A Chapter 13 bankruptcy allows a debtor to cure mortgage arrears, keep all nonexempt property without paying the trustee additional cash, and pay priority tax debt in their Chapter 13 plan. Priority tax debt is tax debt that was incurred by a debtor in the previous 3 years prior to the filing of their Chapter 13 bankruptcy. Priority tax debt would otherwise be nondischargeable in a Chapter 7 bankruptcy. A Chapter 13 bankruptcy allows debtors in a challenging financial situation to repay a portion of all of their debts in a structured and organized way, by making affordable monthly payments to the Chapter 13 trustee’s office.

After a Chapter 13 bankruptcy is filed, it must be confirmed at the Chapter 13 confirmation hearing. A Chapter 13 confirmation hearing is a hearing in which the bankruptcy judge formally approves the debtor’s Chapter 13 plan, and determines whether the plan meets the Chapter 13 requirements. Debtors do not need to attend this hearing. The confirmation of a Chapter 13 plan is important, as after the Chapter 13 plan is confirmed, debtors may start to rebuild their credit and it will be easier for debtors to obtain new financing, such as for a new vehicle. In order for a debtor’s Chapter 13 plan to be formally confirmed by the court, it is crucial that debtors in a Chapter 13 bankruptcy, file all required tax returns for tax periods ending within 4 years of their Chapter 13 filing. This is a requirement dictated by the Bankruptcy Code. Additionally, the Bankruptcy Code also requires that debtors must continue to pay all current taxes as they become due and continue to file all required tax returns timely throughout their Chapter 13 bankruptcy. A debtor’s failure to file tax returns or pay current taxes during a Chapter 13 bankruptcy may result in their case being dismissed, or may result in their Chapter 13 plan not being formally confirmed by the court. The Chapter 13 trustee will review the debtor’s Chapter 13 plan, and will look for changes in income. The trustee will also review the debtor’s tax returns each year, to determine if there is a change in income that is significant enough to require a modification in the debtor’s monthly Chapter 13 payment plan. The trustee will also review the debtor’s tax returns to determine if the debtor will receive any tax refunds that must be turned over to the trustee. In Minnesota, the Chapter 13 trustee’s office allows joint tax filers to keep $2,000 of their tax refund and allows single tax filers to keep $1,200 of their tax refunds each year in the Chapter 13 bankruptcy. The Chapter 13 trustee also allows the debtor to keep any portion of their state and federal refund that derives from the federal earned income credit and Minnesota working family credit, in addition to these amounts. Any portion of the debtor’s tax refunds that the trustee does not allow the debtor to keep, will generally have to be turned over to the trustee. These funds would be used to pay the debtor’s creditors.

     Over the years, I have seen some brave Minnesotans think it is a good idea to file bankruptcy themselves. Here is what they quickly discovered. For those I spoke with, they regretted filing bankruptcy themselves. Usually that regret surfaced after meeting with a Chapter 7 trustee and after listening to the trustee’s commentary and realized, they were in some trouble.

When you take the leap to speak with a bankruptcy attorney, a big weight should be lifted off your shoulders, as you will be given your options for taking control of your finances again.  

     What is a reaffirmation agreement in bankruptcy? First, it is important to note that a reaffirmation agreement is a subject discussed in Chapter 7 Bankruptcy, not Chapter 13 Bankruptcy. There is no such thing as a reaffirmation agreement in Chapter 13 Bankruptcy. In Chapter 13 Bankruptcy, collateral on a loan is either surrendered, paid on the plan, or paid outside the plan, with language on the plan that binds both debtor and creditor. 

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

     The prospect of filing Chapter 7 Bankruptcy can be daunting. For those of us with high anxiety, it can push you to the far edge of your comfort zone, and beyond. Even for those with lower anxiety, the thought of filing Chapter 7 Bankruptcy can be overwhelming. Unfortunately, there are ways to make a bad situation worse. These are two things you should watch out for when filing Chapter 7 Bankruptcy in Minneapolis, MN. 

     You live in Minneapolis, MN and you are contemplating hiring LifeBack Law Firm to file Chapter 7 Bankruptcy on your behalf. You know you are going to hire LifeBack Law Firm as your bankruptcy law firm because LifeBack Law Firm is Minnesota’s most kind and helpful bankruptcy law firm. But before you file, you want to know, what do Chapter 7 Bankruptcy trustee’s look for in a Chapter 7 Bankruptcy case. The first thing you need to understand is Chapter 7 trustee’s get paid a small fee to administer most Chapter 7 Bankruptcy cases. Most would not be a trustee if they were paid this small fee only. 

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.

Filing for chapter 7 bankruptcy is a great way for individuals struggling with debt to find financial relief. When filing bankruptcy, anyone who earns less than the median Minnesota State income, based on their household size, can file a chapter 7 bankruptcy case. When they do so, the court discharges their personal liability on all of their debts, with a few exceptions (i.e. past due child support, most taxes, criminal fines, etc.)

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.

In a chapter 13 bankruptcy case, a person makes payments towards their debts in a three to five year repayment plan. In most cases, the debtor pays only a fraction of their total debt. After successfully completing their repayment plan at the end of three to five years, the debtor receives a discharge which relieves them from any further responsibility to pay their remaining debts, with limited exceptions.  Chapter 13 bankruptcy often affords a tremendous amount of financial relief for those who are struggling to pay their debts and make ends meet.  

There are many reasons you may want or need to file a chapter 13 bankruptcy. The main reasons clients consider filing a chapter 13 are income, transfers, tax debt, arrears, and assets. 

Filing for bankruptcy brings a lot of relief to thousands of Minnesotans each year. When a person files a personal chapter 7 bankruptcy case, they are afforded a great deal of protection from their creditors and relief from their debts, most of which are completely wiped out forever when they receive their discharge. Up until when a person files a bankruptcy case, they often continue to attempt to pay their creditors as much as they can. Often, it is only when a person realizes that it is futile to continue to pay their debts, and simultaneously afford to pay their other necessary bills, that a person decides to file bankruptcy and stops paying their creditors.  

No matter how much you love your home, when you file bankruptcy a question that likely will pop into the back of your mind is, if I file will I ever be able to sell my home? The short answer is yes. Although you have filed a bankruptcy, you are still able to sell your home down the road and keep all of the exempt net proceeds from the sale. 

Welcome back to our series of blog posts on the history and philosophy of the economy, bankruptcy, and debt – today let’s return to the not-often discussed intersection of philosophy and finance.

Getting behind on your mortgage is an extremely stressful situation. If you are wondering what your options are, you have come to the right place. Please keep in mind the options in this blog are general ideas for mortgage arrears and are not specific advice. You should speak to a licensed attorney for advice on your specific situation.