Bankruptcy provides a relief to debtors who are facing unsurmountable debt and is an avenue towards better financial management. While the remedy bankruptcy affords is a wipe out of old debt that was incurred prior to filing for bankruptcy, it is important that debtors are aware and cautious about how they are spending their money in the 90 days prior to filing for bankruptcy

A debtor filing a Chapter 13 bankruptcy may receive income and property tax refunds during their 3-5 year payment plan. In some instances, these refunds are allowed to be kept; in other instances, these refunds must be turned over to the debtor’s Chapter 13 trustee and used to pay creditors. 

A debtor may choose to file a Chapter 7 bankruptcy in order to wipe out their unsecured debt in three to four months. This provides the debtor with a fresh, new start. In a debtor’s Chapter 7 bankruptcy, the debtor’s assigned bankruptcy trustee may “avoid” or “undo” particular transfers of money or property the debtor made prior to the filing of their case. The bankruptcy trustee can avoid a transfer by demanding the return of the transferred property or money from the person or entity to whom the transfer was made.

A Chapter 7 bankruptcy provides debtors with a new and fresh financial start. It is a remedy that allows debtors to wipe out unsecured debt in approximately 3-4 months. Unsecured debt includes credit card debt, medical debt, and personal loans. A debtor filing a Chapter 7 bankruptcy must list and disclose all known debts in their bankruptcy petition and schedules.

Under section 365 of the Bankruptcy Code, a debtor has a choice of either assuming or rejecting a lease while in a bankruptcy. If a lease is “assumed,” the debtor will retain the lease and remain responsible for their obligations under the terms of the lease. 

A debtor filing for bankruptcy may be able to receive garnished wages back if they were garnished within the 90 day period before the bankruptcy case was filed, and if the amount was a total of $600 or more.

Bankruptcy is a great way for Minnesotans to get rid of debt. Once a debtor files for bankruptcy, the automatic stay goes into effect immediately when the debtor’s case is filed.

If a debtor has filed for a Chapter 7 or a Chapter 13 bankruptcy in the past, as a general rule, the debtor must wait after a particular time period has passed before filing for bankruptcy again. 

A debtor who is financing a vehicle and is planning on filing for bankruptcy, has the option to either retain the vehicle and continue making payments on the vehicle or voluntarily surrender the vehicle and give it back to the car lender. When a debtor voluntarily surrenders a car, the car is returned back to the car dealership and the debtor ceases to make payments on the car. 

During a Chapter 7 or a Chapter 13 bankruptcy, judgment liens recorded against a debtor’s property may be removed. This is known as lien avoidance. 11 U.S.C. §522(f)(1) provides that, “notwithstanding any waiver of exemptions, but subject to paragraph (3), the debtor may avoid the fixing of a lien on an interest of the debtor in property to the extent that such lien impairs an exemption to which the debtor would have been entitled under, subsection (b) of this section, if such lien is a judicial lien.” In other words, a judgment lien on a piece of property can be avoided if the lien would result in a loss of some or all of the exempt equity if the property were sold.

A claim in a bankruptcy case is essentially a creditor’s assertion of the dollar amount that is due and owing from the debtor, as of the date the bankruptcy petition was filed. A claim establishes a creditor’s right to receive future payments from a debtor’s bankruptcy estate, assuming that there are assets and money available for distribution. The distribution of money to creditors is subject to the priority rules laid out under the Bankruptcy Code. The Bankruptcy Code’s definition of a claim is very broad. A claim does not have to be a fixed amount that is due at the time the bankruptcy case was filed – it could merely be an estimated amount or unliquidated. A claim must be “allowed,” before the claim holder or creditor can be entitled to receive any distributions from the bankruptcy estate. 

    Monthly living expenses can be high, especially rent. If you cannot keep up with rent payments, eventually your landlord could begin a formal process of removing you from your house or apartment; this is known as an eviction. A Chapter 13 bankruptcy can be helpful in stopping the eviction process. Under section 362(b)(22), a landlord may continue an eviction proceeding against a debtor to obtain possession of residential property, but only if a judgment was obtained against the debtor before the filing date.

    A bankruptcy discharge provides the debtor with a fresh start. It is a court order that releases a debtor from personal liability for certain types of debts that were incurred pre-bankruptcy or pre-petition. Once a bankruptcy discharge issued, the debtor is absolved of any obligation to repay their debts. The bankruptcy discharge voids personal liability on judgments and acts as a permanent injunction against any act to collect a discharged debt as a personal liability of the debtor. The bankruptcy discharge applies only to debts.

    A debtor filing a Chapter 7 bankruptcy may keep their tax refunds in certain situations. Whether they can keep their tax refunds and how much they can keep, largely depends on whether their case was filed using state or federal exemption law to protect all of their property. A debtor typically chooses federal exemptions when they have little to no equity in their homestead property. Under federal exemption law, debtors get up to $15,425 to protect miscellaneous property that is not specifically protected under another exemption law.

    Bankruptcy was designed to be a remedy, to help people who would like assistance and guidance to be in a better financial situation. The bankruptcy system was created to provide honest debtors a fresh start. Therefore, Congress enacted bankruptcy fraud and related statutes to deter and punish those who commit bankruptcy fraud. One of the more commonly charged bankruptcy fraud provisions is 18 U.S.C. §152(1), which makes it a crime for a debtor to “knowingly and fraudulently” conceal estate assets from the court, the trustee, or creditors.