Last week I discussed the timing of the filing of a Chapter 13 Bankruptcy case specifically in relation to mortgage defaults and foreclosure. Chapter 13 Bankruptcy is commonly filed by people with debt problems who are facing defaults in secured loans, such as home mortgage loans. The most common secured loan, though is a vehicle loan. Because of the retail price of both new and used cars, many if not most consumers have to finance the purchase of a vehicle.

Chapter 7 Bankruptcy is also commonly referred to as the “fresh start” bankruptcy. Chapter 7 is the most commonly filed consumer Bankruptcy in Minnesota for several good reasons. Immediately after you file a Chapter 7 you’re protected from any creditors trying to take property that secures a debt. Creditors are prohibited from obtaining a judgment for unsecured debt that can be turned into a lien against your property. You also get the option to keep any property that secures a debt or give it up to your creditor without having to pay them. Chapter 7 Bankruptcy can really give you some comforting power over your creditors. Here’s how:

At Kain & Scott, one of the biggest concerns that our clients have is what’s going to happen to their house when they file bankruptcy. However, there’s no need to be alarmed because most of the cases that our MN Bankruptcy Lawyers file are considered “no asset” cases. That means you get to keep everything, including your house. No matter where you live in Minnesota there are either state or federal bankruptcy exemptions designed to protect your property. And fortunately in MN our MN Homestead Exemptions are rather generous compared to most other states.

So your life is upside down and in financial turmoil. You can’t afford to satisfy your debts anymore and creditors are calling screaming at you for payments. You feel guilty, stressed out and depressed but at the same time you’re asking yourself, “What in the world am I supposed to do?” After realizing that doing nothing isn’t going to make things better and debt consolidation is a waste of time you come to the conclusion that filing bankruptcy is the best and/or only solution for you. Now you need a MN Bankruptcy Lawyer... So what’s next?

For most of the clients I meet at my Minneapolis Bankruptcy Law Firm, the most important question they have, after we finish analyzing their financial circumstances is whether it is advisable to file a bankruptcy case. That’s the primary question, and in most cases, the only one. But for some clients there are additional questions - should I wait to file a case, or should I file right away. And for a few clients, the question is whether they should file a case in Minneapolis, Minnesota, or some other state. Let’s take a look at the factors that enter into decision-making about whether to file, when to file and where to file.

In my last blog, Can I File Bankruptcy In MN And Keep My House Or Car, I discussed the social cost of debt - that is, what happens to our society as a whole when individuals find themselves in a financial position in which they cannot manage the debt they have incurred. I discussed the approaches people take when debt has gotten out of control. I discussed in detail the approach of essentially doing nothing to take the initiative to resolve the debt problem, and the cost to the individual who takes this approach and to society as a whole. At the end of the blog, I started to discuss the social cost of taking the most common approach to resolving difficult debt issues: increasing income and decreasing expenses to allow a more significant pay-down of debt out of a person’s monthly budget. 

In my last blog I wrote about the choices many clients have to face: whether filing a Chapter 7 or Chapter 13 Bankruptcy case is best for them. I discussed that there tends to be “chapter 7 income” and “chapter 13 income” and “chapter 7 debt” and “chapter 13 debt.” Now I would like to discuss the last of the three factors that should be considered in making the decision between chapter 7 and chapter 13 - what kind of assets does the client own, for just as there are income and debt distinctions to make, there are also “chapter 7 assets” and “chapter 13 assets.”

At the end of the last blog, Can i keep my house or car if i file a Roseville MN Bankruptcy, I wrote that even if a client of mine owned a vehicle that he or she liked, with a payment that the client could afford and the car was a new enough model that it was possible that the lender would repossess the car unless the client signed a reaffirmation agreement, I would still advise the client not to do so. Why? In my analysis, it all comes down to worst-case scenarios. By definition, with my bankruptcy practice I am not dealing with lucky people. My clients are my clients because things have not worked out as planned for them financially, or some sudden unanticipated event has taken place to create financial strain. My clients at our Bankruptcy Law Firm in Roseville are used to having worst-case scenarios come true.

Last week, I wrote about how bankruptcy cases interact with home mortgage and car loans in chapter 7 cases. The general rule is simple: as long as individuals in bankruptcy cases make their house and car payments on time, those individuals should be able to “keep” their homes and cars. The reason for this is that the equity in residential real estate and motor vehicles is almost always exempt under either the Bankruptcy Code or the Minnesota state law that deals with debtors and creditors. But while that general rule is true, individuals who are thinking about filing a bankruptcy case need to know that there are issues that these individuals should be aware of as they make a decision - first, whether to file a bankruptcy case and second, if they intend to keep their homes and/or their cars after their bankruptcy case.

One of the most common questions that potential clients ask their Bankruptcy Attorney when filing is what is the effect that bankruptcy has on continuing home and car ownership. It's understandable that people with debt problems are worried about retaining the place where they live and retaining the car or truck they drive. My typical response is to assure them. As long as you continue to make any loan payments associated with your home and/or your vehicles, you should be able to keep your home and your car. Now this is a good, sound, general statement. And it's true; but to be well informed clients need to know more about theinterplay between ownership of assets and bankruptcy.

I wrote in an earlier blog, Death, Taxes & Maple Grove MN Bankruptcy, that under certain circumstances, an individual who has tax liabilities can sometimes have these tax liabilities discharged in a bankruptcy case. I noted, though, that discharge is available only in very specific circumstances: the tax owed must be income tax, the tax liability must be “old” and returns must have been filed in a timely fashion. While some people who have tax problems meet these criteria, most of my clients do not. So the tax problem that they have is not going to disappear simply by filing a bankruptcy case. So what can we do about tax liability that isn’t discharged in a bankruptcy case?

Benjamin Franklin famously wrote “in this world nothing can be said to be certain, except death and taxes.” And death and taxes can add layers of complications to debt problems - and create issues for a person who is thinking about filing a bankruptcy case. Let’s take a closer look at the only two certainties in life.

If you’re an individual in Minnesota, then technically you don’t need an attorney to file bankruptcy. The constitution of the United States allows anyone to file bankruptcy on their own. This is also known as a “pro se” filing. However, you have to file several forms and schedules with the bankruptcy court so if you choose this route, you need to be very, very careful. The consequences of filing improperly are severe. You could be taking a chance at losing your car, your house or your retirement account. You have to know what you’re doing and that’s why hiring your Maple Grove Bankruptcy Attorneys at Kain & Scott is desirable.

Everybody asks our Bankruptcy Attorneys in Eden Prairie MN what they get to keep and what they have to lose after they file bankruptcy. However 98% of all bankruptcies that are filed are called no-asset cases, meaning that you will get to keep everything that you own. This is because most everything these days is exempt by an attachment from a creditor- contrary to back in the mid to early 1800’s before bankruptcy started. Prior to the formation of bankruptcy in the 1870’s if you owed someone a lot of money they would take you to court, get a writ of attachment, come to your home in Eden Prairie and literally take everything you own. The problem with this is that those people who lost everything would become a burden on the state; the government would have to support them. Well the government didn’t want to do that anymore so they created a list of things that are exempt from attachment. Meaning the creditors can’t get them or have them liquidated to pay your debt. We still have this list today.

The truth is that Bankruptcy is a negative credit event. However, it’s not life threatening and there are ways to immediately start rebuilding your credit after you file with your Roseville Bankruptcy Attorneys. Especially after filing a Chapter 7 Bankruptcy. Chapter 7 Bankruptcy, also known as the “Fresh Start Bankruptcy”, allows you to press the re-set button and get all of your unsecured credit card, medical, department store card and some personal loan debt discharged in only four months! Now a lot of people assume that their life is over at this point, at least financially, but that’s not the case. There are a lot things that you can do to start rebuilding your credit to start getting those larger loans and mortgages again.