Minneapolis Bankruptcy Law Blog

The key differences between Chapter 7 and Chapter 13

If you are a Minnesota resident struggling under a heavy debt load, you may be thinking about filing bankruptcy so as to get most of your debts discharged and give yourself a new financial start. If so, you likely have many questions about which type of bankruptcy is right for you, Chapter 7 or Chapter 13.

The answer to that question depends upon your own circumstances, since both Chapter 7 and Chapter 13 have their own respective advantages and disadvantages

Understanding the bankruptcy means test

As someone facing considerable debt, whether due to medical bills, credit card use or what have you, you may be working through your options and trying to determine whether bankruptcy may give you the fresh start you crave. Typically, should you decide to move forward with a consumer bankruptcy, you will do so through either a Chapter 7 bankruptcy or a Chapter 13 filing, and the bankruptcy means test can help you determine whether a Chapter 7 filing is potentially an option for you.

The bankruptcy means test is what determines whether you are eligible for pursuing a Chapter 7 bankruptcy, which offers a possible solution for lower-income earners who are unlikely to be able to reasonably pay back their debts. Chapter 13 bankruptcies, meanwhile, provide an option for Americans who have too much “disposable income” available to them to qualify for a Chapter 7 filing. They typically involve creating payback plans to cover at least some percentage of what you owe your creditors.

Does Chapter 7 discharge recent credit card debt?

If you have begun thinking about filing bankruptcy in Minnesota, you would do well to stop using your credit cards. Although Chapter 7 discharges virtually all of your consumer debt, including your credit card debt, it may not discharge debts or cash advances you incur via your credit cards shortly before you file bankruptcy.

The reason for this is a little known provision within the Bankruptcy Code. Section 523(a)(2)(C)(I) contains a presumption against the discharge of a credit card debt totaling over $675 worth of consumer goods that you make within 90 days prior to your filing date.

Understanding lien stripping

If you are thinking about filing bankruptcy in Minnesota due to your overwhelming debts, you likely have many questions about which kind of bankruptcy is right for you: Chapter 7, Chapter 13 or one of the other bankruptcy types. While all have their respective advantages and disadvantages, Chapter 13 has a special feature that may be just what you are looking for.

If you have two mortgages on your home, Chapter 13 offers you the opportunity to strip the lien against your house that your second mortgage holder holds. Bear in mind that whereas virtually all of your consumer debts, including credit card debts, get discharged in a Chapter 7, a Chapter 13 works differently. Here you have the opportunity to reorganize your debts and get three to five years to pay most of them off.

The 341 meeting is an important step in a bankruptcy journey

If you have decided to resolve your debt problems by filing for bankruptcy, you have taken a positive step toward a brighter financial future. One of the stops along the way to debt discharge will be the 341 meeting.

The meaning of 341

More seniors turning to bankruptcy for financial relief

Conventional wisdom holds that once you reach your senior years, your hard-earned retirement and savings will kick in to provide for you. However, nowadays, the reality is that more and more seniors are filing for bankruptcy.

Left with little to no savings and a meager income from retirement or Social Security, many senior citizens are simply unable to manage financially in the face of overwhelming debt. If you fall into this category and are feeling helpless and unable to meet your debt commitments and monthly bills, you should know that bankruptcy may be a viable option.

Understanding the Fair Debt Collection Practices Act

If your consumer debt has gotten out of hand in Minnesota, it may seem as though you “owe everybody,” and “everybody” is constantly harassing you by phone to collect their debts. Actually, this is not true. The Fair Debt Collection Practices Act prevents third-party creditors from harassing you.

A third-party creditor is not someone to whom you owe money. Rather, it is someone like a collection agency that collects debts for the people or companies to which you owe money. For instance, if you are substantially behind on your credit card payments, collection agencies may buy those debts, usually at a discount, and then proceed to try to collect them from you themselves.

3 benefits of bankruptcy for your business

Plenty of companies have been in the news in recent years because they have filed for bankruptcy. Blockbuster, Claire's and Sears are just a few of the major businesses that have found themselves seeking debt relief in the face of a changing economy. Retailers are not the only businesses that need debt relief, though—perhaps you own a business, retail or not, and are wondering how to handle mounting debts.

There are a number of ways to address this problem, but you should not rule out Chapter 13 bankruptcy. This option offers several benefits to business owners seeking to retain their company and continue operations while working on repaying debts that have accumulated.

Can you qualify for bankruptcy if your wages are being garnished?

In many cases, yes, you will qualify for bankruptcy protection if your wages are being garnished. At the very least, an automatic stay while the bankruptcy petition is pending should protect your wages. Do note, though, that these stays may not apply if the garnishment is for past-due child support or tax obligations. Stays should apply in cases such as a creditor trying to collect on medical bills or credit card bills. It is important to move as quickly as possible.

However, what happens if the court denies your petition, and the wage garnishment continues? Up to 25 percent of your income is gone, and no matter what the bankruptcy court thinks, it is income you cannot afford to lose.

Prescott Pearson & Tande, PA
443 Old Highway 8 Northwest, Suite 208
New Brighton, MN 55112

Toll Free: 888-366-0827
Phone: 651-968-8096
Fax: 651-633-7562
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