In 2019 alone, there were 779,940 bankruptcy filings in the US. For businesses and individuals suffering from financial hardship, filing for bankruptcy can provide the foundation for a new beginning. To that end, understanding what Chapter of bankruptcy you should file for can help you prepare for bankruptcy.
At Johnson/Turner Legal, our Minnesota bankruptcy lawyers help clients who file for bankruptcy regain control of their finances and lives. We use a flat-fee pricing model so you know exactly how much our services cost up-front. Our goal is to help you move through the bankruptcy process and get a fresh start, so we’ll never saddle you with hidden fees or unexpected costs..
Learn more about how our bankruptcy lawyers in the Twin Cities area can help you file for bankruptcy in MN. Book a consultation with our firm! Contact us online or call us at (320) 299-4249.
When you feel overwhelmed by your bills and need a fresh start. You can imagine the relief and peace of mind of being shed of the stress that you feel every day.
The problem is you don’t understand the process, whether you qualify to file bankruptcy and you worry you will lose valued assets in the process.
Johnson/Turner Legal’s Fresh Start bankruptcy is designed for you. Our Minnesota bankruptcy attorneys will meet with you to answer your questions, determine if you are eligible for a Chapter 7 or Chapter 13 bankruptcy, explain the timeline and process and explain to you what assets you can retain.
The average American household carries a debt of $137,063. If you, like many Americans, feel like you’re in a hole you can’t dig your way out of, you might consider bankruptcy.
One of the most significant benefits of bankruptcy is the automatic stay you receive when you file. An automatic stay can stop foreclosure, eviction, or wage garnishment. It can also stop creditors from pursuing you via debt collection.
It’s important to note that creditors can ask to have the automatic stay lifted to collect secure debts. A secured debt is a loan the borrower pledges asset or collateral to “secure,” such as a mortgage.
To receive an automatic stay, you only need to file a three-page bankruptcy petition, a signature declaration, and a list of your outstanding liabilities (debts) and creditors with the bankruptcy court.
To prepare for bankruptcy in Minnesota and file successfully, you’ll need to take the following steps:
Now that we’ve covered the basics of bankruptcy, it’s time to look at the two most common types: Chapter 7 and Chapter 13 bankruptcy.
Chapter 7 bankruptcy is also commonly called “liquidation bankruptcy,” because debtors liquidize their assets to repay creditors.
To qualify for a Chapter 7 bankruptcy, you must complete a means test and meet certain requirements, such as falling under your state’s median income. In Minnesota, the median income is $58,476 for single-earners and $70,315 for two-earner households.
To file for Chapter 7 bankruptcy, you’ll need to provide the bankruptcy court with various documents, such as:
Typically, essential assets such as your home or vehicle will be exempt from the bankruptcy process. However, that doesn’t mean all your non-essential assets will be claimed by creditors and used to repay debts. Many creditors consider common assets worthless, and will simply forgive debts or ask to set up a payment plan instead of asking you to liquidize assets.
When you file for Chapter 7 bankruptcy, the Office of the US Trustee will assign a bankruptcy trustee to your case. The bankruptcy trustee acts as a sort of mediator between the debtor and the creditors.
The trustee will arrange a creditors meeting. At the creditors meeting, you sit down with your trustee and creditors to discuss your debts. Ideally, you will work with the trustee and the creditors to determine how to repay your debts (or which liabilities will be forgiven).
Certain debts, such as delinquent child support payments, student loans, and owed taxes, are exempt from the Chapter 7 bankruptcy process. You will need to pay off these loans regardless of your bankruptcy case.
At the end of the case, any creditors that have decided to claim assets as repayment for debts will do so. Any other non-secured debts or non-exempt liabilities you have will be discharged (wiped out) by the bankruptcy court.
A skilled Minnesota bankruptcy lawyer can help you understand the bankruptcy process more thoroughly and act as an advocate throughout the process, helping you defend your assets from creditors.
If you don’t qualify for Chapter 7 bankruptcy because your income is too high, you’ll probably end up filing for Chapter 13 bankruptcy. To file for Chapter 13 bankruptcy, your debt cannot exceed a certain limit, and you must possess a steady income.
Unlike a Chapter 7 bankruptcy, your assets and property are completely safe in a Chapter 13 bankruptcy. Instead, you work with creditors to establish new debt repayment plans.
Like a Chapter 7 bankruptcy, a trustee is assigned to a Chapter 13 bankruptcy and acts as a mediator. In a Chapter 13 bankruptcy, the trustee works with the debtor and creditors to draft new repayment plans that allow the debtor to repay liabilities while still maintaining a good quality of life.
Priority debts (child support, taxes, etc.) and secured debts (mortgage and car payments) take precedence in the repayment plan. Once those debts are repaid, the debtor then typically moves on to repaying unsecured debts (any other liabilities). Chapter 13 repayment plans are often 3-5 years long and can be modified depending on the debtor’s circumstances (for example, if your income increases, you can petition the bankruptcy court to adjust the repayment plan, so you pay off debts faster).
Yes and no. Filing bankruptcy is harmful to your credit score, but there are a couple of things to keep in mind.
First, if you are seriously evaluating a bankruptcy filing, your credit score might already be low due to missed or late payments, so bankruptcy can actually help in the rebuilding process.
Second, under bankruptcy law, after a period of years, you cannot be discriminated against in applications for credit because of the bankruptcy filing. Most people find it fairly easy to rebuild credit after bankruptcy. You might be surprised at how quickly your credit profile improves! It seems that many lenders are more concerned with whether someone has an income rather than whether they filed a bankruptcy.
Many of our clients receive credit offers just after filing bankruptcy. So you don’t need to give up on any dreams of car, home, or boat ownership.
At Johnson/Turner Legal, we understand how difficult it can be to file for bankruptcy. That’s why all of our clients get a team consisting of a Minnesota bankruptcy attorney, two paralegals, a client engagement specialist, and a life coach. We won’t just guide you through your case—we’ll give you the tools you need to succeed long after your case is resolved.
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