Waiting will only make things worse. Timing is important.
It is important to act before it is too late.
Talk to a Minnesota bankruptcy attorney today!
Call us at 651‑639‑0313 for a free phone consultation.
Timing is important. The month you choose to file bankruptcy can be important.
And some debts should not be paid if you need to file bankruptcy soon.
Bankruptcy can be a very complicated and technical legal process.
Competent, affordable legal advice is a must.
Twin City Attorneys has filed over 1,500 bankruptcy cases. Our experience means our Minnesota bankruptcy attorneys have seen many unusual financial situations before. You won’t pay a high hourly fee for a lawyer’s on the job training.
Bankruptcy is not a recent invention. The Constitution empowers Congress to pass “uniform laws on the subject of Bankruptcies.” Congress established a system of federal courts to administer bankruptcy law. Judges have been appointed for over 90 districts throughout the country. Each state has at least one district.
The goal of the bankruptcy laws is to give debtors a ”fresh start”. The U.S. Supreme Court said, “It gives to the honest but unfortunate debtor¼a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.”
There are 6 types of bankruptcy
Chapters 7 & 11. Individuals as well as business entities like corporations, limited liability companies and partnerships may file a Chapter 7 or Chapter 11 bankruptcy.
Chapter 13. Only individuals (actual people – not organizations ) with unsecured debts of less than $419,275 and secured debt of less than $1,257,850 can file a Chapter 13 case. (Debt limits change every 3 years)
Chapter 12.Only family farmers and family fishermen may file a Chapter 12 case.
Chapter 9. Only municipalities such as cities, towns, villages, counties and school districts can file Chapter 9.
Chapter 15. Chapter 15 is designed to resolve cross border insolvency issues involving claims or assets in both the United States and at least one other country.
Chapter 7 in Minnesota.
Chapter 7 is sometimes called a “liquidation bankruptcy”. The debtor can keep assets defined as “exempt”. Most debtors, but not all, lose no assets. If some assets are not “exempt”, the trustee may liquidate the assets (turn them into cash) and distribute the proceeds to creditors who file a “proof of claim” with the bankruptcy court.
A debtor will be able to keep two types of property: property which does not become part of the debtor’s bankruptcy estate and property which is deemed exempt. 11 U.S.C. §541 describes the type of property which is part of the estate and property excluded from the estate. If property becomes part of the estate and is not covered by an “exemption”, the trustee may sell the property and use the proceeds to pay creditors who file a valid ‘Proof of Claim’.
Bankruptcy Estate. Important property excluded from the estate and which the debtor can keep includes such property as most retirement funds such as IRAs and 401k funds, education IRAs in many cases and certain health insurance plans. This list is not complete – it only lists examples of property not part of a debtor’s bankruptcy estate.
Exempt Property. The Bankruptcy Code also lists property deemed “exempt” meaning the debtor is permitted to keep the property out of the bankruptcy (or the debtor’s “bankruptcy estate”). In a Minnesota Chapter 7 bankruptcy a debtor can select a slate of “state exemptions” or a slate of “federal exemptions” set out in 11 U.S.C. §522. The debtor must choose which slate of exemptions to use.Which slate to choose will largely depend on the type and value of property owned by the debtor. For example, if all of the debtor’s property is worth $XX,XXX or less the debtor will keep all his or her property under federal exemptions. But if the only important asset of the debtor is a $300,000 homestead, Minnesota exemptions will probably be chosen and the debtor will be able to keep the home. You will probably have to ask a bankruptcy attorney which exemption slate will work for you.
In most Chapter 7 cases the object is to rid the debtor of the obligation to repay debts. Most debts can be discharged in a Chapter 7 case. However, the Bankruptcy Code lists various “exceptions to discharge” – that is debts which cannot be discharged.
Non-dischargeable debts include (these are major non-dischargeable debts – there are others) THIS LIST IS NOT COMPLETE :
Debts for money, services property or related to credit to the extent procured through fraud or false pretenses;
Fraud in a fiduciary capacity, larceny or embezzlement;
Domestic support obligations such as child support or alimony (spousal maintenance);
Debts for willful and malicious injury to another or to property of another;
Certain fines, obligations, penalties of forefeitures payable to or for a governmental unit;
Student loans and the like unless repayment would impose an “undue hardship”;
Debts for death or personal injury caused by debtor’s operation of a vehicle, vessel or aircraft if unlawful because the debtor was intoxicated from use of alcohol, drug or another substance;
Debts which were or could have been listed in another bankruptcy;
Debts incurred to pay a tax that would be non-dischargeable;
Debts to a spouse, former spouse or child in connection with a divorce, separation or similar action;
If you have a question about whether a debt can be discharged, call us at:
Many debtors prefer a Chapter 7 filing because their case is resolved quickly and because they often will not have to make any payments to the trustee. Chapter 7 cases are often resolved within a little more than 90 days. The trustee may object to a Chapter 7 filing from a debtors with a high enough income to be able to pay a significant part ofdebt in a Chapter 13.
Chapter 13 in Minnesota
Chapter 13 is designed to ‘adjust’ the debts of a debtor with regular income. The debtor proposes a plan to repay part or all of his or her debts. The plan normally consists of 36 to 60 payments over 3 to 5 years and must be “confirmed” by the court.
Thus, all Chapter 13 cases require a debtor to be able to make a series of (36-60) monthly payments over a period of years. A Chapter 13 debtor may pay all his or her debts or pay only a small percentage of the debts depending on the debtor’s needs and ability to pay.
At the end of the Chapter 13 when all of the payments have been made, many or perhaps all of a typical debtor’s debts willbe discharged. “Discharged” means a debt is void and is no longer a personal liability of the debtor. A creditor is to enjoined (prohibited) from acting to collect, recover or offset the discharged debt.
Debts that cannot be discharged in a Chapter 7 cannot be discharged in a Chapter 13. (See the above Chapter 7 list) However a Chapter 13 can provide for payment of such debts in a manageable way.
Even if a debt cannot be discharged, Chapter 13 may help. For instance,
Child Support or Alimony. Although a child support or alimony obligation cannot normally be discharged unless fully paid, a debtor can be given more time to make up an arrearage;
Tax obligations. Although a recent tax obligation cannot normally be discharged, a debtor can have time to pay off the obligation and may stop interest or added penalties;
Mortgages and Car Loans. Although missed payments on a secured debt such as a home mortgage or car loan cannot be discharged (unless the whole debt is paid through the plan) a Chapter 13 might be used to stop a foreclosure or repossession and give the debtor additional time to make up an arrearage. A foreclosure or repossession can be stopped if the debtor acts promptly.
Cosigners. A debtor may be able to protect a cosigner on a debt by making payments through a Chapter 13.
In a Chapter 13 a debtor has a bankruptcy estate and also lists exemptions when filing. See the discussion of the bankruptcy estate and exemptions for Chapter 7, above. However, the exemptions may not be as important in a Chapter 13, since the debtor will be able to use property of the estate during the pendency of the case.
A Chapter 13 can even be used to build substantial equity in property owned be the debtor.
• Extinguish 2d Mortgages. If you owe more on first mortgage than your home is worth you may be able to ‘strip off’ a 2d mortgage – meaning you no longer have to pay the 2d mortgage and keep the property (although you still have to make payments on the 1st mortgage).
• Cramdown Car Payments. Chapter 13 can sometimes reduce the debt on a car if a debtor owes more than your car is worth. The amount the debtor owes can be reduced to the current value of the car. In other cases, the interest rate charged on a car debt may be reduced if the current rate is excessive.
Chapter 12 Bankruptcy
A Chapter 12 ‘adjusts’ the debts of a family farmer or fisherman with regular income. This Chapter is designed to keep a farmer or fisherman in business while the plan is carried out. Chapter12 is like Chapter 13 in that a plan is proposed to make regular payments to the trustee. The plan generally does not last longer than 3 years unless the debtor proposes a longer period of up to 5 years. Debtors have some additional powers of a trustee in a Chapter 12.
Chapter 11 Bankruptcy was originally designed to reorganize a commercial enterprise. But changes to the Bankruptcy Code in 2005 made Chapter 11 useful to many individual debtors. For individuals, a Chapter 11 amounts to a more expensive but supercharged Chapter 13.
The object often will be to continue to operate a business while repaying creditors through a reorganization plan. The debtor has a 120 day exclusivity period in which to propose a plan. A debtor can use the plan to pay some creditors and discharge the debts of others. Chapter 11 is often used to free the debtor from burdensome contracts or leases. The “debtor in possession” has most of the powers of a trustee. These powers can be used to recover property and pursue claims to aid reorganization.
Chapter 9 ‘adjusts’ the debts of a municipality. While somewhat similar to a Chapter 11 or Chapter 12 Bankruptcy, Chapter 9 is unique. Since municipalities are entities of State Governments their power to adjust their debts through Bankruptcy is limited by the 10th and 11th Amendments to the Constitution.
Chapter 15 helps insolvent debtors with business problems that stretch across international borders.
Related Bankruptcy Matters
In addition to Chapter 13 and Chapter 7, Twin City Attorneys assists clients who face a range of issues related to bankruptcy. Some of the other matters on which our lawyer staff can advise include:
To learn more about filing bankruptcy or gaining other financial relief, contact us today. We will have a bankruptcy lawyer devise a plan to deal with your financial troubles.
Call us at 651‑639‑0313 for a free phone consultation.