Categorizing Debt Claims for Liquidation Bankruptcy in Pipestone, MN

Several types of bankruptcy are available to individuals and businesses. For individual consumers, Chapter 13 and Chapter 7 are both potential options. Chapter 13 works to reorganize debts into a three-to-five-year repayment plan suited to your income and reasonable and necessary monthly living expenses. Chapter 7, on the other hand, is a liquidation bankruptcy where non-exempt assets are sold/liquidated in exchange for the discharge of debts. This latter chapter is the most common form of bankruptcy for individual and small business bankruptcy filers.

Bankruptcy Attorney

If you are considering filing for bankruptcy through either chapter, you need to be aware of the level of detail that will be required in your petition. The bankruptcy court will require your bankruptcy attorney to review documentation concerning your income, assets, debts, and other particulars of your financial situation. Because of the strict documentation requirements that are necessary to adequately and completely draft a bankruptcy petition, we recommend getting help from a professional. Behm Law Group Ltd. attorneys provide legal guidance, protection, and support throughout reorganization and liquidation bankruptcy in Pipestone, MN, and the surrounding areas.

Liquidation Bankruptcy

When you file for any kind of bankruptcy, your debts will be classified and treated differently depending on their status as secured, unsecured, or priority. For liquidation Chapter 7 bankruptcy, these different debts are handled in the following ways:

  1. Secured debts are secured to a property, such as a home or car. Debts that are secured to an asset can be discharged in liquidation bankruptcy.  The secured creditor can take and sell its collateral and apply the sale proceeds against the debt you owe.  If the sale proceeds are insufficient to pay off all the debt, the unpaid balance is discharged and you are not responsible for paying it.  Alternatively, many people want to retain their house or their car and they want to retain the debts that are secured by those assets.  In many cases, people will reaffirm the debts with the secured creditors by entering into a reaffirmation agreement.  A reaffirmation agreement is a document that memorializes the terms and conditions of the original mortgage or vehicle loan.  By signing it, a filer agrees to continue being liable on those debts after a bankruptcy case has concluded.  Essentially, a filer can preferentially treat those secured debts and exempt them out of the bankruptcy process.  Any equity or value that a filer has above the debt against a house or a car is protected from one’s creditors by asserting one of the many exemptions that are provided under state or federal law.  Exemptions are allowed in varying amounts. The exemptions also change over time as market values fluctuate (some current important exemptions for Minnesota).

 

  1. Unsecured debts are not tied to or secured by a property. Some of the most common unsecured debts include credit cards, medical bills, overdue utility bills bounced checks, and personal loans. In chapter 7 liquidation bankruptcy, these debts are completely discharged. However, there are unsecured debts that are considered priority, and these are treated differently than general unsecured debts.

 

  1. Priority debts are usually excepted from a chapter 7 discharge. General Common priority debts include alimony, child support, tax debt, criminal fines and penalties and debts for personal injury caused through intoxication and wrongful death claims.  Like all debts, they must be disclosed or listed in a bankruptcy.  There are some nuanced exceptions to the general rule that priority debts are not discharged.   One exception for instance is 1040-type tax debt that is dated/ old.  For instance, presume that you owe $5,000.00 for the 2010 tax year because your employer did not withhold enough out of your paychecks.  Presume further that you duly filed your 2010 state and federal tax returns by April 15, 2011.  Presume still further that you filed for chapter 7 bankruptcy relief on August 21, 2021.  This sort of dated/old tax debt would very possibly be discharged in your chapter 7 bankruptcy case.

In every bankruptcy case, all debts are handled in complex ways that vary depending on the situation. However, overall, the secured, unsecured, and priority debts will likely be addressed as previously described. To learn more about filing for chapter 13 reorganization or chapter 7 liquidation bankruptcy in Pipestone, MN, and the local region for long-term debt relief, contact Behm Law Group Ltd. by calling (507) 387-7200 or by emailing stephen@mankatobankruptcy.com.

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 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.

 

Exempted Properties and Debts Involved with Chapter 7 Liquidation Bankruptcy in Mankato, MN

Chapter 7 bankruptcy is the most common form of bankruptcy used to address issues of bankruptcy for individuals and businesses. Almost all cases of Chapter 7 bankruptcy involve converting all of the debtor’s assets into a cash value—otherwise known as liquidity. Because Chapter 7 functions to turn a debtor’s property and assets into cash used to repay creditors, it is commonly referred to as liquidation bankruptcy. At Behm Law Group, Ltd., we offer professional guidance and legal protection in all cases of Chapter 7 liquidation bankruptcy in Mankato, MN.

Chapter 7 is often the best choice for individuals filing for bankruptcy because it provides an efficiently-governed breakdown of assets. This gives the debtor a debt-free new start while also allowing for several properties exemptions. This means that the federal court allows the debtor to withhold necessities of life—such as housing and transportation—from the bankruptcy process.

The common assets that are exempt from the Chapter 7 bankruptcy liquidation process are considered basic needs for the debtor, in terms of survival and ability to function as a contributing member of society. In the state of Minnesota, these debts include, but are not limited to:

  • Homestead
  • Household car or other means of transportation
  • Pension or retirement benefits
  • Personal property (such as clothing, appliances, furniture, food, wedding rings, and tools of trade)
  • Insurance benefits
  • Assistance and other benefits
  • Wages

While the promise of these exemptions of property from the bankruptcy process are comforting, keep in mind that Chapter 7 bankruptcy doesn’t allow for the liquidation of several kinds of common debts. Not every debt is forgiven, and there are many cases where filing for bankruptcy is not ideal. Chapter 7 does not involve the following:

  • Student loan debts
  • Debts from fraud
  • DUI and DWI debts
  • Child support debts
  • Tax debts
Chapter 7 bankruptcy is not an answer for all debt situations, but if you choose to acknowledge the exemptions for the process and file for liquidation bankruptcy, our attorneys can guide you every step of the way. We do everything in our power to make filing for bankruptcy into a beneficial situation, giving you an opportunity to start fresh.

For more information about your options with liquidation bankruptcy in Mankato, MN, contact Behm Law Group, Ltd. at (507) 387-7200, or via email at stephen@mankatobankruptcy.com today.