Right before his son went off to the big city in Shakespeare’s Hamlet, Polonius told Laertes “Neither a borrower nor lender be/For loan oft loses both itself and friend.” In other words, be careful about borrowing and lending money to friends. If you lend, they won’t pay it back; if you borrow, you’ll fall out of favor. But loaning and borrowing is not bad. In fact, sometimes both are very good.

His advice is still valid in today’s Minneapolis. People haven’t really changed much since the sixteenth century. So, mixing money and friendship still ends badly most of the time. But sometimes, you need to borrow money. In fact, over two-thirds of the nation’s $13.2 trillion in household debt is mortgage debt. Most of the time, mortgage debt is “good debt.”

Many Minnesota families have excessive credit card debts. Making matters worse, according to one estimate, 60 percent of cardholders struggle just to make the minimum payment. So, every month, the family goes deeper into debt. This downward debt spiral quickly becomes overwhelming.

Many “debt consolidation” firms only make empty promises. But there is a federal debt relief program that’s designed to do away with excess debt and give Minnesota families a chance to start over. But bankruptcy is a very big decision. Before you file your voluntary petition, it’s important to know everything about Chapter 7 bankruptcy.

Most likely, bankruptcy would affect a business partner. However, the effects are almost all positive.

Sometimes, liquidating a failing business is the best course of action. This issue is very common, as only a small percentage of new businesses survive past the first five years. A failed business does not necessarily mean that you and your partners are poor planners or businesspeople. It just means that, for whatever reason, a particular concept did not work out.

Last week I wrote about the timing of filing a bankruptcy case when determining how to know if you should file bankruptcy. The focus of that was when to file in the context of the collection process - filing to avoid the execution on a judgment and to avoid the entry of a judgment entirely. The idea was to give the people reading the blog a sense of the collection process and what a bankruptcy filing would create the most protection for someone looking at difficult to manage debt issues . This week I want to continue examining the timing issue, but instead of looking at the collection process, look at timing issues through the lens of the Bankruptcy Code, and its requirements for filing. And I want to spend some time examining the mortgage foreclosure process and how foreclosure affects the decision of when to file a bankruptcy case .

In my last two blogs, I’ve written about some unexpected consequences that some of our clients experience as a result of filing a bankruptcy case.  These surprises come from different areas - from the fact that ACH payments can be discontinued to the fact that a lapsed car insurance policy can result in a safe driver being dropped into the risk pool when a new auto-owners policy is taken out.  This week I’ll continue to write about expecting the unexpected as a result of filing a bankruptcy case.

Absolutely not. Financial problems are so common that they touch almost everyone. Many people live paycheck-to-paycheck. So even a slight income disruption or a small unexpected expense is often devastating. One in four Minnesotans worry about money so much that they have PTSD-like symptoms. That figure is self-reported, so the actual number may be even higher.

In other words, if financial problems could affect your job, many of us would be out of work. That’s simply not a workable environment, so bankruptcy discrimination is illegal.

Bankruptcy gives fresh starts to distressed debtors. But it uses the least restrictive means to accomplish this goal. Property rights are sacred to many people in America, and that includes a contract between a debtor and a creditor. So, bankruptcy does not interfere with that contract.

Instead, a bankruptcy discharge removes the debtor’s legal obligation to repay debt. It does not affect the collateral consequences. Assume a judge discharges past-due university tuition. The school cannot do anything to collect the amount owed. However, it can withhold the student’s transcript until the debt is paid or otherwise resolved. A bankruptcy judge does not have the authority to order the school to release the transcript.

Last week I started writing about the collateral events in a bankruptcy case that can confuse, concern or surprise bankruptcy debtors.  I looked specifically at the fact that many creditors will automatically discontinue ACH automatic withdrawals out of the bank accounts of bankruptcy debtors and that many creditors will disable a bankruptcy debtor’s ability to pay bills online (by the way, many pay-by-phone services are discontinued, also).

This week I will write about some other “surprises” that debtors can find in a bankruptcy case.

Technically, the answer to this question is “yes.” However, there may be some debt that you do not want bankruptcy to clear.

There’s a significant difference between secured and unsecured debt. Secured debt includes things like home mortgages and auto loans. If the debtor violates the security agreement, the moneylender has the right to repossess the collateral. That right remains in place whether the debtor files bankruptcy or not. Unsecured debts are things like credit cards and medical bills. As outlined below, these debts sometimes have collateral consequences as well. But in most cases, they are quite limited.

One of the most common questions that I get from clients after we’ve gone through the process of preparing a bankruptcy case for filing at Kain & Scott is “what else should I know?”

It’s a perfectly understandable question - our clients have been with us at every step of the process of preparing their bankruptcy petition, schedules and statements.  They’ve spoken with us at the initial stage, where we put together a “game plan” for addressing their financial problems. They’ve been with us as our assistants verify the facts of their case to make sure the information that is on the petition and schedules filed with the court is complete and accurate.  And they’ve sat in with the lawyer on their case to make sure, as the lawyer and clients review the petition and schedules together, that the lawyer is satisfied that there are no legal issues that will create complications in the client receiving a bankruptcy discharge. We process a lot of information, together.  But many clients want to be sure that they’ve been fully informed as to what will happen when their case is filed and what they can expect after filing and after they receive their discharge.

Bankruptcy gives fresh starts to unfortunate yet honest debtors. This fresh start usually comes through a Chapter 13 repayment or a Chapter 7 “liquidation” bankruptcy.

Unfortunately, there is a presumption in the law that criminal and civil fines are related to dishonesty. That’s certainly not always the case. Some people make one poor decision under difficult circumstances. Others got mixed up in a bad situation they did not fully understand. Still others were simply in the wrong place at the wrong time. But the presumption of dishonesty still applies.

Raising a family in Minneapolis is not easy from an emotional or financial perspective. Statistically, wage growth barely keeps up with general inflation. In certain areas, most notably medical bills, wage growth rates are not even close to inflation rates. As a result, thousands of your neighbors file for bankruptcy protection every year. They understand that financial problems, like many other problems in life, only get worse if you ignore them.

Despite some recent changes to the Bankruptcy Code, this law still gives the honest but unfortunate debtor a fresh start. At Kain & Scott, we do much more than help people get this fresh start. We help them maximize the opportunity.

All bankruptcy wipes out debt. The type of bankruptcy you need to file usually depends on the type of debts you owe.

David Debtor had some unexpected medical bills last year. His daughter had emergency surgery out-of-network and he ran his car off the road one night. He now owes tens of thousands of dollars that he can’t afford to pay. He tried to retire the debt as best he could. But his payments hardly made a dent and put him behind in other areas. He’s not quite at the desperation point, but he is getting close.

Just before Laertes went off to Paris in Hamlet, his father (Polonius) gave him a slew of fatherly advice. One suggestion was “Neither a borrower nor a lender be.”

But most of us have ignored that advice. We are both borrowers and lenders. So, it’s very important for us to understand how bankruptcy affects both groups. Many of our previous posts focus on the rights of debtors in bankruptcy. That makes sense, because we are a debt-relief law firm. But we also need to examine creditors rights in bankruptcy. Believe it or not, moneylenders are people too.

Making the decision to file a bankruptcy case is never easy; however, bankruptcy may be the best solution to your debt problems.  Bankruptcy offers many advantages that other debt solutions do not offer. Although there are numerous advantages, there are also some disadvantages. To help you weigh your options, our attorneys discuss all of the pros and cons of Chapter 7 during your free bankruptcy consultation.  Below are some of the common pros and cons of Chapter 7 that apply in most cases filed in Minnesota.

In the last two blogs, I’ve written about the issues presented in a bankruptcy case when a small business faces financial difficulty.  And I’ve concentrated on the business, not the business owner, in writing about these issues.  In the last two blogs, I’ve spent some time looking at the issue of whether a business should remain open - it’s a critical first issue for business owners with money problems.  This week, let’s look at the issues that business owners face when the owners have decided to close the business and wind up the financial affairs of the business.