Rising costs and declining insurance benefits continue to plague many Americans. Even a run-of-the mill medical event can generate huge bills. A catastrophic injury, chronic illness or major surgery can bring much worse.
No one wants to lose their home.
Many Minnesota consumers who are struggling with financial obligations think of bankruptcy as the option of last resort, and often for good reason. Filing for bankruptcy will damage their credit, as a Chapter 7 bankruptcy will stay on their credit reports for 10 years. Still, in some cases, bankruptcy is the correct choice for people.
During Chapter 13 bankruptcy proceedings, creditors in Minnesota and elsewhere are prohibited under federal law from pursuing further collection activities pending the court's ruling. A provision of the Bankruptcy Code provides that debtors who are harmed by a violation can obtain damages, including legal fees. A recent ruling by the U.S. Court of Appeals for the 9th Circuit overturned one of its prior decisions that had held that only legal fees incurred while attempting to end the stay were covered.
Whether a debtor files for a Chapter 7 or Chapter 13 bankruptcy, the court automatically issues a stay to all creditors to prevent any further collection actions. This includes any phone calls, court proceedings, bank levies and wage executions. With respect to debts that are secured by property, however, a secured creditor may request to bypass the automatic stay to enforce its lien through foreclosure or other available method.
Retired people in Minnesota may want to consider filing for bankruptcy as a way to get rid of debt and protect their retirement assets. Qualifying for Chapter 7 bankruptcy is easy for some retired people, as this type of filing is based on the last six months of the filer's income and not what they have in savings. Social Security income is considered protected income and does not count in the calculation.
Minnesota residents who are considering filing Chapter 13 petitions may want to take note of two recent decisions that arose out of Chapter 13 bankruptcy cases. In both, the courts ruled that creditors holding old debt that was beyond the statute of limitations were able to file proof of claims with the bankruptcy court because the debtor did not object to the filing of the claims.
Debtors living in Minnesota may benefit from understanding more about obligations mandated by undertaking Chapter 13 bankruptcy. This form of bankruptcy is designed for debtors who have a regular income. These debtor are afforded three to five years to pay off all or a portion of what is owed. In order to qualify for Chapter 13 bankruptcy, debtors are required to develop a repayment plan that can be approved by a bankruptcy judge.
Minnesota residents who are considering filing personal bankruptcy probably have heard of the two most common forms for individuals, Chapters 7 and 13. They may be unaware of what the differences are between the two, however, or what the result of choosing to file under either chapter might be.
Although a Chapter 13 bankruptcy may eliminate some debts, others may remain. For instance, an individual who owes child support or student loans will generally still owe those debts after the case is over. Additionally, some debts related to criminal activities such as drunk driving may still be owed by the debtor after the case is resolved. Long-term debts such as a mortgage may also remain.