Frequently Asked Questions About Bankruptcy In Minnesota

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  1. Do both husband and wife have to file bankruptcy?

    Married people can file separate bankruptcies, or one spouse can file bankruptcy alone. However, if both spouses are responsible for an obligation, and only one spouse files for bankruptcy, the other spouse will still owe the debt. The creditors will have the right to come after the non-filing spouse as if a bankruptcy had not been filed. In circumstances where parties have recently married and most of the debt is from only one of the spouses, only the spouse that owes the debt needs to file bankruptcy.

    If you or your spouse has medical debts and is thinking about filing for bankruptcy, then you should make sure to file a joint case. This is because under Minnesota law, spouses can be liable for each other's medical debts. This is true even if the bill only says one of the spouses, or if the medical company didn't know you were married.

  2. What is the current status of lien stripping 2nd mortgages in Minnesota?

    At present, February 19, 2014, it is possible to strip off and discharge a second mortgage against your house in Minnesota by filing a Chapter 13 bankruptcy. The Minnesota Bankruptcy Courts have made a Local Rule about the procedures attorneys must follow to strip off second mortgages and home equity lines of credit. There is a small possibility that this may change in the future, but for cases filed now, the removal of the second mortgage or home equity loan will be effective.

    As of February 19, 2014, we are still waiting for the appeal of the original case to be resolved. The case that opened the door to lien stripping in Minnesota was decided in fall 2011. The mortgage industry has appealed that decision, and a panel of three appellate judges heard oral arguments on that appeal in Spring 2012. Judging by the questions the judges asked at the oral arguments, two of them thought lien stripping ought to be legal, and the third judge didn't seem to have a strong opinion either way. Thus I expect that they will affirm the lower court's opinion, and continue to allow lien stripping in Minnesota. In most of the rest of the country it is a well-established point of law that second mortgages can be stripped in a Chapter 13, and we expect Minnesota to join the majority. If this case is repealed, then new chapter 13 bankruptcies filed after the repeal would not be able to strip off lines.

    Most practitioners expected the appellate court to issue an opinion by now, but as of February 19, 2014 it is still up in the air. We will notify all of our clients with second mortgage liens to be stripped, or in the process of being stripped, as soon as this issue is resolved.

  3. What is bankruptcy?

    Bankruptcy is a legal action to help people with debt problems. A person owing money can often get a court order that they no longer owe their debts (Chapter 7 bankruptcy) or they can get a court order that lets them pay their bills in whole or part over 5 years (Chapter 13 wage earner plan) while protecting them from their creditors.

  4. How do I get a free credit report to find my creditors?

    Go to the website www.annualcreditreport.com and follow the directions to get a free credit report. We recommend choosing the experian report. This website is maintained by the government and will not charge you for the report. Any other site will charge you to look at your credit report.

    Please keep in mind that credit reports often have mistakes, and often don't include all of your debts. You want to make sure that your lawyer lists all of your creditors, otherwise they might not be discharged. For example, many hospitals do not list medical debts on credit reports. So if the lawyer only looks at your credit report, he won't know about the medical debts.

  5. How do I get a tax return or transcript?

    The bankruptcy court requires tax returns or tax transcripts with your bankruptcy petition. Either one is acceptable. If you don't have a copy of your tax return you can request a tax transcript for free from the IRS. Please keep in mind that this process can take up to 2 weeks.

    There are two ways to do this. Either you can call 1-800-908-9946 . Or you can request it in the mail by printing out the form from http://www.irs.gov/pub/irs-pdf/f4506t.pdf and mailing it to the address on the last page.

  6. How do I get to the hearing with the Minneapolis trustee?

    The bankruptcy hearings, which are called the "meeting of creditors" are held in Room 1017A of the United States Courthouse at 300 South 4th Street, Minneapolis, MN 55415. For directions, click the following link: http://goo.gl/nGcmD, click "get directions," and enter your address.

    The attorney will meet you outside the room. Please arrive 15 minutes early so that the attorney can explain the process to you and we can make sure you have everything ready. There are 4 documents you must bring:
    1) Photo ID
    2) Proof of your Social Security Number
    3) Most recent paystub for all jobs you have
    4) a bank statement for the day we filed your bankruptcy for each and every bank and credit union account you have even if the balance is zero.

    You should have received two letters telling us which courtroom to go to. One from us, and one from the court. Make sure that you go to the courtroom in the letter.

  7. How do I get to the hearing with the Saint Paul trustee?

    The bankruptcy hearings, which are called the "meeting of creditors" are held in Room 402 of the United States Courthouse at 316 North Robert St. St Paul, MN 55101. For directions, click the following link: http://goo.gl/QP22c, click "get directions," and enter your address.

    The attorney will meet you outside the room. Please arrive 15 minutes early so that the attorney can explain the process to you and we can make sure you have everything ready. There are 4 documents you must bring:
    1) Photo ID
    2) Proof of your Social Security Number
    3) Most recent paystub for all jobs you have
    4) a bank statement for the day we filed your bankruptcy for each and every bank and credit union account you have even if the balance is zero.

    You should have received two letters telling us which courtroom to go to. One from us, and one from the court. Make sure that you go to the courtroom in the letter.

  8. How do I get to the Chapter 13 hearing with the trustee?

    If you are filing a Chapter 13, your hearing will be in a different place. The Chapter 13 hearings are held in Room 310 in the Plymouth Building at 12 South 6th Street, Minneapolis MN 55402. For directions, click the following link: http://goo.gl/UpRbt, click "get directions," and enter your address.

    The attorney will meet you outside the room. Please arrive 15 minutes early so that the attorney can explain the process to you and we can make sure you have everything ready. There are 4 documents you must bring:
    1) Photo ID
    2) Proof of your Social Security Number
    3) Most recent paystub for all jobs you have
    4) a bank statement for the day we filed your bankruptcy for each and every bank and credit union account you have even if the balance is zero.

    You should have received two letters telling us which courtroom to go to. One from us, and one from the court. Make sure that you go to the courtroom in the letter.

  9. How can bankruptcy help me?

    If you are being garnished, a bankruptcy can stop it and can sometimes even get back the money.

    If your home is threatened with foreclosure, a chapter 13 bankruptcy can prevent a foreclosure. Chapter 13 may be the only way to save your home.

    If you are behind on your car payments or if a creditor is threatening repossession, a bankruptcy can stop that.

    If you owe taxes, and the IRS is threatening to garnish or seize your assets, a bankruptcy may be the only effective way of dealing with the IRS.

    If your debts are overwhelming, and you can see no way out, bankruptcy can give you a fresh start. If your income has declined so that you can't meet your obligations, bankruptcy can reduce your obligations, or possibly eliminate some of them, so you can support yourself in a reasonable and dignified manner.

  10. Will bankruptcy hurt my credit rating?

    A bankruptcy discharge will remain on your credit report for 7 to 10 years, but will eventually improve your credit rating. Credit ratings are computed in part by looking at how much debt you have as compared to the amount of credit you have unused. Before bankruptcy people often have several maxed-out credit cards, and it is these credit cards that are giving them the bad credit rating because they have much more debt than credit. A bankruptcy discharge creates the opposite situation by wiping out these debts, so that the filer has not used any of his available credit. Think about it from the lender's point of view, would you rather lend to someone who already owes thousands of dollars to others, or to someone who has no other debts, but just filed bankruptcy?

    Most of our clients receive credit card offers within the month after they file bankruptcy, and many get home mortgages within 2 to 3 years of their discharge. The best way to maintain your credit rating in the face of mounting debt is to file bankruptcy immediately and start over rather than struggle over time to attempt to pay off debts that are constantly increased by late fees and interest.

  11. Why do people file bankruptcy?

    - To get out of debt
    - To save their home or car
    - To stop garnishments
    - To stop lawsuits and creditor harassment
    - To get help to pay their bills

  12. Common signs that you need to file bankruptcy.

    - You cannot pay your bills as they come due
    - You are borrowing on credit cards, using loans to make your monthly payments
    - You are considering a consolidation loan, home equity loan or a 2nd mortgage
    - Collection agencies are calling or writing you, or if you are being sued or garnished.
    - You are behind on mortgage payments.

  13. How do I complete the pre-bankruptcy credit counseling course?

    Before you file for bankruptcy relief, you must complete a credit counseling course. There are many providers of this course available. The price varies greatly from course to course, but they all give you the same certificate.

    If you are one of our clients, then we give you a letter with several providers, and instructions on how to do the course. If you don't have this letter, then please call our office and ask for it.

  14. How do I complete the post-bankruptcy financial management course?

    After you file for bankruptcy but before your hearing with the bankruptcy trustee, you must complete a second class. This course can be done online, in person, or over the phone. Some websites with the course are: www.alpsite.com/main.asp, or www.debtorwise.org. Make sure that you select the "after bankruptcy financial management course." After you watch the video and answer the questions, make sure to tell them that Curtis Walker is your attorney so that they can send us the certificate.

    The www.alpsite.com/main.asp site is the cheapest class available.

    Our letter to you explains several other licensed financial management course providers.

  15. Where do I send my Chapter 13 plan payments?

    There are two Chapter 13 trustees in Minnesota. You will be assigned to one of them when you file your case. The trustees will accept only money orders, not personal checks.

    If your trustee is Jasmin Z Keller, then send your plan payments to:

    Gregory A. Burrell, Trustee
    SDS - 12 - 2943
    PO Box 86 Minneapolis MN 55486-2943
    (612) 338-7591

    If your trustee is Kyle Carlson, then send your plan payments to:

    Kyle Carlson
    Chapter 13 Trustee
    2900 Momentum Place
    Chicago, IL 60689-5329
    (218) 354-7356

  16. What is Curtis Walker Attorney at law's fax number?

    Our fax number is 612-824-8005.

  17. What is a 341 hearing?

    The 341 hearing, also called the meeting of creditors is a short meeting between the bankruptcy trustee, the debtor, the debtor's attorney, and any creditors that want to attend. The meetings are usually short, and should not be stressful.

    There are usually no creditors present at the meeting, so the only people present are the debtor and debtor's attorney and the trustee. The trustee will ask the debtor a few simple questions, like the debtor's address, and may ask questions about any unprotected assets of the debtor. The entire process can be completed in five minutes, and is not stressful or difficult. A good attorney will advise you on how to answer the questions, and you will be finished with the hearing and ready to receive your discharge. The discharge is a legal document stating that you no longer owe your debts. The court will mail it to you about two months after the 341 hearing.

  18. How do I stop creditor calls?

    Are you being called nonstop by debt collectors? Do they call you on your cell phone? At work? If so, then you know how annoying these calls can be. I have clients that had stopped answering their phone because they were afraid of collection calls.

    Luckily, I am able to help these clients even before filing for bankruptcy. In fact, as soon as you hire a lawyer to file for bankruptcy, you can refer creditor calls to your attorney. This means that the collection agencies must stop calling you as soon as you tell them that you have retained a lawyer to file your case. Thus you can stop those calls and answer your phone knowing that the caller is a friend, not someone asking you for money.

  19. Do I have to be a US citizen to file for bankruptcy?

    No, you do not have to be a citizen to file for bankruptcy. The bankruptcy code requires only that you be a person residing in the united states, or have a domicile or business in the United States. Residents of the United States may file for bankruptcy whether or not they have citizenship.

    Furthermore, filing for bankruptcy will probably not stop you from becoming a citizen in the future. ICE can look at a bankruptcy as evidence of bad character, but generally this is only an issue where the bankruptcy was filed fraudulently. An experienced bankruptcy attorney will make sure that your bankruptcy is not filed fraudulently and therefore won't harm your citizenship application.

  20. How do I dispute incorrect credit report entries?

    Credit reports provide information about where clients live, how they pay their bills, and whether they owe money to interested parties. This information, however, is often inaccurate and can give potential creditors, landlords, and employers the wrong idea about people, especially people who have filed for bankruptcy. This is because creditors do not necessarily take the time to inform the credit bureaus that the bankrupt person no longer owes any debts.

    Luckily, the government recognizes this and passed a law to make it easy for you to dispute incorrect entries on your credit report. This law is called the Fair Credit Reporting Act (FCRA), and it requires the credit bureaus and anyone who submits information to them to keep that information accurate and truthful. It also requires each credit bureau to give you a free credit report once per year.

    A few months after receiving your bankruptcy discharge it is a good idea to contest any inaccurate entries on your credit report so that your credit rating starts to increase as quickly as possible. Our office does not handle these disputes, but the process is rather simple and you can do it yourself over the Internet for free. If any website asks you for money, then you are at the wrong site and should go back and find the correct site.

    Step 1: go to the website http://www.annualcreditreport,com and input your personal information to request your free credit report from each of the 3 bureaus. Save or print these reports because you cannot get another one, and you will need them later.

    Step 2: look at the entries and make sure that none of the debts which were discharged by the bankruptcy are listed as being in default or still owing. Write down the reference number for each of these debts and the report it came from (either Experian, Equifax, or Transunion).

    Step 3: go to the website for any bureau that has an inaccurate entry on its credit report. These are http://www.experian.com, http://www.investigate.equifax.com, and http://www.transunion.com. Each of these bureaus has its own online process, but you must give them your personal information, tell them the incorrect entry, and then explain why it is incorrect. After a few weeks you should hear back from the credit bureau, and they should tell you that the error has been corrected (assuming it is an error). If they disagree with you, then you should follow the offline procedure below or go to a consumer rights attorney to pursue the issue further.

    If you want to dispute any credit reports by mail, then follow the Federal Trade Commission's instructions on the following website: http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre21.pdf. An advantage of this method is that you can include supporting documentation such as your bankruptcy discharge letter, and the list of creditors that will show that the debt was discharged.

    I suspect that as you compare the three reports, you will find that they are not the same. This is common, and in my opinion it suggests that credit reports are not a very reliable source of information.

  21. My Chapter 7 bankruptcy is filed, what next?

    Congratulations!  Most of the work is done.  Your attorney will take care of the rest of the details, and guide you through to the discharge.  There are only a few small tasks left fory you to complete.  They are all quite easy.

    STEP ONE: COMPLETE THE FINANCIAL MANAGEMENT COURSE

    Now you can go ahead and do the second bankruptcy course.  You will need your bankruptcy case number to do this, and my office will mail you the number and some detailed instructions on how to take the course.  Don't worry, the course is very cheap.  Our firm generally works with Always Lowest Price Bankruptcy Education.  www.alpsite.com/main.asp.  Their course is available only over the internet, but is very cheap, costing only $8.  If you want to do the course over the phone, then call Access Counseling at 1-800-205-9297.  They charge $15 for the phone course.  Their website is www.accesscounselinginc.org.

    STEP TWO: GET BANK STATEMENTS THAT SHOW YOUR ACCOUNT BALANCES ON THE DAY WE FILED YOUR CASE

    Even though you already gave my office lots of paperwork, you will have to provide the trustee with bank statements that show your balance on the date of filing the case.  These statements weren't included in the other paperwork because we can't file the case until after we get the paperwork, so these statements won't get craeated until a few weeks after the case is filed.  The best thing to do is go online to your bank's website and print out statements that show the balance in each of your accounts for the day we filed your case, and send them to my office.  Some trustees will ask for statements going back a few months before we filed the case.  My office will let you know if your trustee wants more bank statements.

    We need statements for every account with your name on it.  This includes accounts with a small or $0 balance, and accounts that you have for your children.  

    STEP THREE: PREPARE FOR THE HEARING

    This sounds difficult, but is actually the easiest step.  All you have to do to prepare is make sure that you have the following three things: 1.  Your social security card (or a w-2 if you can't find it).  2.  Your ID (driver's license, passport, or military ID). 3. Your most recent paystub (in case you got a raise or bonus).  Bring these 3 documents with you to the hearing and we will take care of the rest.

    STEP FOUR: ATTEND THE HEARING

    My office will mail you detailed directions about how to get to the hearing and what to bring.  You should arrive at least 15 minutes early so that the attorney can explain everything to you and answer any questions.  The attorney will tell you exactly what questions the trustee will ask, and the best way to answer them.  Usually the best answers are yes or no.  There are no trick questions, and the questions are not difficult to undersand or answer.  Most of my clients say that they were very nervous about going to the hearing, but that after it was done, they felt great.  It takes about 5 minutes.

    STEP FIVE: RELAX AND WAIT FOR THE DISCHARGE

    Two months after the hearing, the court will issue the discharge order.  What happens during those two months?  They are a due diligence period for the trustee and the courts to decide if they think that there are any problems with your case.  If you don't hear from your attorney in these two months, that is because there is nothing wrong with your case, and you are entitled to the discharge.  The vast majority of my clients hear nothing during this time, and receive their discharges without any problems.  During these two months you are still protected from creditors by the court (unless the creditor files a motion for relief).  This means that they shouldn't be calling you, garnishing your wages, or foreclosing on your house.  If any of these things happen, call my office immediately and we will sort it out.

    STEP SIX: RECEIVE THE DISCHARGE

    The discharge is the court order that destroys the debts.  Once you have received this, you are no longer protected by the court, but all of your debts (except student loans, certain taxes, child support, and others) are wiped out.  That means your creditors no longer have the legal right to pursue you for the money, so losing the court's protection doesn't matter.  Now you should enjoy your financial fresh start, and maybe start thinking about rebuilding your credit.  If you learn that a creditor wasn't listed, and they try to collect, then call my office.  We may be able to add them into the bankruptcy even after the case is closed.

  22. What is a motion for relief from the automatic stay? Do I need to respond?

    WHAT IS A MOTION FOR RELIEF?

    A motion for relief is a creditor's way to ask the court for permission to foreclose on a house or repossess a car.  In most cases, only a mortgage lender or a car lender can bring a motion for relief.  The court usually hears the motion approximately one month after the creditor files the motion.  The judge generally grants the motion on the hearing date, which allows the creditor to restart the foreclosure process, or repossess the car.

    WHEN AND WHY DO CREDITOR'S MAKE MOTIONS FOR RELIEF?

    The most common reason for a creditor to make a motion for relief is that the debtor has filed bankruptcy and does not want to use the bankruptcy to keep a house or car.  The bankruptcy petition tells creditors which property with secured loans against it, such as car loans and mortgages, the debtor wants to payt for and keep, and which ones the debtor wants to surrender and discharge.  If you want to keep a piece of property with a secured loan against it, then you must keep paying the loan.  If you continue making the normal payments, the creditor won't make a motion for relief, and  won't foreclose or repossess.  If the debtor isn't making payments on one of the loans, then the creditor might decide to make a motion for relief.  The benefit of this motion to the creditor is that the creditor can take back the collateral (the house or the car) more quickly than just waiting for the bankruptcy to end.  Since a Chapter 7 only takes three months, the motion only gives the creditor two extra months in a Chapter 7 (the motion takes one month to resolve), but a Chapter 13 can take up to 5 years.  Most secured lenders in Chapter 7 don't file motions for relief, they usually prefer to wait the three months and foreclose or repossess after the bankruptcy case is discharged.  This is because there are additional attorney's fees and complications to filing these motions, and foreclosing 2 months sooner is generally not worth very much to the creditor.

    WHAT SHOULD I DO IF ONE OF MY CREDITORS MAKES A MOTION FOR RELIEF?

    The first thing to do is to think about whether you want to keep the collateral (the house or the car).  If you want to surrender the house or car, then you don't need to do anything.  The creditor will win the motion by default and the court will give them permission to start foreclosure or repossession.  IIn the case of a foreclosure, you still get the 6-weeks notice before a sheriff's sale and the 6-month redemption period after the sheriff's sale.  In the case of a car repossession, the creditor can send the repo man to take the car as soon as the judge grants the motion for relief.

    If you want to keep the collateral, then you should talk with your attorney about catching up on the loan payments, and possibly making a payment arrangement.  Creditors don't want to foreclose on your property, they are not in the business of selling houses and cars, they would prefer that you make the normal payments and keep the property.

    If a creditor files a motion for relief when you are current on the loan, then you should contact your attorney immediately, because the creditor might have made a mistake.

  23. What is a Chapter 13 Trustee's motion to dismiss? What should I do about it?

    WHAT IS A CHAPTER 13 TRUSTEE'S MOTION TO DISMISS?

    The Chapter 13 Trustee is the court-appointed lawyer who distributes the chapter 13 plan payments, and watches out for the best interests of the unsecured creditors.  It is the trustee's duty to dismiss, or end, the chapter 13 if the debtor isn't doing all of the things that the debtor is required to do.  The most common things that the debtor neglects to do are to provide documents, such as tax returns, receipts, and statements, or more commonly, the problem is that the debtor has stopped making the plan payments.  In Minnesota, if you fall behind by two payments, then the trustee will usually move to dismiss your case.

    WHAT DOES IT MEAN IF MY CASE GETS DISMISSED?

    Generally speaking, you don't want your case to get dismissed because the dismissal undoes almost everything that you have been working for.  When a chapter 13 gets dismissed, the case is over.  All of the time and money that you put into the chapter 13 case is essentially wasted.  It is true that whatever you have paid to your creditors is counted against your debts, but you will lose all of your progress towards the chapter 13 discharge.  The discharge is the court order that eliminates your debts, and you only get it if you stay in the chapter 13 for 3 to 5 years (you can do 3 years only if you make less than the median income for your state).  The main goal of filing a chapter 13 is usually to get the discharge, so this is important.  When your chapter 13 is dismissed, you also lose the protection of the Automatic Stay.  The Automatic Stay prevents creditors from taking acts to collect debts against you while you are in bankruptcy.  It generally lasts for the whole 5 years of a chapter 13 and it is very important because it prevents things like foreclosure (while you catch up on your mortgage), repossession, wage garnishment, and bank levy.  As soon as your chapter 13 is dismissed, creditors can do all of these things to you just as if there were no bankruptcy.

    WHAT CAN I DO ABOUT A MOTION TO DISMISS?

    I know a motion to dismiss sounds pretty bad.  Potentially, it could cause you to lose everything that you have fought for through the bankruptcy process.  Don't worry, though, if you have a good attorney, that attorney will usually be able to work something out to get your chapter 13 back on track.  The trustee doesn't want your plan to fail either, so it is usually possible to make a deal, so long as both sides are reasonable.  To stop the motion to dismiss, you can either make extra payments to catch up on the regular plan payments, or it may be possible to modify your plan.  We can modify your plan if your economic situation has changed.  Possible changes include things like job changes, temporary layoffs or furloughs, new expenses (such as childcare or medical issues), and other similar things.  If we can prove that you have less income available for creditors, then we can lower your payment, or temporarily lower your payment, to help you get caught up.

    If you get one of these motions in the mail, then you should call your attorney immediately to see what can be done.  This is true especially if you are in years 3, 4, or 5 of your chapter 13 plan.  It would be a shame to lose all of that time and money just because of a temporary emergency, or forgetting to provide some documents.  We want to work with you, and make sure that your chapter 13 is successful.

  24. How do I contact the Bankruptcy Court?

    If you are represented by an attorney in your bankruptcy, then you should not need to contact the bankruptcy court.  Your attorney will handle all communication with the court for you.

    If you do need to contact the US Bankruptcy Court for the District of Minnesota, then the place to start is at the court's website (clickable link).  The website has phone numbers, locations, Local Rules, and even the official bankruptcy forms.

    If you want case information, you must create a user name and account with the Federal Government's Public Access to Court Electronic Records system (clickable link).  This system contains documents relating to every bankruptcy filed in the country and is an invaluable resource for finding out whether anyone has filed for bankruptcy, and what assets and debts were included.

    If my office represented you in your bankruptcy, then we can provide you with copies of any of the documents filed in your case.

  25. What is a reaffirmation agreement? Do I need to sign it?

    A reaffirmation agreement is a contract between a debtor and a creditor to keep the creditor's debt out of the bankruptcy. This means that the debt in question will not be discharged, and the debtor will have to repay it after the bankruptcy. In effect, signing a reaffirmation agreement puts the debtor back on the hook for the debt. You do not have to sign reaffirmation agreements in many cases. Since the whole purpose of filing a bankruptcy is to get rid of debts, you should be very careful about agreeing to sign reaffirmation agreements. In fact, you should not sign a reaffirmation agreement without first talking to your attorney about the consequences of doing it.

    Reaffirmation agreements, although required by the bankruptcy laws for every secured debt that the debtor will continue to pay, are often not necessary in practice. This is because the only penalty for failure to sign the reaffirmation is that the creditor might repossess the collateral securing the loan. The collateral is usually a car or a house for consumer bankruptcies. The creditor, however, wants money, not collateral, so the creditor prefers to continue to receive payments and interest rather than take the collateral. If the creditor decides to take the collateral because the debtor did not reaffirm the debt, then the creditor will not get any payments, because the bankruptcy discharged the debt. The creditor will also have to pay to foreclose on the house, or to repossess the car, which is expensive. Thus if the creditor insists on a reaffirmation agreement, then the creditor might get stuck with the collateral and will not get any payments. This is exactly what the creditor does not want. Creditors want predictable monthly payments, they do not want to auction off cars and houses for a fraction of their value.

    Because insisting on the reaffirmation agreement is often a losing game for creditors, many creditors will simply allow the debtor to keep making the normal payments and keep the collateral. This is the best option for the debtor because you will have the collateral (i.e. you can live in the house or drive the car), but you won't be on the hook if something happens to the collateral. Examples of this are losing your job so you can't make payments, or getting your car or house is destroyed by an accident or fire which is not covered by insurance. If you sign a reaffirmation agreement and one of these happens, then the creditor can sue you to collect the balance. If you haven't signed a reaffirmation, then they can't sue you for a deficiency judgment to collect the loan balance.

    A good bankruptcy lawyer will ask your creditors whether or not they will repossess the collateral without a reaffirmation agreement. Then the attorney will make sure that you do not sign any reaffirmation agreements unless they are absolutely necessary.

    One downside of not signing the reaffirmation agreement is that lenders often will deny you access to online account records.

    The lender will usually continue to accept the monthly payments, just make sure to put the loan number in the memo field of your check or money order.

  26. What is a charged off debt? Do I still owe it?

    You might hear that one of your debts has been "charged off," but what does that mean? Sometimes you see this word on a credit report, or you are told that the debt has been charged off when you call to inquire about the debt. It sounds like you no longer owe the money, but this is not true. Charged off is an accounting term. It means that the creditor no longer thinks they can collect on the debt. It does not mean that the creditor has forgiven the debt.

    After charging off a debt, the creditor will usually sell it to a collection agency, or move it to a collections department. It is the collections agencies that will then try to get the debt paid back. They will use disagreeable tactics like calling you many times a day, or even garnishing paychecks or bank accounts. Do not assume that when a debt is charged off, that you no longer owe the debt. The statute of limitations for debt collection is almost unlimited (a decade or longer, depending on if the creditor renews their judgment or if you make a payment), so creditors almost never run out of time to collect debts. Thus you know that a charge off isn't an acknowledgment that the debt is too old to be collected.

  27. Do I have to attend my Chapter 13 Confirmation hearing?

    Most likely you do not have to go if you are filing in Minnesota. In some states, debtors must attend the confirmation hearings, so check with your lawyer if you are not in Minnesota. If there has been an objection to your Chapter 13 Plan, then you might have to attend, or want to attend so as to learn the outcome.

    The purpose of the confirmation hearing is for a judge to decide whether or not to confirm the debtor's Chapter 13 plan. Most consumer Chapter 13 plans are approved without a hearing. This is because most experienced bankruptcy lawyers file Chapter 13 plans that properly follow the bankruptcy code, so that no party has a reason or grounds to object to the hearing.

    If you will have to go to your confirmation hearing, then your lawyer or the court will let you know that you must attend.

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