Previously, I wrote about different individuals you’ll come across in your bankruptcy.  Here, I want to discuss and provide common terms you’ll come across as well.

A chapter 13 is a reorganization bankruptcy where you establish a repayment plan that usually lasts 5 years.  Typically, the repayment plan is based on a budget that is created by looking at your net income and then your expenses.  

When you decide to file bankruptcy there are other individuals and terms that are used when describing the process and your case.  Here are a few different parties you’ll come across during your bankruptcy.

Here is what CAN occur in a Chapter 7 Bankruptcy:

There are many options to try and resolve an abundance of debt.  Many of our clients seek these options before filing bankruptcy and that’s okay, since bankruptcy can be an intimidating process.  So, let’s breakdown your other options.

If you owe money to your credit card company, and if you stop paying them, they can sue you for the amount owed.  If that same credit card company obtains a judgment from a court, they can take that judgment and garnish your wages.

One of the most important parts of filing a bankruptcy is the ability to get rid, or discharge your debts.  

If you receive an inheritance before filing bankruptcy, whether it’s cash or physical property, then those items may become part of your bankruptcy.  

Typically, you can’t get rid of tax debt in a Chapter 7 bankruptcy.  But, if you can afford the payments, then a Chapter 13 bankruptcy is a great tool to help you with this type of debt.  This is because you’re allowed to pay your tax debt through a Chapter 13 repayment plan, which lasts 3 or 5 years.  Even if your tax debt is considerably large, filing a Chapter 13 may still make financial sense, since you’re not incurring interest and penalties during your bankruptcy.  Plus, you’re not paying back your credit credits, unsecured loans, and medical bills, and those debts will go away once you’re finished with your Chapter 13 plan! 

Your 341 Meeting or the Meeting of Creditors is the opportunity for your Trustee and creditors to ask you questions about your petition and schedules, while under oath.  

A very common question I get when I speak to potential clients is – can I keep one credit card out of my bankruptcy?  In short, no.  This is due to the fact that you have to list all your debts.  This includes unsecured debt, so all your credit cards, and unsecured loans, your tax debt, domestic support obligations, such as child support, and all secured debt, including your home and cars. 

You may think that your credit union is the same as a typical bank, and in many respects, it is; but, there are some differences. For example, your credit union is a nonprofit, whereas a bank like Huntington Bank, is for profit.

Two common questions I get when I speak to clients are – what happens to my credit and how do I repair it after I file my bankruptcy? Bad news first, your credit will suffer negatively when you file. Now the good news, filing bankruptcy is often the fastest way to repair credit and obtain better financing.

When you file for bankruptcy, you’re seeking relief from your debts, but you’re also declaring and disclosing all your assets, liabilities and income. You must submit your petition and complete 10 different schedules, a complete statement of financial affairs and calculate a means test. The purpose of the means test is to see whether or not you can file a chapter 7 bankruptcy.

There are a number of parties when you decide to file for bankruptcy.  There’s you, the debtor.  Your attorney, if you choose to hire one, who represents you.  There are your creditors, companies or individuals you owe money to.  And, there’s a trustee.  A trustee is an individual who reviews and investigates your bankruptcy petition and schedules.  They are supervised by the courts and the United States Trustee Program, which is a part of the Department of Justice.

Within your bankruptcy schedules, there are two types of debt that the bankruptcy court require you to disclose – secured and unsecured.  Understanding what type of debt a bankruptcy debtor has will help them understand their bankruptcy better and with their finances once they’ve completed their bankruptcy. 

You’ve decided to file bankruptcy to get rid of your outstanding debt. But, you owe your parents money and don’t want to include them in your bankruptcy. So, you decide to pay them back and then file. While your intentions are good, you’ve made a common mistake of making an insider preferential payment.

Gambling is an addiction brought on by a combination of psychological, societal, and familial factors. The repercussions of gambling affects you, your family, your job and other important parts of your life. Serious gamblers take out personal loans, use their retirement accounts, savings, and even borrow against their home or car loan.

If you have been unable to pay your debt back for some time, your creditors may seek legal action against you to collect that debt. Usually, when you miss a payment, your creditors will they start with phone calls, then letters, or e-mails, and they get more aggressive.

After some time, they will start a lawsuit and you will know by receiving a summons and complaint. If you receive a summons and complaint, do not ignore it like a phone call or regular letter!

With the possible exception of your home, your car is usually your most important asset. You need it to get to work, buy groceries, take your child to their doctor appointment, etc. When you file a chapter 7 bankruptcy, you may be able to keep your car, but that depends are a number of factors.

Since mid-2020, an eviction moratorium has been in place to assist renters due to the ongoing Covid-19 pandemic. This has been a great lifesaver for renters, but the moratorium won’t last forever and your obligation to pay rent will continue when the moratorium ends.

A common question I hear when clients decide to move forward in a bankruptcy is – will I lose my home or will I lose my car? A lot of the time the answer is, no. If there’s a secured loan attached to your property and I’m able to apply the applicable law to protect the equity, then you won’t lose it. Of course, some secured creditors want you to sign a reaffirmation agreement.

Bankruptcy is a last option for many people. Before making a decision to file, most people will struggle with their rent or mortgage and other bills. Due to ongoing stress, mistakes will occur, such as paying a credit card bill instead of an electric bill or paying the monthly balance on a personal loan instead of their home owner’s association fee.

Filing a chapter 7 or chapter 13 bankruptcy can be a scary process, but in the right hands of a proper attorney, it doesn’t have to be. Let’s say you file and now you want to know what happens after you’ve filed.

First, the automatic stay is applied when your case is filed. This stay prevents your creditors from pursuing any further collection activity, including lawsuits or garnishments.

Since mid-2020, an eviction moratorium has been in place to assist renters due to the ongoing Covid-19 pandemic. This has been a great lifesaver for renters, but the moratorium won’t last forever and your obligation to pay rent will continue when the moratorium ends.

Imagine having job security, being able to pay your bills, and life being just fine. Then, you lose your job and you can’t keep up with your bills and all of the sudden you’re sued for not paying your credit card or a creditor bringing you to court for breaching your contract to them. This happens all the time.

As you may know, a chapter 13 bankruptcy is a reorganization bankruptcy where you establish a repayment plan that usually lasts 5 years. Typically, the repayment plan is based on a budget that is created by looking at your net income and then your expenses.  One of the many benefits of a chapter 13 bankruptcy is the availability to lower or “cram down” a debt from the current loan balance to the value of that debt.

Bankruptcy is a last option for many people. Before making a decision to file, most people will struggle with their rent or mortgage and other bills. Due to ongoing stress, mistakes will occur, such as paying a credit card bill instead of an electric bill or paying the monthly balance on a personal loan instead of their home owner’s association fee. They may even skip one or two mortgage payments to pay an unsecured debt.

A garnishment is when someone, usually a creditor or someone you owe money to, goes into your bank account or paycheck to obtain money that you owe.

On March 11, 2021, the American Rescue Plan Act was signed into law. Part of this law expended the existing child tax credit for tax year 2021.

Instead of applying up to $2,000 per qualified child, the amount was increased to $3,600 for a child under the age of 6 and $3,000 for a child aged 6 – 17. In addition, a household would receive half of either $3,600 or $3,600 in direct monthly payments between the months of July and December 2021.

In this discussion, I am going to focus on Minn. Stat. § 550.37, subd. 12 and 12a, referencing how bankruptcy can affect manufactured homes and vehicles in Minnesota.

I am going to skip over subdivision 11, which covers “beneficiary associations” because this law was found unconstitutional. See the court decision, In re Tveten, 402 N.W.2d 551 (Minn. 1987).

Individuals looking for a fresh start seek a bankruptcy to get rid of their overwhelming debt. They may be able to file under a chapter 7 or chapter 13, or they may be eligible for just a chapter 13.

In Minnesota, you are allowed to exempt or protect proceeds stemming from the death of your spouse or parent up to $50,000. You may protect or exempt $12,500 more for each dependent or child. If you have received funds from an unfortunate event such as this and are considering filing bankruptcy, consider letting Kain & Scott help you protect your property and funds.

In my last installments about understanding Minnesota law to protect your property (Part 5), I discussed tools of the trade and farm machine. In those cases, I was able to find case law to help describe those laws as viewed by a court. Here, the case law is sparse, so I’m going to keep it brief, but still speak on the subject if when you are allowed to exempt property in Minnesota.

Under Minn. Stat. § 550.37, subd. 6, you are allowed to exempt property if your interest in that property consists of “tools, implements, machines, instruments, office furniture, stock in trade, and library reasonably necessary in the trade, business, or profession of the debtor…”.

From the ancient Mississippian people who grew crops near present-day Winona, to European immigrants farming in Jordan, and to present-day family farms, Minnesota has a rich farming history.

Under Minn. Stat. § 550.37, subd. 4, “[a]ll wearing apparel, one watch, utensils, and foodstuffs of the debtor and the debtor's family; and (b) household furniture, household appliances, phonographs, radio and television receivers of the debtor and the debtor's family...” are exempt. See In re Irwin, 232 B.R. 151 (Bankr. Minn. 1999).

In a previous post, I wrote about some simple rules for determining ownership of property.  The concept of property is important in both chapter 7 and chapter 13 bankruptcy cases – it affects the administration of chapter 7 cases and the amount paid in monthly chapter 13 plan payments, since the debtor’s property composes what’s called the bankruptcy estate.  And in most cases, property ownership is pretty easy to determine.  But there are some cases in which who owns property – and how much the property is worth – can get complicated.  Here are a few examples: