FAQs for Bankruptcy

General:

What is Bankruptcy?
Bankruptcy is a legal process that will help you eliminate or repay debt.

Is it harder to file bankruptcy since the law was rewritten in 2005?
Yes and no. Some people will find it easier and others will find it more difficult, it depends on your specific circumstances. One of the new requirements states that you must undergo 90 minutes of credit counseling and complete a two-hour financial management course, both of which may greatly benefit some people.

Can Bankruptcy Stop a Foreclosures and/or Repossessions?
Yes. If you file Chapter 13 bankruptcy, your creditors are expected to accept reorganized payments set up through the bankruptcy.

How Do Creditors Know I Filed For Bankruptcy?
The court will notify your creditors by mail, including the bankruptcy number, your name, the date of the creditor meeting, a notice of the automatic stay, and information on how to file claims and/or objections to the proceedings.

Do I Have to Work with a Lawyer?
You are not legally required to hire an attorney, but the law is very complex and it is generally a good idea to work with a skilled Minnesota bankruptcy lawyer from the start. An attorney can help you decide which type of bankruptcy is right for you and help you fill out all necessary paperwork.

How Do I Get Started In a Bankruptcy?
First, make a list of all assets you own and debts owed. Second, contact a St. Paul bankruptcy attorney to help guide you through the complex filing process.

What Should I Avoid When Filing Bankruptcy?

  • Do not incur additional debts or the court may assume you are trying to manipulate the debt discharge process.
  • Do not repay loans to one group of creditors over another, the court will equally distribute your money to your creditors and this will look like you were trying to avert the court’s authority.
  • Never hide property, this is fraud and you can be arrested and jailed.
  • Do not include incorrect or incomplete information on your forms. Accidents will look bad to the court. Allow your Minneapolis bankruptcy attorney to help you fill out the forms to avoid making common mistakes.

How Long Does the Process Take?
Filing for bankruptcy generally takes around 4 months. When you file Chapter 7, this will be the end of the process. If you file Chapter 13, the bankruptcy will last throughout the payment plan time frame, which may be between three and five years.

How Long Does a Bankruptcy Stay on My Credit?
For up to ten years.

Can I Get a Bankruptcy Removed from My Credit?
No, but you can file an explanation with the credit bureaus which may help your score.

Do I Have to Repay My Creditors After Bankruptcy?
It depends on which type of bankruptcy you file. If you file Chapter 7, you will not need to repay discharged debts. If you file Chapter 13, you will pay all or part of your debts on a structured payment plan.

How Can I Re-establish Credit After a Bankruptcy?
There are a few ways to boost your credit after you file a bankruptcy. Many credit card companies offer what’s known as a “secured credit card,” where you provide a deposit and charges made count against your deposit. Also, debt management groups and debtor education programs may help improve your score.

Chapter 7:

What is Chapter 7 Bankruptcy?
This is probably the most popular form of bankruptcy, as it allows you to discharge certain debts –meaning you no longer need to pay them. Not all debts can be discharged though and you may need to give up certain assets.

Does Chapter 7 Protect Debtors?
Yes. Once you file Chapter 7, an “automatic stay” is placed on most of your debts, meaning no legal action can be taken on them. This will stop harassing creditors from being able to contact you and will put a hold on any foreclosures or repossessions you may face. The automatic stay will be dissolved when the bankruptcy is complete, but at that time, most debts will be discharged.

What Are the Qualifications for Chapter 7?
You must live in or own a business in the US. If you filed for Chapter 7 or Chapter 11 within the last 8 years or Chapter 13 in the last 6 years, you may not apply.

There is a means test to see if you qualify for Chapter 7 bankruptcy, but if you are a disabled veteran or earn less than the Minnesota state medium income for your family size, you will automatically qualify. If you make over the state medium income, you must demonstrate an inability to pay your creditors. A Minnesota bankruptcy attorney can help you evaluate your qualifications to file under Chapter 7. Your lawyer may also help you decide if this type of bankruptcy is a good option for you.

How Much Does a Chapter 7 Bankruptcy Cost to File?
Filing for Chapter 7 costs $299. You are also recommended to use the legal services of an experienced attorney, which will add to the costs. Attorney fees vary based on your specific circumstances.

What Assets Will I Lose If I File For Chapter 7?
In most cases, you will not lose any property. If your total property is worth less than $10,225, or $20, 450 if you have filed as a couple, you will not lose any property. You are allowed to keep all property that does not become part of the bankruptcy estate or that is exempt. Your attorney will help divide your assets into categories, such as personal, work tools, household items, etc., and then the total value of each category will be calculated. You are entitled to select one of two sets of exemptions. Amounts of some of your property classifications are not set by monetary terms, but terms like “to the extent reasonably necessary for the support of the debtor and any dependent of the debtor.”

You may keep your home if the property is less than an acre and worth under $200,000, but this may reduce other exemptions you are entitled to. If your home was acquired within the last 3 and a half years or you were convicted of certain crimes, this property limit is reduced to $125,000.

Ask your attorney to help you understand what assets you may be required to give up.

What Debts Will Not be Discharged in a Chapter 7 Bankruptcy?

Most of your debts will be discharged when you file for Chapter 7, some exceptions include:

  • Taxes and interest due on delinquent, non-discharged taxes.
  • Debts procured through false pretenses, fraud, embezzlement, false representations or fraudulent financial statements.
  • Debts arising from securities violations or wrongful acts of fiduciary.
  • Debts not listed to the bankruptcy court.
  • Debts that could have been included in a previous bankruptcy, but were not discharged.
  • Support obligations, such as alimony, child support, etc.
  • Debts owed to your ex-spouse due to a divorce or separation, although these may be discharged if the court finds the benefits to you outweigh the hardships the forfeiture will cause your ex.
  • Debts for willful or malicious injuries you have caused or debts due to a DUI injury lawsuit.
  • Student loans, unless payment of these debts will cause an undue hardship on you or your dependants.
  • And more, speak to your attorney to discuss whether any of your debts will be exempt from discharge.

Chapter 13:

What is Chapter 13 Bankruptcy?
Chapter 13 is a government-monitored repayment plan. You will be expected to create a realistic repayment plan for all or part of your debts. When the plan is approved by the court, your creditors cannot attempt to collect their money while the plan is pending. Dischargeable debts will be discharged at the end of the period.

How is Chapter 13 Different From Using a Debt Consolidation Service?
When you work with a private consolidation service, creditors cannot be forced to accept your repayment plan. With Chapter 13, you also may be entitled to pay off only a portion of the full debt and foreclosure and repossession actions will be cancelled.

Who Qualifies to File For Chapter 13?
Only naturalized citizens with regular income, who live in or own businesses in the US may file for Chapter 13. Your unsecured debts must be under $307,675 and secured debts must be under $922,975. In addition, you cannot be a stockbroker or commodity broker or have filed any form of bankruptcy within the last 180 days.

What’s the Difference Between Secured and Unsecured Debts?
Secured debts are secured with the lien of some type of property, like a home or vehicle. Unsecured debts are unconnected to actual property, for example, credit cards.

How Does Chapter 13 Protect Me, as a Debtor?
When you file for protection under Chapter 13, you receive an automatic stay. This temporarily prevents your creditors from being able to take action on your debts.

What Property do I Have to Give Up under Chapter 13?
Generally, you will not have to lose any property. If you are unable to make substantial payments on secured debts like your mortgage or vehicle loan, you may have to sell property in order to pay off your debts or you may give up the collateral and treat the balance as an unsecured debt.

How Much Are Chapter 13 Payments?
In most cases, your calculated disposable income will be applied to the payment of your plan. You will be required to report your income and monthly expenses to the court to be able to calculate your disposable income.

How long does the Plan last?
The plans will generally last between three and five years.

What Happens If I Cannot Pay All of My Debts During the Plan?
If the debt is not paid and still dischargeable at the end of the plan, it will be discharged. Secured debts and other debts not discharged will return to the payment plans used before the Chapter 13 was filed. The automatic stay will expire at the end of the plan.

What Kind of Debts Are Included in the Plan?
Practically any debts can be included in your plan, however not all dents can be discharged at the plan’s end.

What Debts Are Discharged At The End of A Chapter 13 Plan?
Only debts covered by your plan and paid as part of your plan can be discharged. Alimony, child support payments, student loans, DUI-related injury claims, and court fines cannot be discharged.

Why Would I Put Payments on My Plan For Certain Debts that Cannot be Discharged?
The automatic stay is a good way to make debt collectors stop harassment and to prevent repossession and foreclosures. Additionally, these payments may be less than you would otherwise be paying outside of the plan.

Ask your Minneapolis bankruptcy attorney about any questions you have regarding bankruptcy law and details of your specific case. We are happy to help you however we can.