Minnesota Bankruptcy FAQ
In order to file for bankruptcy you will need to gather all your financial documents including: a complete list of creditors with addresses and balances owed, any collection notice from law firms or collection agencies, tax returns for the last two years, pay stubs from your employer for the last 60 days, evidence of all income received for the past seven months, and the legal description of your house. You will also need to attend a credit counseling class before and after the bankruptcy is filed.
Can I keep my home?
If you are a Minnesota resident you have the choice to take the Minnesota or federal exemptions. The Minnesota homestead exemption is found in Minn. Stat. Sec. 510.01, which allows a homeowner to keep up to $200,000.00 of equity in real property on less than one half acre found in a city. If your property is located outside the city you can keep up to 160 acres of land as long as the value does not exceed $500,000.00. The federal homestead exemption allows for an exemption of $18,450.00 single or $36,900.00 married equity in your homestead. The choice of which set of exemptions to use is complicated and an attorney should be consulted before determining your preferred set of exemptions.
Can I keep my vehicle?
Minnesota statute section 550.37 allows an individual to keep a motor vehicle valued at $3,800.00. Under the federal exemption an individual can keep one motor vehicle valued at $2,950.00. If you still owe money on the car, you can choose to reaffirm the debt to the secured lender, keep the car, and continue paying under the existing terms; or you can buy the car from the secured creditor in a single payment for its present value (redemption). The above figures are indexed for inflation and are subject to change.
Can I keep my retirement (IRA, 401(k), 403(b), pension) money after bankruptcy?
Under the federal exemptions you can keep up to $1,000,000.00 in qualified retirement plans exempt from creditors in the bankruptcy estate. Minnesota Statute 550.37 subd. 24 allows for an exemption of $60,000.00 for qualified retirement plans. The $60,000.00 is indexed and changes on a regular basis.
What is a bankruptcy discharge?
The bankruptcy discharge eliminates the debtor’s personal liability on loans including, but not limited to, credit cards, personal loans, and business loans. This means that the creditor can no longer use the legal process to garnish wages or bank accounts. A creditor can still repossess or foreclose on secured property after the bankruptcy, but the debtor will not have personal liability for the debt. Oftentimes in order to keep secured property after the bankruptcy a debtor will have to sign a reaffirmation agreement with the creditor to keep the property.
What is a reaffirmation agreement?
The debtor can chose to reaffirm debts that would otherwise be discharged by the bankruptcy. Generally, when a debt is reaffirmed, the parties to the reaffirmed debt have the same rights and liabilities that each had prior to the bankruptcy filing; the debtor is obligated to pay and the creditor can sue or repossess if the debtor doesn’t pay.
How much personal property can I keep after filing?
Under Minn. Stat. Sec. 550.37 you are entitled to keep household appliances, furniture, tv, radio and phonographs up to a $7,200.00 in value. You are also entitled to keep clothing (including a watch), utensils, and food. Federal exemptions also allow for you to keep much of your personal property as long as it does not exceed $9,300.00 in value.
Are liens removed after filing for bankruptcy?
In Minnesota liens can be removed after your debts are discharged in bankruptcy. The Minnesota statute governing lien removal is Minn. Stat. Sec. 548.181. The process of removing liens after a bankruptcy discharge is time consuming and all the proper procedures must be followed for the court to remove judicial liens.
What is the automatic stay?
Bankruptcy Code § 362 imposes an automatic stay the moment a bankruptcy petition is filed. The automatic stay generally prohibits the commencement or enforcement of actions, judicial or administrative, against a debtor for the collection of a claim that arose prior to the commencement of the case. The stay also prohibits collection actions aimed at property of the estate itself.
What is the means test for a Chapter 7 bankruptcy?
You may have read that the new bankruptcy law imposes a “means test” on who can file for Chapter 7 bankruptcy. You might think this new test will prevent you from filing. Most people considering bankruptcy have no trouble passing the means test. Indeed, some lawyers think more people will qualify for Chapter 7 under this test than under the old law that provided judges with discretion on when someone was eligible for a Chapter 7 bankruptcy.
Can I get credit cards after bankruptcy?
After bankruptcy you may still be able to get a credit card. Most credit card issuers will allow you a secured credit card after you bankruptcy. The secured credit card will help build up your credit score following bankruptcy.
Can all debts be discharged in bankruptcy?
Not all debts can be discharged in bankruptcy non-dischargable debts include:
- Debts by fraud or false pretenses
- Debts incurred by a false statement in writing.
- Income taxes for tax debt less than three years ago.
- Debts incurred by committing willful and malicious injury.
- Student loan debt unless an undue hardship can be shown to the bankruptcy court.
- Spousal or child support obligations.
- Death or personal injury caused by person when intoxicated.
- Fines and penalties owed to the government.
- Criminal fines and restitution.
- Fraud while acting in a fiduciary capacity including embezzlement and larceny.
Can I be fired for filing bankruptcy?
No. Federal Bankruptcy law specifically prohibits an employer from firing an employee for filing for bankruptcy protection.
What are the most common reasons for filing for bankruptcy protection?
The most common reasons for filing for bankruptcy protection include:
- Medical Bills
- Job Loss
- Credit was Over Extended
- Tax Debts
- Unexpected Bills
- Divorce (Speak To A Family Law Attorney)
What is the meeting of your creditors?
The meeting of your creditors is referred to as a 341 meeting and takes place 20 to 40 days after you file your Chapter 7 or Chapter 13 bankruptcy. The 341 meeting is typically a 3-5 minute meeting with the bankruptcy trustee where they will ask you some questions regarding the documents filed in your Minnesota bankruptcy petition.
How many creditors will show up at my 341 meeting?
Typically, no creditors actually attend the 341 meeting of your creditors. If creditors do show up at the hearing it is typically to get you to sign a reaffirmation agreement in order to keep your vehicle or home.
Should my business file bankruptcy?
If your business is struggling financially you need to know what your options are regarding bankruptcy. Chapter 7 and Chapter 11 bankruptcy is available to corporations, limited liability companies, and partnerships. These corporate forms are considered separate legal entities from their owners. In some circumstances the business owner may have personally guaranteed the business loans and may be forced to file an individual Chapter 7, 11, or 13 bankruptcy to escape the personal guarantee.
The other common situation is where the business is a proprietorship without any limited liability protections. In this case the owner of the proprietorship would have to file a personal bankruptcy to get out from under the business debt. The individual would be eligible for protection under any chapter of the Bankruptcy Code, subject to the restrictions on filing a Chapter 7 or Chapter 13 bankruptcy.
How do I know what type of bankruptcy is right for my business?
A Chapter 11 bankruptcy may be right for your business if you would like to maintain control of your business during the bankruptcy process. Chapter 11 bankruptcy allows a company to come up with a plan to reorganize the business and eventually return the company to profitability or in some cases the company liquidates. Chapter 11 bankruptcy allows a company to restructure or consolidate their existing obligations in order to make manageable payments.
The reorganization plan must be approved by the bankruptcy court, and is typically voted on by stockholders, creditors, and even the SEC (if the company is publicly traded). The reorganization plan can be approved by the court even if the plan is not approved by the creditors and shareholders if the court thinks the Chapter 11 plan is fair to all parties. During a Chapter 11 bankruptcy a company’s stocks and bonds continue to be traded.
Recent high profile Chapter 11 cases include Northwest Airlines and Winn Dixie Supermarket whose stock continued to be traded after the Chapter 11 bankruptcy filing.