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.

Chapter 13 Bankruptcy in MN

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).

Will Bankruptcy Hurt My Credit?

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.

Speak with a Bankruptcy Lawyer in Minnesota

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.