,110.00
10 $14,509.17            $174,110.00

These income amounts are calculated as gross income, so the actual conclusion of the Means Test doesn’t come until after your debts and other expenses are subtracted from these gross income amounts. If you have children, own a home and a car, are married, or have other common life expenses that are shared among many filers, it’s likely you will be more able to qualify and file for Chapter 7 bankruptcy even if your income is on the higher end.

Means Test

Due to lower costs of living and fewer expenses, single filers or households of just two people typically have a harder time passing the Means Test. If you fail the Means Test, you’ll still be able to file a Chapter 13 case. Chapter 13 reorganizes your debts into a manageable three (3) to five (5) year repayment plan that is tailored to your monthly income and your monthly reasonable and necessary living expenses. Your unsecured creditors are only partially paid – usually anywhere from 10% to 30% (depending on the level of your monthly household income) — and your secured debts are usually repaid under more favorable terms than you had before your bankruptcy case was filed.

To learn more about the Means Test and using individual consumer bankruptcy for permanent debt relief in Worthington, MN, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.

There are many ways to resolve debts that you would otherwise never be able to repay, but the fastest and permanent way is through bankruptcy. Depending on the type of bankruptcy you file, your case could be processed as quickly as three to four months. In comparison, debt relief programs can take up to two to four years to handle your case, are rarely successful, and, in the few cases that are successful, can greatly increase the costs and the amount of time it takes to repay your debts by up to five years. Individuals can file a Chapter 7 case, which permanently discharges debts in exchange for the  liquidation of non-exempt assets, or a Chapter 13 case, which reorganizes debts into a manageable repayment plan lasting three to five years where you pay only a portion of your debts at no interest, late penalties or fees.  If you’re considering filing for Chapter 13 or Chapter 7 bankruptcy in Owatonna, MN or the surrounding area, Behm Law Group, Ltd. can provide comprehensive legal support and protection throughout your case.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is the most common kind of individual consumer case. However, it does require filers to pass the Means Test in order to qualify. The Means Test measures your debt-to-income ratio. If that ratio is lower than the state median or average income for a similarly sized household, you’ll be eligible for a Chapter 7 case.

Steps in Chapter 7 Filing

There are many steps to a Chapter 7 case, including pre-bankruptcy requirements, paperwork, and the meeting of creditors, but when the necessary, sensible and understandable steps are completed, the bankruptcy court will grant a permanent discharge of most of your debts.

Discharge of Debts

Once the bankruptcy court approves the discharge of your debts, the bankruptcy court will issue a discharge order and a “discharge letter” will be mailed to your creditors and to you, officially and permanently ending your legal responsibility to repay all discharged debts. This order will wipe out all qualifying debts, including credit card, utility, medical, and personal debts. The discharge letter/order is typically sent 60 days after your meeting of creditors.

Exemption Claims

If you have properly asserted exemption claims regarding your property, your case will be fully closed and you will be able to move past your bankruptcy and move forward to a better and brighter future with much less stress.  In the majority of cases, people can assert exemption claims as to all their property items.  In most cases, people do not lose any property.

Trustee Final Report

Your case is closed when the trustee files their final report. This report and the final decree of the court usually closes your case for good.  However, bankruptcy cases can be reopened for various reasons.  For instance, if a creditor you listed in your bankruptcy case is still bothering you for repayment of its debt, you can reopen your bankruptcy case to initiate a lawsuit against that creditor and ask the bankruptcy court to punitively sanction the creditor.  Also, if you forgot about an asset and did not disclose the asset in your initial bankruptcy paperwork, you could reopen your bankruptcy case to amend your bankruptcy schedules to list the asset.

Summary

To learn more about filing for Chapter 7 bankruptcy in Owatonna, MN and how cases are finalized, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.

At Behm Law Group, Ltd., we’ve worked with clients in all kinds of situations filing for Chapter 7, 12, and 13 bankruptcies. The process of Chapter 7 is called “liquidation bankruptcy”.  Essentially, people who file for chapter 7 bankruptcy relief have their non-exempt properties sold and the value is distributed to their creditors. The debts tied to or secured by vehicles and houses and other assets are discharged.  However, in such cases, the properties tied to or secured by those debts are generally not retained by the person filing for bankruptcy relief.   Unsecured debts (credit card debt and medical bills, for example) are also discharged. Filers can also use bankruptcy exemptions to protect the properties they want to keep from liquidation. If you are considering filing for Chapter 7 bankruptcy in Jackson, MN or the surrounding areas, Behm attorneys can protect and guide you throughout the process.

Chapter 7 Bankruptcy

In addition to its impact on the filer’s credit, one of the main reasons people balk at filing a bankruptcy case to resolve their debt is the fear of losing property. The truth is that most filers lose very little property if they qualify for a Chapter 7 bankruptcy in the first place.  Losing property in chapter 7 bankruptcy is generally not something that happens in every case.  In fact, in most cases, all people lose are their debts.  The bankruptcy exemptions that people can claim to protect their important assets such as homes, cars, appliances, and tools of their trade, and other things are quite generous.

Exemptions

It is important to note, however, that bankruptcy exemptions only protect equity that someone has in an asset or property.  Bankruptcy exemptions do not eliminate secured mortgages or validly perfected vehicle liens.  There may be an asset that you have that is secured by or subject to a mortgage or lien that you want to continue working with the creditor to retain.  You may have equity or value in that asset that exceeds the debt against it.  In chapter 7 bankruptcy, people retain such debts by signing a reaffirmation agreement.  A reaffirmation agreement is a legal document that you and the subject creditor sign that recites and memorializes the terms and conditions of the original mortgage loan or vehicle loan that you negotiated with the subject creditor.  It is entirely voluntary on your part and on the creditor’s part.  No one can force you to do a reaffirmation agreement.

Presume, for instance, that you own a house that is worth $300,000.  Presume further that you owe your mortgage lender $200,000 and that you, therefore, have $100,000 worth of equity or value in the house.  You would protect the $100,000 equity or value with your homestead exemption.   The exemption you claim, however, does not make the $200,000 mortgage go away.  If you want to retain the house and the $100,000 equity or value that you have in the house, you must still pay the underlying mortgage.  To do this, you and your attorney would sign a reaffirmation agreement concerning the $200,000 mortgage with the subject creditor.  After your bankruptcy concluded, that mortgage debt would survive and your relationship with the creditor would essentially be the same as it was before you filed bankruptcy.  As long as you made your mortgage payments after the conclusion of your case, the creditor would continue sending you monthly billing statements and it would continue allowing you online account privileges.  The creditor also would continue reporting your timely mortgage payments to the three big credit reporting agencies:  Equifax, Experian and Transunion.  This would help rehabilitate and restore your credit profile.

 Court Approval

Once you’ve negotiated the reaffirmation with your creditor, the bankruptcy court must approve it.  To approve a reaffirmation agreement the court looks at various factors such as whether the terms are fair to all involved parties. The court also looks at the value of your property, your income, changes to your expenses, the monthly debt payment requirement, your on-time payment history, and whether you’re current with your mortgage payments. In most cases, the bankruptcy court will approve a reaffirmation agreement unless the terms are obviously unfair to one of the parties involved.

While most reaffirmation agreements are approved by the bankruptcy court the reaffirmation process is not routine and it can become complicated, both during creditor negotiations and with respect to the review by the court. It is essential that you have an experienced lawyer assist you with a reaffirmation agreement in your Chapter 7 bankruptcy in Jackson, MN or the neighboring regions. Contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com to get started with expert guidance in your case.

Bankruptcy is one of several ways for individuals and businesses in the United States to resolve debts they can’t repay. While there are different chapters of bankruptcy that follow some general processes and rules, there are also complicated aspects and nuanced conditions that change from case to case. When it comes to business bankruptcy, the question of who is liable for the business debts is a key point of the case. That liability is determined by the way a business is organized for tax, revenue, and general legal purposes. If you are considering using Chapter 13 or Chapter 7 bankruptcy in Waseca, MN, to resolve your business debts, Behm Law Group Ltd. can help you build a strong case for long-term debt relief and financial balance.

Bankruptcy

In filing for bankruptcy, the way that your business is established determines whether or not you’re responsible for its debts. When a business is set up as a sole proprietorship or partnership, for example, the owners of the business are personally responsible for their company’s debts. If a business is set up as a limited liability company (LLC) or corporation, on the other hand, the owners, members, or shareholders are generally not personally responsible for the company’s debts.  Some lenders, however, will require the owner of a company to sign a personal guarantee for the company’s debts.

While business owners often establish their company as an LLC or corporation in order to not be held personally responsible for business debts, there is one exception where they can be held liable. A court process called “piercing the corporate veil” can render owners, members, or shareholders of an LLC or corporation personally liable for business debt.

To pierce the corporate veil of your company, your creditors need to file a lawsuit. If the court sides with your creditors, you, any other owners, members, or shareholders of your company’s stock may be forced to repay the business debt or include it in a personal bankruptcy case. If you aren’t filing for bankruptcy, your creditors can pull from your home, bank accounts, investments, wages, or other assets to repay the debt owed.

Chapter 7 Bankruptcy

If you are filing for bankruptcy, and the court pierces the corporate veil, your business debts are included in the same way your personal debts are. In a Chapter 7 bankruptcy case, your business debts will likely be included in the discharge process, but if they are secured to an asset, that property will also likely be repossessed and liquidated by the creditor to repay the debt. In a Chapter 13 case, business debts will be included for payment in your repayment plan.

Generally speaking, piercing the corporate veil in court is very rare. The process will only be approved if your company acted recklessly or fraudulently in its borrowing practices or business dealings, if your creditors were unjustly left with unpaid funds, or if there isn’t an actual separation between your finances and your company’s finances.

To learn more about how business debts are handled in a Chapter 13 or Chapter 7 bankruptcy in Waseca, MN, or the surrounding areas, contact Behm Law Group Ltd. by calling (507) 387-7200 or emailing stephen@mankatobankruptcy.com.

One of the most commonly reported causes of debt and the filing of bankruptcy cases is divorce. No matter what a married couple’s financial situation is before a divorce, the legal, emotional, and physical process of ending a marriage wreaks havoc. If you’ve worked through a divorce and find yourself facing serious debt, you are not alone. Divorce is one of the most difficult life changes in many ways, including having a significant impact on your finances. Divorce typically splits savings and properties between spouses, legal fees and attorney costs can be high, child support payments are required from the spouse that does not gain custody of any dependents in the marriage, and alimony payments are generally assessed against one party in the divorce as well. All that said, it’s not surprising that post-divorce finances can be complex and burdensome. If you’re looking for debt assistance in Owatonna, MN after a divorce, Behm Law Group, Ltd. can provide legal support and protection throughout a bankruptcy case. Our skilled attorneys will handle your case with care, expertise, and sensitivity from start to finish.

 

Most attorneys will recommend waiting to file for bankruptcy until after a divorce is finalized or filing jointly as spouses before a divorce is started. This is largely because of the complexities of overlapping state and federal legal procedures and the significant costs with filing two different legal proceedings at the same time.

 

However, if you need to use bankruptcy for debt assistance after a divorce, you won’t need to worry about the overlap or going through two complicated legal processes – divorce and bankruptcy – at the same time. If you aren’t filing jointly with your spouse, it’s likely you’ll qualify for Chapter 7 bankruptcy. Those eligible for Chapter 7 have income-to-debt ratios below the state median or average income for a household of a similar size.

 

Chapter 7 works to liquidate non-exempt assets in exchange for debt discharge. Filers are allotted several bankruptcy exemptions that protect the equity or value they have in their home, car, furniture, and household appliances and many other assets from the liquidation process.  In the vast majority of chapter 7 bankruptcy cases, the only things people lose are their burdensome debts.

 

Why Divorced Spouses Will Qualify

• If you have custody of your children, you have to support them with a lower income than when you were married. This situation means divorced spouses often resort to being more dependent on credit cards and other forms of borrowing.
• The spouse that did not gain custody of the children of a marriage may be required to pay alimony and child support. Though they only support themselves in their household, there are many new financial obligations in their lives that result from a divorce.
• Divorced spouses may lose health insurance that they otherwise had through their ex-spouse’s workplace. If they don’t qualify for state-supported programs, they may have significant trouble paying for health insurance or medical bills.

 

Chapter 7 will not allow the discharge of certain debts involved with divorce, like alimony and child support, but it will discharge many other debts, including medical bills, credit card debt, foreclosed mortgages, bounced checks, checking/savings account lines of credit, past due utility bills, loans concerning repossessed vehicles and many other loans.

 

To learn more about using bankruptcy for debt assistance in Owatonna, MN after a divorce, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.

A common misconception about bankruptcy in the United States is that the individuals or businesses that file will lose all their property. While it’s true that property can be at risk in any bankruptcy case, the fact is that the vast majority of individual filers don’t lose a single piece of property in a liquidation, Chapter 7 bankruptcy.  In the vast majority of cases, all people lose are their debts.  This is largely because of the exemptions filers can claim to protect their property from the liquidation process and because of filers’ financial conditions prior to bankruptcy. For individual consumers, Chapter 7 is the liquidation process the bankruptcy code provides. If you’re considering filing for Chapter 7 bankruptcy in Luverne, MN, or the surrounding areas, Behm Law Group Ltd. provides legal protection and guidance throughout the process.

 

Chapter 7 bankruptcy is a liquidation process that works to discharge debts in exchange for the sale or liquidation of non-exempt assets. However, because of the situation most people are in when they file for Chapter 7 bankruptcy and because of the available bankruptcy exemptions, individuals will probably not lose any property to the Chapter 7 liquidation process.

 

Situation: In order to qualify for Chapter 7, filers need to pass the Means Test, which measures your debt-to-income ratio. If this measurement is lower than the state median or average for a household of similar size, you’ll be eligible for Chapter 7. This generally means you have a low income or you have a lot of debt that “outweighs” a middle to upper-middle class income. If this is the case, you probably don’t own much property of high value. You may have a house, a car or two, other common items like appliances and furniture, and maybe even some valuable jewelry or tools in your name, but these items often fit into the range of monetary values set by the bankruptcy exemptions.

 

Exemptions: When you file for bankruptcy, the goal of the process is not to devastate your finances or have you lose all your property, but instead to provide you with permanent debt relief while remaining fair to your creditors. This means that there are exemptions you can claim to protect your property up to certain values. Exemptions keep those properties from being vulnerable to the liquidation process.  In Minnesota, filers can claim the exemptions provided under Minnesota state law or the federal bankruptcy exemptions provided under the bankruptcy code, but they cannot mix and match between the two. The current exemption amounts filers can claim often cover the values of most people’s properties. Additionally, in some cases, exemption amounts can be doubled when spouses file jointly.

 

Because of the available exemptions and because filers who qualify for Chapter 7 bankruptcy often don’t own a lot of high-value property, most filers will not lose any property or very little property to the liquidation process. If you’re planning on filing for Chapter 7 bankruptcy in Luverne, MN, or other communities in the area, our attorneys can help you protect as much property as possible and work through a successful case. Contact Behm Law Group Ltd. today by calling (507) 387-7200 or emailing stephen@mankatobankruptcy.com.

We all have many financial obligations to meet each month, from car payments and mortgages to health insurance and retirement funds. For many households, meeting those obligations is difficult, and since the coronavirus pandemic in 2020, the poverty rate spiked from 9.3% in June to 11.7% in November of the same year. Small business owners had their own troubles in the pandemic with statewide shutdowns dramatically decreasing revenue. For those with accumulated debts and many other financial obligations they’re having a hard time paying, bankruptcy can be a source of long-term, effective debt relief. If you’re considering filing for Chapter 13 or Chapter 7 bankruptcy in Windom, MN, Behm Law Group, Ltd. can help you build a strong case for the most beneficial outcome.

For individuals and businesses alike, the most commonly filed kind of bankruptcy is Chapter 7 liquidation. This chapter works to discharge debts in exchange for the liquidation/sale of the filer’s non-exempt assets. Individual filers are typically able to protect all of their property with the exemptions provided under state law or under the bankruptcy code.  At worst, exemptions will protect the equity or value a bankruptcy filer has in one’s home, car, appliances, items for their jobs/business, and other various properties.

In a business case, the process of Chapter 7 bankruptcy sometimes results in the shutdown of business operations. Businesses organized as corporations or LLC’s are not able to claim exemptions in bankruptcy.  Therefore, when a business files for bankruptcy relief, all the business assets will be liquidated or sold by the chapter 7 trustee. For a struggling business, the question can become whether it should either file for bankruptcy relief or liquidate/sell its assets and use the proceeds to directly work with its creditors to settle its debts.

Benefits of a business liquidating its assets on its own:

• The process will be private
• The business won’t have to pay bankruptcy filing fees or bankruptcy attorney fees
• The business can choose which debts it will repay first and how much each creditor gets from the liquidation of the assets
• The business can generally prioritize the payment of personal loans to friends and relatives
• It’s likely that the business will get more value from the liquidation/sale of its own assets than having the assets liquidated in a bankruptcy because the business would have more control over the selling process and there would not be any funds paid to a chapter 7 trustee from the sale of the assets

Benefits of filing for Chapter 7 bankruptcy:

• Liquidation/sale will be done more quickly
• One’s personal assets generally won’t be vulnerable in a Chapter 7 business case unless one’s business is a sole proprietorship or a partnership
• The business receives the benefit of the automatic stay on creditor action during the bankruptcy which prevents creditors from employing or continuing collection activities
• Business bankruptcy typically won’t affect your personal credit
• The liquidation process is handled through the bankruptcy court, so you have no responsibility in finding buyers or distributing repayment to creditors.  The chapter 7 trustee takes care of all such details.
• The court also administers and governs any interaction between you and your creditors so the process will be as fair as possible
• There is complete finality when the bankruptcy process is over.  No creditors will be able to sell any of their claims to debt purchasers.

If you’re personally liable for your business debts–for example, if you own a sole proprietorship or partnership–you may want to consider filing for bankruptcy and having the chapter 7 liquidation process address your personal and business debts together. With a partnership, however, it’s important to make sure your partner understands they’re still liable for their end of the business debts unless they also file for bankruptcy relief.

Whether you own a business or not and you’re considering filing for Chapter 13 or Chapter 7 bankruptcy in Windom, MN, contact Behm Law Group, Ltd. at (507) 387-7200 today or stephen@mankatobankruptcy.com.

 

 

If you are struggling to make debt payments on time or if trying to pay off debts has significantly damaged your quality of life, finding debt relief through bankruptcy might be the right choice. The most commonly filed type of bankruptcy is Chapter 7, which discharges debts in exchange for the liquidation of non-exempt assets. This means some of your property may be subjected to sale and the resulting sale proceeds may be paid over to your creditors. However, in the vast majority of chapter 7 bankruptcy cases, a person is able to protect all of his or her property.  Chapter 7 bankruptcy isn’t designed to leave filers destitute and without property to reorganize.  There are ways to protect your assets from liquidation. By asserting and taking advantage of the applicable bankruptcy exemptions, filing a reaffirmation agreement on a debt that is secured by some of your property, or by redeeming an asset by paying the present value of that asset to the creditor holding a secured lien on that asset, you can keep your home, car, appliances, and other important items. Behm Law Group, Ltd. provides protection and guidance for those filing for Chapter 7 bankruptcy in Redwood Falls, MN and the surrounding areas. Our attorneys help you work through your petition to protect your assets from liquidation and to file a strong case for long-term, bankruptcy court enforced debt relief.

Each state has different bankruptcy exemptions that Chapter 7 bankruptcy filers can claim. The most current exemptions will protect the value in your home, car, household appliances, clothing, retirement accounts, life insurance policy proceeds, and many additional miscellaneous items.

Filers can also choose to redeem an asset in a Chapter 7 bankruptcy petition from a creditor that has a secured lien on that asset.  In order to redeem an asset, one must pay the asset’s present value to the secured creditor in one lump sum. The value of the property you want to redeem may be agreed upon between you and the creditor. If the creditor believes that the property is worth more than you do, you can present the matter to the bankruptcy court and the bankruptcy court will determine the appropriate value for the asset.

If you have the resources/funds to redeem an asset, it can be beneficial to your financial circumstances in many ways. Redeeming an asset makes the most sense if:

• The value of the property is less than the debt against it. If the subject debt has accumulated over time with missed payments, late fees, and interest, it makes sense to pay off the actual, present value of the property in a redemption rather than pay the total debt owed. For example, if you bought a car worth $15,000 in 2015 and the loan in 2021 has only been reduced to $10,000 but the value of the car has depreciated to $5,000, it makes more sense to pay the $5,000 value of the car than the $10,000 debt.
• If the asset works well and will be reliable going forward or if it is an asset that is unique, difficult to replace and is needed for your employment, trade or profession, such as specific mechanical tools or farming equipment or equipment used in construction, it makes sense to redeem the asset rather than invest time and energy looking for a new replacement.
• Sometimes it may be challenging to obtain a loan to purchase a vehicle or other asset after a bankruptcy.  In such circumstances, it makes sense for someone to use proceeds from a retirement account, use tax refunds or use the cash value that has been built up in a life insurance policy to redeem an asset.

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

When you file for bankruptcy, information about all your debts, income, and properties must be disclosed in your bankruptcy paperwork. Documentation about your financial history as far back as six months to two years must be reviewed for any bankruptcy chapter. Any material inaccuracies or omissions of debts, income, and properties can be considered fraudulent and result in a dismissal of your case. Because of the strict and thorough documentation requirements for any bankruptcy petition, filing without the help of a professional can be difficult and risky. The guidance and protection Behm Law Group, Ltd. attorneys provide will help you file a successful petition and receive long-term debt relief through Chapter 12, Chapter 13 or Chapter 7 bankruptcy in St. Peter, MN.

Chapter 7 bankruptcy is the most filed for individual consumers and businesses alike. Chapter 7 works to liquidate non-exempt assets in exchange for a discharge of debts. The value of your non-exempt liquidated property is distributed among your creditors. Because a key part of a Chapter 7 bankruptcy case is the liquidation of your non-exempt assets, it’s important to know how you can protect property from that process.

Protecting properties from liquidation is accomplished by asserting exemptions provided either under state law or under the bankruptcy code, but it can also be done through a reaffirmation agreement or through redemption.

1. Exemptions: Allotted exemptions vary by state.  In most states, you are allowed to claim the federal exemptions provided under the bankruptcy code instead of the exemptions provided by a particular state if the federal exemptions serve your situation better. Typical exemptions claimed protect the home, car, and household appliances, clothing, life insurance policies, jewelry and many other items from liquidation. Exemptions also change over time as incomes and costs of living are adjusted. A recent list of common Minnesota exemptions can be found here.
2. Reaffirmation agreement: In Chapter 7, if you are current on payments for a certain debt, such as your car loan, you can file a reaffirmation agreement to have that debt preserved or exempted out of the bankruptcy process. This basically leaves a debt as-is, meaning you can keep your property secured by the subject loan, but you still have to make payments on the debt as usual. More on reaffirmation agreements can be found here.
3. Redemption: Finally, you can protect a property from the liquidation process through redemption. You indicate that you wish to redeem a certain property item when you file your initial bankruptcy petition paperwork. You notify the court and the creditor that has a lien that you wish to keep a certain item of property.   Through redemption you must pay a secured creditor the present value for the property that serves as the creditor’s collateral.  Typically, that value is paid in one lump-sum payment to the secured creditor.  However, sometimes the issue of what constitutes present or current value for that asset will be disputed.  If you and the affected secured creditor disagree on that value, the issue is presented to the court at a redemption hearing and the court determines what constitutes the present or current value for the asset.

These ways of protecting a property from the liquidation process can become complex depending on the circumstances of each loan, property type, creditor, and much more. Behm Law Group, Ltd. can help you work through this and many other parts of a Chapter 7 bankruptcy in St. Peter, MN. Contact us at (507) 387-7200 or stephen@mankatobankruptcy.com today to learn more.