Minneapolis Bankruptcy Law Blog

The condition of child support in bankruptcy cases

When in the throes of insurmountable debt, even your highest priorities can take a major hit. Providing for your children from a previous marriage may be number one on that list.

If you are in arrears with your child support payments, can declaring bankruptcy ease the strain of this delinquency? It can, but not in the way you may expect. Keep the following information in mind as you prepare for the next steps.

Bankruptcy may help you get relief from medical debt

Healthcare costs have an uncanny ability to rise quickly. Even if you have a minor health condition or injury, you may spend thousands of dollars on medical bills. Whether or not you have health insurance, you may be facing the sort of debt that can cripple your financial life. You are not alone, though. In fact, roughly 70 million Americans have some amount of outstanding medical debt, shares Moneymunk. 

Bankruptcy may help you get relief from medical debt. Still, choosing to file for bankruptcy protection is a personal decision that only you can make. Before you decide, you should know a few things about medical debt and bankruptcy law. 

What documents do you need to file for bankruptcy?

At the height of the Great Recession, many Minnesota residents filed for bankruptcy. Those numbers went down in recent years, but 2018 saw an increase from the previous year. According to data from the United States Bankruptcy Court District of Minnesota, 9,761 people filed for bankruptcy in 2018, which is a 1.54 percent increase from 2017. 

Many Minnesota residents rely on bankruptcy to get their finances back on order. However, it is still a daunting process. The first thing you should do if you need to consider bankruptcy is to get all the paperwork in order. Gather the following documents before seeing your attorney. 

How to rebuild credit after bankruptcy

Bankruptcy impacts many aspects of your life. One of the areas where it hits hardest is your credit score. Someone with a credit score of 780 prior to bankruptcy, which is excellent, would see it drop around 240 points. Someone with a score of 680 may only see it drop by 150 points. 

Your bankruptcy will remain on your credit report for between seven and 10 years. That does not mean you have to deal with a poor credit score the entire time. After the court has approved your bankruptcy, you can start taking steps to increase it once again. In a few years, your credit score may fall back in the good or excellent range. 

Should you file for bankruptcy in retirement?

After having worked your entire adult life, you were likely looking forward to a serene retirement with financial security. Unfortunately, many people nowadays have seen this dream vanish in the wake of a financial crisis.

If you find yourself pondering whether bankruptcy is a smart and valid option for you in your current state of life living in retirement, you are not alone. Here is some information regarding filing for bankruptcy in your retirement years.

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.

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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