IMPORTANT NOTICE: IF YOU ARE CONTEMPLATING BANKRUPTCY, CERTAIN PAYMENTS OR TRANSACTIONS WITH YOUR ASSETS OR YOUR CREDIT CARDS COULD CAUSE YOU TO BE UNABLE TO FILE BANKRUPTCY, SIGNIFICANTLY DELAY YOUR FILING, OR NEGATIVELY AFFECT YOUR CHOICES.
IT IS CRITICAL THAT YOU SPEAK TO COUNSEL, BEFORE MAKING ANY DECISIONS ABOUT TRANSFERRING OR ENCUMBERING YOUR ASSETS, ACQUIRING ASSETS, OR PAYING OFF YOUR DEBTS IN ANTICIPATION OF FILING BANKRUPTCY!
There are several possible bankruptcy chapters under which a person or business could file. Most people will file under Chapter 7 because it allows the discharge of debt in a short period and often without any payment to creditors, or loss of assets. If you cannot qualify to file under Chapter 7, you may be able to file under Chapter 13. Upon filing a Petition in bankruptcy, in most cases, an automatic stay comes into affect which prohibits creditors from attempting to collect and/or enforce collection of their respective debts.
A Chapter 7 bankruptcy filing is referred to as “liquidation” but in reality most people do not have to give up any assets. Because many assets owned by the debtor are exempt, the debtor often does not have to give up any assets or pay to keep them. If a chapter 7 debtor has assets whose value exceeds his or her exemptions, the debtor usually has an opportunity to “buy” that excess value from the trustee if the debtor chooses to do so.
To file for a Chapter 7 filing, the debtor needs to qualify under the “means test” unless the debtor is a “business” debtor. If the means test applies, a preliminary determination is made as to whether the debtor is under certain threshold income and budget levels. If so, the debtor will file for a discharge of debts under Chapter 7 and will generally not have to make any payment to creditors. In a Chapter 7, if there have been no valid objections to discharge, the debtor is granted a complete discharge of his or her debts within approximately three months.
A Chapter 13 bankruptcy filing may be available if the debtor’s income exceeds the debtor’s actual and allowed budget by the set standards, or the debtor cannot satisfy the means test. If so, in a Chapter 13, the debtor’s excess monthly income over his monthly budget is determined and the debtor is required to propose a plan to pay that excess sum to the trustee for a period of three to five years. Even in that case, the total payments made in a Chapter 13 bankruptcy are usually only a portion of the debtor’s total unsecured debt. At the end of the plan payment period all remaining unpaid debt is discharged.
Chapter 11 and Chapter 12 are specific bankruptcy provisions usually utilized for reorganization by businesses and farms and will not be discussed herein.
According to the definitions in the Bankruptcy Code, this law firm is a debt relief agency which helps people file for bankruptcy relief.
If you have questions concerning bankruptcy, please call an experienced Minnesota bankruptcy attorney at Felix Law Office, P.A. at 952-894-8380.