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.
Some Common Features of Consumer Bankruptcy in Minnesota
Your fresh start begins the moment you file a voluntary bankruptcy petition. That’s when the automatic stay takes effect. In most cases. Section 362 of the Bankruptcy Code prevents first party moneylenders, third party debt buyers, and even public agencies like the IRS from actions like:
- Wage garnishment,
- Vehicle repossession,
- Civil lawsuits,
- Involuntary eviction, and
- Home foreclosure.
The automatic stay may have limited application if the debtor has filed bankruptcy more than once in the past year. Moreover, a creditor can ask the judge for a waiver. These cases are incredibly difficult for the moneylender to win, especially if the debtor has an aggressive attorney.
When players file bankruptcy in board games, like Monopoly, they lose most or all of their assets. But in real life, Minnesota debtors get to keep most or all of their assets. Some common exemptions include:
- Home equity up to $390,000,
- Most life insurance cash value and other insurance policies and proceeds,
- Retirement accounts of any number and value,
- Most government benefits,
- Some wages and/or money in bank accounts,
- Personal property, and
- Motor vehicle.
It’s important to note that an asset’s bankruptcy value is usually much lower than its fair market value. For example, many petitions use the IRS QSV (Quick Sale Value), which is 80 percent of the fair market value.
Chapter 7 Bankruptcy in Minneapolis
The poorly-named “liquidation bankruptcy” is often an excellent option for families with significant amounts of unsecured debt. This category generally includes any obligations which the debtor simply promised to pay, either orally or in writing. Some specific examples include:
- Medical bills,
- Credit card debt,
- Government loans,
- Delinquent income taxes, and
- Payday loans.
Special rules apply to some of these debts. For example, IRS and Minnesota Department of Revenue income taxes are dischargeable if the obligation is at least three years old and the return has been on file for at least two years. Tax debt illustrates another aspect of discharge as well. Bankruptcy eliminates the legal obligation to repay the debt, but not the debt itself. So, if you have an IRS or MDR tax lien, you must remove it separately, even if the bankruptcy judge forgives the debt.
Procedurally, a meeting with the trustee (person who oversees the bankruptcy for the United States Trustee’s Office) takes place about six weeks after the filing date. The trustee usually asks for some financial and identification documents, such as recent tax returns and a Social Security card. Assuming there are no red flags, and there rarely are, the judge signs a discharge order 60 days after the meeting with the trustee.
Chapter 13 Bankruptcy in Minnesota
When a Chapter 7 bankruptcy discharge is entered, if a debtor is in default on secured debt, such as home mortgages and auto loans, the moneylender has the ability repossess or foreclose on the collateral. The Chapter 13 wage-earner plan avoids that outcome. This chapter gives debtors up to five years to erase secured debt delinquency.
Essentially, the trustee puts the debtor on an allowance for the entire protected repayment period. Any disposable income during that period goes to a monthly debt consolidation payment. Assuming that the debtor makes all the scheduled payments, the automatic stay usually remains in force the entire time.
Some advanced options are also available in some Chapter 13s, such as the strip-off and the redemption option. In some cases, a bankruptcy attorney can remove a junior lien on a home, such as a HELOC. The redemption option is available with regard to many motor vehicles. After the debtor pays the vehicle’s fair market value, the debtor owns it free and clear.
At the end of the repayment period, any remaining unsecured debt is discharged, as outlined above.
Chapter 20 Bankruptcy in Minneapolis
This Chapter is not in the Bankruptcy Code, but it’s a very good option for a number of families in Minnesota.
Many debtors begin in Chapter 13 but are unable to afford the monthly debt consolidation payment. These individuals can convert to Chapter 7 and have their unsecured debts discharged in a few months as opposed to a few years. Some people do the opposite. A Minneapolis debtor can file a Chapter 7 and discharge unsecured debts. Then, the debtor can file a Chapter 13 to take advantage of the protected repayment period.
At Kain & Scott, we offer free credit repair to Chapter 7, Chapter 13, and Chapter 20 debtors. Many people recover financially within a very short time. After the bankruptcy falls off their credit reports, which is usually in seven or ten years, they often do not even remember filing a petition.
Bankruptcy gives a fresh start to most debtors. For a free consultation with an experienced bankruptcy attorney in Minneapolis, contact Kain & Scott. Convenient payment plans are available.
