How a New Job Affects Chapter 7 Bankruptcy in Mankato, MN

If you’ve been struggling with extreme financial difficulties, bankruptcy is a way to find relief and recovery. If you have a low income or are unemployed, Chapter 7 bankruptcy is designed to help your situation. For individuals, Chapter 7 is the most common type of bankruptcy. It’s applicable to most situations for unemployed filers, low income filers, and high debt filers. Behm Law Group, Ltd. provides expert counsel if you’re considering Chapter 7 bankruptcy in Mankato, MN.

The most important thing to be aware of when filing for bankruptcy is that honesty counts in every aspect of your case. The U.S. Bankruptcy Courts and bankruptcy trustees are highly experienced and trained in examining bankruptcy cases and detecting mistakes and fraudulent behavior. With the guidance of a bankruptcy attorney, you can more effectively lay out your financial circumstances establishing your need for Chapter 7 relief.

Qualifying for Chapter 7 bankruptcy requires you to pass the Means Test to determine if your income is too low to make debt repayments possible. If you pass this test, your income is either lower than the state median income of a similar household size or the total amount of your debt is exceedingly high.

After you’ve passed the Means Test and qualified for Chapter 7 bankruptcy relief, you’ll begin to work through the process of discharging certain debts, exempting certain properties, and figuring out the details of your bankruptcy estate. In most cases, a filer’s job status doesn’t change during the bankruptcy process. However, there are some times during the pendency of a case when some filers have employment or other income changes.

New Income

If you have a change in employment during the pendency of your bankruptcy case, it’s likely that your income will change as well. If this happens, the best thing to do is to immediately notify your attorney. This change in income may significantly alter your case.  New income can affect your case in several ways:

  1. Your case can be converted to a Chapter 13 bankruptcy case, and you could enter a restructured debt repayment plan that could last three to five years.
  2. If you receive income from lawsuit settlements, lottery winnings, divorce settlements or if you inherit any money or property within 180 days after your case is filed, such income could be used by the bankruptcy trustee administering your case to pay your creditors.
  3. Your case may be dismissed because of your lack of disclosure of any income changes or for other fraudulent behavior.

Other sources causing an income change are also taken into account in a Chapter 7 case, and you should be open and honest about all alterations to your financial situation. For more information about filing for Chapter 7 bankruptcy in Mankato, MN, contact Behm Law Group, Ltd. at (507) 387-7200 today.

Priority Claim Treatment for Debts Resolved With Bankruptcy in Worthington, MN

If you’re an individual struggling financially in the United States, you have several options to resolve your debts effectively. These options include bankruptcy, which in many cases is a far more beneficial option than other remedies such as debt settlement or debt consolidation. Individual bankruptcy options commonly take the form of asset liquidation/debt discharge or debt reorganization, known respectively in bankruptcy terms as Chapter 7 and Chapter 13. If you choose to file for bankruptcy in Worthington, MN, Behm Law Group, Ltd. provides legal advice and assistance in navigating the process from start to finish.

With either bankruptcy chapter, any individuals, companies, or organizations to which you have debt obligations are categorized into types of creditors based on the kind of debt owed. These categorizations will determine how your debts are handled and how your creditors may be paid in your bankruptcy case.

One type of debt that is commonly encountered in bankruptcy cases is priority, unsecured debt. This kind of debt is generally treated more preferentially than general, unsecured debts.  Priority creditors will often file proofs of claim regarding the debts you owe.  In a chapter 7 bankruptcy case, priority, unsecured debts will not be discharged and a debtor will remain liable on those debts after a chapter 7 bankruptcy case is concluded.  In a chapter 13 bankruptcy case, priority, unsecured debts must be paid in full in order for a chapter 13 repayment plan to be approved by the bankruptcy court.

Creditors with priority claims will often have debts that are directly linked to the well-being of another person or organization. This includes debts owed to employees, child support and other spousal support obligations, contracted amounts owed in return for promised services, taxes, and settlements for injuries caused by intoxicated or substance-influenced motor vehicle accidents.

These claims are treated in accordance with the chapter regulations that delegate how all other debts are handled in a case.

Chapter 13: Priority claims in a Chapter 13 case determine in part how the filer’s repayment plan will be structured. In most cases, these debts will be handled in a process similar to secured debts. This means filers might be required to repay priority debts in full during their 3 to 5-year repayment plan period.  However, unlike secured debts, priority claims are not paid interest.

Chapter 7: In a Chapter 7 case, debts are processed in terms of discharge and exceptions to discharge.  As indicated above, the claims of priority, unsecured creditors will not be encompassed by the discharge issued by the bankruptcy court at the end of the case.

If you’re considering filing for bankruptcy in Worthington, MN, it’s important to understand how your creditors will be defined and what options they might have in the process. Behm Law Group, Ltd. provides counsel and support for both Chapter 13 and Chapter 7 cases. Contact us at (507) 387-7200 today for more information.

Categorizing Creditors When You File for Bankruptcy in Owatonna, MN

Almost all U.S. citizens hold one or more forms of debt in their day-to-day financial obligations. This includes anything from mortgages to credit card debts, and most individuals find ways to work those debts into their budgets. If you’ve found yourself struggling to do this, however, you might consider bankruptcy. If you choose to file for bankruptcy, Behm Law Group, Ltd. offers legal support to help you navigate through the process when you file for bankruptcy in Owatonna, MN.

If you have debts, the individuals, companies, or organizations that loaned you those debts are your creditors. Even with personal loans from family members or employers or friends, the lenders are considered your creditors until those debts are fully repaid. When you file for bankruptcy, the status of your creditors is determined based on the type of debts you owe to them.

This categorization of creditors can impact how your debts are repaid in bankruptcy. For a Chapter 7 bankruptcy, this means one creditor may not collect a higher return over another creditor. In a Chapter 13 plan, this categorization of creditors determines the percentage of debt you will repay throughout your repayment period.

These are the types of creditors involved in a bankruptcy case: 

  1. Secured: Any debt that involves a tangible property (i.e. mortgages or car loans) is considered secured, and the lenders of those debts are secured by that property, even in the event of a bankruptcy filing. Chapter 7 secured creditors will take back any collateral that secures their claims. In a Chapter 13 repayment plan, the secured creditors are generally repaid the present value, plus reasonable interest, of the assets securing their claims.
  2. Unsecured: Virtually every other type of debt not involving a property is an unsecured debt, and the creditors of those debts are also unsecured in repayment if you file for bankruptcy. For example, credit card debts, personal loans not involving property, medical bills, and certain older tax debts are all unsecured. The creditors of these debts will often only receive small partial repayments in a Chapter 13 plan and, often, will not receive any payment in a chapter 7 bankruptcy case.
  3. Priority: Priority creditors are, in fact, unsecured creditors much like credit cards or medical debts. However, for certain public policy reasons, the drafters of the bankruptcy code wanted to make it much more difficult to discharge or get rid of these debts.  Some examples of priority creditors are unpaid employees of the debtor, spouses with unpaid child support or alimony, or children of the debtor with certain unpaid obligations, tax debts, and criminal court fines and restitution awards.

These creditors are involved in most bankruptcy cases. Behm Law Group, Ltd. offers protection and counsel throughout your case. Contact us at (507) 387-7200 today for more information about filing for bankruptcy in Owatonna, MN.

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

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

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

Predischarge Education

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

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

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

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

 

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

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

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

1. Halting certain lawsuits.

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

2. Halting certain tax requirements.

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

3. Halting wage garnishment for pension loan repayment.

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

4. Halting criminal sentence proceedings.

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

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

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

Cross-Collateralization and Bankruptcy in Jackson, MN

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

Collateral

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

Collateral and Credit Unions

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

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

Debt Categorization and Cross-Collateralization

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

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

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

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

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

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

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

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

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

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

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

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

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

Why You May Not Qualify for Chapter 7 Bankruptcy in Mankato, MN

If you’re struggling to meet debt payments and financial obligations with your income, you’re most likely eligible for Chapter 7 bankruptcy. The two main types of bankruptcy, reorganization and liquidation, are designed for individuals and businesses with very different financial situations. Reorganization bankruptcy (Chapter 13) is an option for those with higher incomes who want to keep their property in the process of filing. Liquidation bankruptcy (Chapter 7), however, is more suitable for those with lower incomes and debts that can be discharged in the process of filing. At Behm Law Group, Ltd., we can help you understand why you might benefit more from Chapter 7 bankruptcy in Mankato, MN, given your situation.

While the risk of loss of some property is higher in Chapter 7, Chapter 7 is generally your best option for recovering financially and getting a fresh start quickly, even with a low income. The following outlines the several reasons why you might not be eligible for Chapter 7 bankruptcy.

Income: To qualify for Chapter 7 bankruptcy, you must pass the Means Test, which determines your income level based on the median Minnesota income level of a household similar to your own. To pass this test and file for Chapter 7, your income must be lower than the Minnesota median income level for a household of your size.  Your income includes any sources of monetary gain except, generally, income tax refunds and Social Security benefits.  Income from inheritances received and retirement accounts that may have been cashed out also may sometimes be excluded from the calculation because such income sources would not constitute regular sources of income.

Repayment: Under 11 U.S.C. §707(b)(2), if your income is higher than the state median income for your household size, you might still be eligible for Chapter 7 under the condition that your income, as determined by this provision, would pay less than 25 percent of your nonpriority unsecured debts or $6,000.00, whichever is greater, or $10,000.00.

Failure to Meet Requirements: Before you can petition for Chapter 7, you must meet several requirements. First and foremost, you must attend a credit counseling course with an approved credit counseling agency within 180 days prior to filing. You must also complete certain paperwork and pay certain filing fees. Our expert attorneys can guide you through these sometimes-complicated requirements.

Previous Bankruptcy: If you filed for bankruptcy within the last 180 days and your case was dismissed for willful failure to abide by orders of the bankruptcy court, for acts of fraud, abuse, or by your own request or following the filing of a request for relief from the automatic stay by one of your creditors under 11 U.S.C. §362, you will not qualify for Chapter 7 bankruptcy.  Under 11 U.S.C. §109(g), you must wait 180 days after the dismissal of your previous case to qualify for Chapter 7 again.

Previous Discharge: If you filed for bankruptcy relief and received a discharge in Chapter 7 in the past eight years or if you filed Chapter 13 bankruptcy and received a discharge in the past six years, you will not be eligible to receive a discharge in a new case in Chapter 7 bankruptcy.

Fraud: Of course, in any bankruptcy case, your petition will be dismissed, and you will not be eligible for any form of bankruptcy if you’re found to exhibit fraudulent or abusive behavior relevant to your case.

To learn more about your eligibility and how filing for Chapter 7 bankruptcy in Mankato, MN, can give you a fresh start, contact Behm Law Group, Ltd. at (507) 387-7200 today.

Secured Debts and Secured Properties Handled with Chapter 7 Bankruptcy in Fairmont, MN

In most cases of bankruptcy, the individuals or businesses that file are struggling with multiple types of debt. These debts can involve mortgages, credit card debt, tax debts, and even personal loans. If you’re finding it impossible to meet payments on your debts, filing for bankruptcy might be right for you. Behm Law Group, Ltd. can help you decide, based on your own situation, whether you should file for Chapter 13 bankruptcy or Chapter 7 bankruptcy in Fairmont, MN.

If you’re overwhelmed by debts that can be discharged in a successful Chapter 7 case, then liquidation bankruptcy is most likely the best choice. Chapter 7 bankruptcy cases are often most effective when a large portion of your debt types are secured debts.

Secured Debts

Secured debts involve property. In short, if you’ve agreed to make payments on a property that you have rented, borrowed, or bought, you have a secured debt on that property. When secured debts are treated in a Chapter 7 case, they’re most beneficial to all parties involved. This is because the debt can be discharged, relieving you of all payment obligations to that debt, and the property asset involved in the debt can be liquidated to repay your creditor. However, even during a Chapter 7 case, there are several ways a secured debt can be handled.

Surrendering Secured Properties

If you choose to surrender your properties involved in a secured debt, you’ll simply return them to your creditor. Under the protection of Chapter 7 bankruptcy, this surrender will remove your creditor’s lien on the property and erase your liability to the loan when the debt is discharged. This is the most common action under Chapter 7 for secured debts.

Redeeming Secured Properties

If you wish to retain the property involved in a secured debt (for example, if you want to keep your car or house), you can choose to redeem it. This requires you to pay your creditor the value they would request for replacing the property without taking the interest you owe on the debt into account. If you owe a large amount more in loan interest than the property itself, this may be a beneficial choice.

Reaffirming Secured Debts

Finally, you may choose to reaffirm a secured debt after your bankruptcy case is concluded. In most cases, this will reinstate your original debt on the property and loan, but you may attempt negotiation with your creditor for a lower debt. This protects creditors from reselling your property at lower costs than you owe, and it allows you to keep your property with an opportunity to negotiate lowered debt obligations.

If you’re considering filing for bankruptcy, you have to choose which type of bankruptcy will be most beneficial given your financial situation. Contact Behm Law Group, Ltd. today for expert legal advice and assistance with Chapter 13 bankruptcy and Chapter 7 bankruptcy in Fairmont, MN.

Treatment of Tax Debts in Chapter 7 Bankruptcy in Mankato, MN

Like the vast majority of countries across the globe, the functioning of the U.S. government and the U.S. economy are largely related to the payment of taxes. While it’s important for everyone to chip into the country finances with taxes, it’s possible for debts related to taxes to be accumulated if a business or individual is struggling financially. However, if you file for bankruptcy, your tax debts may be handled differently than other types of debt involved in the process. In particular, when you file for Chapter 7 bankruptcy in Mankato, MN, the treatment of your tax debts can be complex and confusing. Behm Law Group, Ltd. offers expert legal advice and assistance concerning your tax debts and other financial circumstances in a bankruptcy case.

Chapter 7 bankruptcy allows for the discharge of several kinds of debts you owe. However, the process doesn’t discharge all types of debts, and tax debts are often considered non-dischargeable. In fact, there are conditions as to when your tax debts can be discharged, but your debts must meet all the requirements listed below.

  1. Your tax debts may be discharged in a Chapter 7 bankruptcy case if the due date for your return was three or more years before the date that your bankruptcy case was filed; this includes extensions of return due dates. The time period is measured from the date you filed for bankruptcy.
  2. If your tax debts are due on income taxes they may be eligible for discharge in Chapter 7 bankruptcy. This includes federal income taxes, state income taxes, and gross receipt taxes.
  3. The return for the tax debts you owe must also have been filed more than two years before the date that you filed for bankruptcy. This often doesn’t include returns filed with a “late” status, but in some cases the bankruptcy court will allow tax debts on a late return to be discharged if you meet all other requirements listed.
  4. Even if you have filed your return within the time period required and the return itself and the subject tax debt for that return was at least three years old, your taxes must still meet the additional requirement of the 240-day assessment. This means if your tax return/debt was assessed by the taxing authority less than 240 days before the date that you filed for bankruptcy, your tax debts will not be eligible for discharge.
  5. Additionally, if there is any fraud, evasion, or willful misconduct involved with your tax debts or tax return, those debts will not be eligible for discharge in a Chapter 7 bankruptcy case.

Although the requirements for tax debt discharge in a Chapter 7 bankruptcy case are strict, it’s not impossible for those tax debts to be eligible for discharge. The help of an experienced bankruptcy attorney is key in helping you understand and predict the way your tax debts will be treated when you file for bankruptcy.

Contact Behm Law Group, Ltd. today at (507) 387-7200 for more information about Chapter 7 bankruptcy in Mankato, MN.