Why Small Businesses Aren’t Filing for Bankruptcy Now

Since the end of March and the height of the coronavirus shutdowns, small businesses and beyond have struggled to stay afloat. The benefits of stimulus packages and federal loans have helped many individuals and businesses keep their heads above water and even make a profit during months of decreased income. Unfortunately, most of the effects of the stimulus bills came to an end, and small businesses now need to decide what steps to take to protect themselves given current economic conditions. If you own a sole proprietorship or partnership business, you can use Chapter 13 bankruptcy to resolve debts without losing your business. With the help of Behm Law Group Ltd., you can work through that type of reorganization bankruptcy in New Ulm, MN, and the surrounding areas to file a successful case that will resolve your debts without liquidating your business operations.

Although sole proprietorship and partnership businesses can file for bankruptcy by rolling business debt into the owner’s personal debts, many other small businesses are not able to file because they would be restricted to Chapter 11 reorganization as they may have large amounts of debt and assets with significant values.

Both Chapter 13 and Chapter 11 function similarly to reorganize debts into a repayment plan. Filers will slowly repay debts included in the plan over several years. Many debts will be paid in full but under different terms as denoted in the plan. Other debts will receive payment for a finite period of time and only be partially paid. The remaining balances of those debts at the conclusion of the bankruptcy case would be discharged. While those businesses that qualify for Chapter 13 bankruptcy are more likely to file during this time, if it’s the correct choice given their current finances, businesses that only qualify for Chapter 11 bankruptcy still might not be able to file.

The situation for small businesses right now is complicated. Big business bankruptcy cases have increased by almost 120% in the past 8 months, largely due to the effects of COVID-19, but many smaller businesses have been left unable to file for bankruptcy simply because the costs of filing can be significant. These smaller businesses are operating on shoestring budgets, and once stimulus aid comes to a full stop, they will likely be left with little to no resources.

Because small businesses will be (or already have been) operating on such low incomes, they will literally not be able to afford to file for Chapter 11 bankruptcy. The cost of an attorney and the filing fees involved in a Chapter 11 bankruptcy case are often upward of $10,000 for many small to medium businesses. Most struggling to meet debt payments will just keep operations running until a third party intervenes rather than put time and money into Chapter 11 bankruptcy reorganization plans.

With PPP (payroll protection) loans and stimulus support still helping some small businesses and other businesses with incomes too low to cover bankruptcy fees and costs, small business bankruptcies are down by about 14% from last year.

If you are able to fund a Chapter 13 bankruptcy in New Ulm, MN, or the local area, Behm Law Group Ltd. can help you build a repayment plan for long-term debt relief. Contact us at (507) 387-7200 or stephen@mankatobankruptcy.com today.

Understanding What “Judgment Proof” Means and Debt Relief through Bankruptcy

Thousands of U.S. citizens struggle to make debt payments each month, and with the added impact of coronavirus shutdowns, many more will continue to lose financial stability. If you are among those finding it difficult to keep your budget balanced, you may want to consider taking positive action for debt relief. One of the most effective ways to resolve the majority of common debts in the United States is through the process of bankruptcy. While some creditors can force debtors into involuntary bankruptcy, depending on the situation, most cases are voluntarily filed under whatever chapter best fits the circumstances. At Behm Law Group Ltd., we provide guidance and support to help our clients file a successful bankruptcy case and receive much needed debt relief in Waseca, MN, and the surrounding communities.

Filing for bankruptcy may seem like a drastic action, but it is actually one of the most common ways people in severe debt can resolve those financial struggles and find long-term financial stability. For individuals, two options are typically available for bankruptcy processes.

First, there is the option to file for Chapter 7 liquidation bankruptcy. This process works to discharge debts in exchange for the liquidation of non-exempt assets. This type of bankruptcy is most suitable for individuals with low income and high dischargeable debts such as credit card debts and medical bills.  In the majority of cases, people don’t lose assets and all that they lose are their debts.

Second, filers can choose to use Chapter 13 to restructure their debts into a manageable repayment plan where there are no late fees, no penalties and no interest. This process involves the discharge of unsecured debts, the reorganization of secured debts such as motor vehicle loans and mortgage delinquencies, and the payment of tax debts, child support/alimony debts and other priority unsecured debts on more generous terms. The final results of this process depend on the filer’s own situation and the income/debts involved.

For those who may not be able to file for bankruptcy right away but still cannot pay certain debts, they can sometimes protect themselves from lawsuits and other collection activities if they are “judgment proof”. Even with debt, you can live in a way that makes it harder for creditors to sue you for not paying debts. To be judgment proof, you generally need to receive income from sources that are not subject to garnishment or attachment, such as Social Security income, unemployment income, child support income and state or county welfare income/benefits and other such income.  If you can show that you have a very low income or are unemployed, have minimal assets in the form of money in a bank account or real estate, and have your income sources exempt from seizure (e.g., unemployment benefits), then you are generally “judgment proof” and it will be more difficult, though not impossible, for creditors to initiate and maintain collection activities against you.

Even if you are presently judgment proof, your financial circumstances could improve or you could inherit property unexpectedly.  In other words, your circumstances could change quickly and your creditors would then be in a better position to pursue collection activities against you.   You must be aware that creditors are extremely vigilant and doggedly persistent.  They typically will review and investigate your economic/employment/financial situation at least once a month for any changes.

If you believe you are judgment proof, but want to learn more about what that term means, or if you want to start the process of filing for bankruptcy, Behm Law Group Ltd. can help. Contact us at (507) 387-7200 or stephen@mankatobankruptcy.com for more information about debt relief in Waseca, MN.

The Fair Debt Collection Practices Act and Finding Debt Assistance

No matter what your financial situation is, you don’t deserve to be harassed by creditors and collection agents. In fact, any aggressive or manipulative debt collection practices are illegal, thanks to the 1962 Fair Debt Collection Practices Act (FDCPA). If you’re struggling to meet debt payments each month, you may begin to see some of the nastier collection practices creditors employ. If you’re experiencing that kind of aggression, remember that it’s illegal and you can protect yourself against it. At Behm Law Group Ltd., we see many clients take action to protect themselves from creditors by finding effective debt assistance in Mankato, MN, and the surrounding area by filing a bankruptcy case.

 

While there are ways to protect yourself against aggressive creditor action without filing for bankruptcy, the advantage you gain with a bankruptcy petition and the subsequent automatic stay can be extremely impactful. As soon as you file a bankruptcy petition, the court places an automatic stay on the collection actions of your creditors. If they attempt to continue collections, they may be facing legal repercussions and significant punitive, monetary sanctions. With the additional protection of a Behm Law Group attorney, you can be sure you will be safe from creditor harassment for the duration of your bankruptcy case and afterward.

 

Even if you aren’t filing for bankruptcy, you can still trust in the FDCPA to protect you from creditor misconduct. Under the laws outlined in this act, creditors are prohibited from the following:

 

  1. Calling you without identifying themselves as your creditor, a collection agency, or other related party tasked with collecting on your debt.
  2. Calling you with excessive persistence.
  3. Calling you during inconvenient hours of the day or any time at night (9 pm to 8 am).
  4. Call you or otherwise contact you at your workplace if your employer does not allow it.
  5. Contacting any third parties other than your original creditor (if they are a hired collection agency), credit reporters, and your attorney. The exceptions to this are spouses, co-debtors, and parents of minor-age debtors—all of whom they can call unless you have a written request for them to stop contact.
  6. Claiming to be an attorney.
  7. Claiming you owe more money than you do or adding extra interest, fees, and charges that are not legally included in your contract.
  8. Sending you fake legal documents.
  9. Threatening you with violence.
  10. Using profanity or obscene language with you or other parties.
  11. Telling you that you will go to jail if you don’t pay the debt.
  12. Telling you that the non-payment of your debt is a criminal offense.

 

If you are experiencing any of these illegal actions with your creditors or collection agencies, you have the power to stop them. You can ask them directly to stop in a formal letter, which often works. You can also document their illegal actions if you suspect it will be used in court, file a complaint with the Federal Trade Commission (FTC), and/or sue them in court.

 

To learn more about creditor actions and bankruptcy debt assistance in Mankato, MN, contact Behm Law Group Ltd. at (507) 387-7200 or stephen@mankatobankruptcy.com.

How Bankruptcy Offered Debt Relief to Many During the 2008 Financial Crisis

 

During this unsure economic time, many of us look to the past to see how we reacted, what worked, and what didn’t. Since the first Great Depression in the U.S., there have been many ups and downs in the economy. One notable “down” was the 2008 financial crisis. The unexpected depression during that time was a recent crisis that took place in an economy very similar to the one today.

 

While there are many components to any depression, the 2008 crisis is one we can most likely prevent from occurring again. However, if any financial crises happen in our future, individuals and businesses alike can find solid ground and protection from the relief a bankruptcy case provides. If you’re struggling to make ends meet during these challenging times, Behm Law Group, Ltd. can help you find debt relief in Marshall, MN and the surrounding area through the process of filing for bankruptcy relief.

 

The financial crisis of 2008 saw many bankruptcies, including Lehman Brothers, who filed the largest case of all time. Individuals, small businesses, and Fortune 500 companies were all affected financially during this time. A combination of risky investments, the collapse of the housing market, and various other bad choices made by large players in Wall Street led to a severe financial crisis and a trickle-down effect that made everyone change the way they looked at our economy.

 

In addition to many of the large bankruptcy cases like Lehman Brothers, thousands of people across the U.S. found themselves filing bankruptcy to protect their homes and find debt relief. For individuals then (and now) there were two main options.

 

If their income was lower than the state median income, an individual could file for Chapter 7 bankruptcy and have their non-exempt assets sold in exchange for the discharge of debts. In a Chapter 7 case there are exemptions filers can use to protect the vast majority of their assets (in most cases people are able to protect all of their assets) from liquidation, depending on their financial circumstances. In 2007 there were 467,248 non-business Chapter 7 cases. After the crisis in 2008, that number jumped to 949,002 in 2009 and 1,105,534 in 2010.

 

A debtor’s other option was to file for Chapter 13 bankruptcy. This was an option for those with an income higher than the state median income who were ineligible for Chapter 7. Chapter 13 worked to restructure debts into a manageable repayment plan lasting three to five years. In 2007, there were 307,521 non-business Chapter 13 cases. In 2009, that number increased to 393,786, and in 2010, rose again to 430,583.

 

All of the bankruptcy cases born out of the 2008 crisis were effective in many ways, helping to rebalance our economy and provide much needed debt relief to filers. To learn more about filing for debt relief in Marshall, MN during today’s difficult financial times, contact Behm Law Group, Ltd. at (507) 387-7200 or stephen@mankatobankruptcy.com.

Debt Assistance in a Major Recession

Despite the $2.2 trillion stimulus package of the CARES (Coronavirus Aid, Relief, and Economic Security) Act in March 2020, the impacts the novel coronavirus is having on the local, national, and global economies will most likely continue, potentially causing a recession that may result in the same severities as the 2008 Great Recession. In fact, some studies show the economic downtown due to COVID-19 may become a full-blown depression. Despite the dire financial reports and record rise in unemployment rates, individuals and their communities can implement many methods to weather difficult financial times, no matter how widespread the fallout. If you’re already experiencing the effects of the current economic downturn, consider the many options for debt assistance in Owatonna, MN, and the surrounding area, including filing for bankruptcy. With the help of Behm Law Group Ltd., you can use the bankruptcy process for long-term, effective debt relief during this time of crisis.

 

The projected recession will affect millions of U.S. citizens and businesses for an unforeseeable amount of time. Because of this uncertainty, many people will have difficulties meeting debt payments on time and they may accumulate delinquencies. Some options always available, such as debt settlement, loan consolidation, and debt workout, require direct communication with creditors or include the involvement of third-party agencies. In addition, the CARES Act provides several other options for debt assistance, including loan extensions, and payments deferments and modifications. Likewise, some private lenders are providing assistance programs and case-by-case work outs of debt.

 

While all of these non-bankruptcy debt assistance options vary in effectiveness, presuming you find a trustworthy third-party who will work with you in good faith instead of one of the many bad actors who simply want to make money off of you and cut and run, as the months wear on, you may need to do more for sustained and permanent debt relief in the long term. For many people, this will be the filing of a bankruptcy petition.

 

Bankruptcy is one of the longest used debt assistance options during times of recession and depression in the United States. In the 2008 recession, over 4 million non-business bankruptcy cases resolved individual debts in the time it took to turn the economy around (between 2008-2010). The history of bankruptcy successes during times of economic recession is a sign of hope for the future.

 

Bankruptcy is an effective tool whether you file to resolve a large portion of credit card debt and medical bills as a direct result of the COVID-19 crisis, or if you need to restructure your mortgage and other secured debts into a manageable repayment plan. During this current health and financial crisis, the majority of debt increases will be medical bills and credit card debts, both of which are dischargeable in bankruptcy. Other common debts taken on in a recession, such as tax debts and car loans, can also be resolved with the bankruptcy process and payment terms that are more favorable to you can be established.

 

To learn more about using bankruptcy as a form of debt assistance in Owatonna, MN,

during a recession, contact Behm Law Group Ltd. at (507) 387-7200 or stephen@mankatobankruptcy.com today.