Minnesota Bankruptcy Attorneys Fighting For You
When a debtor files for protection under Chapter 7 of the bankruptcy code, they must meet certain financial criteria. Chapter 7 may be used by both individuals and small business owners who can meet the guidelines. This criterion is based on the median income in the state in which they are filing and is known as a means test. When the debtor does qualify based on the means test, the petition which is filed with the bankruptcy court must include a comprehensive overview of the petitioner’s income, assets, and debt. Minnesota is one of the richer states, so we tend to have a higher median income than most states. At the end of 2019 the median income for a single person is approximately $57,000.
Automatic Stay After Filing Bankruptcy
Immediately following a bankruptcy petition being filed with the court, per U.S. Code § 362 will automatically grant a stay. The stay allows a debtor to be protected from collection activities, stops wage garnishments, and halts eviction or foreclosure proceedings. This stay usually lasts for 3 months and gives people the time they need to get back on their feet.
Bankruptcy Estate Created
The bankruptcy court will establish an estate for the property, which is owned in full, or partially by the debtor including any property which they are making a claim. The estate is governed by U.S. Code § 541. Once established, a trustee is assigned and the estate will be reviewed by the trustee to determine which, if any assets are exempt from liquidation.
The trustee will also be the person who will review your assets, income, and debts in preparation for the “341 meeting” which is the meeting of your creditors. The trustee may ask you for additional documentation, proof of income, as well as proof of identity.
Bankruptcy Exemptions in Minnesota
There are two rules which govern exemptions in Minnesota when filing bankruptcy. An experienced bankruptcy attorney can help you determine whether the bankruptcy exemptions offered by Minnesota statutes, or U.S. Code §522 is more beneficial to you when they review your case. Any property which is not considered exempt would then be subject to liquidation.
Chapter 7 Liquidation
The role of the trustee in cases where a debtor has property which is not exempt is to oversee the liquidation of such property. In these cases, the trustee is entrusted with obtaining the non-exempt property, valuing such property, facilitating the sale, and collecting the funds from the sale of the property.
Once the liquidation of assets is complete, the role of the trustee is then to disburse the funds which are collected. There is a specific order in which debts are paid — the initial disbursement of funds will be used to reduce debt associated with priority unsecured debts which may include taxes to the federal, state, or local government, and child support payments which are in arrears. Keep in mind, if the non-exempt property is insufficient to pay these debts in full, in most cases, the debtor will still be obligated to pay them after the bankruptcy is discharged.
Should there be funds remaining from the liquidation of assets after priority unsecured debts are paid in full, then the trustee would allocate those funds to non-priority unsecured creditors. These creditors would include medical providers, utility providers, and credit card companies. Liquidation of debt, the process for creditors, and the order in which creditors are paid are governed by U.S. Code §726.
Filing Chapter 7 bankruptcy is a major financial decision, and one which no one enters lightly. However, Chapter 7 can give most debtors a fresh start and thanks to generous exemptions, most debtors need not worry about having their assets liquidated and used to pay their debts.
Facing Debt? Contact Walker & Walker Today
If you are facing overwhelming amounts of debt, being threatened with foreclosure or eviction, and you are tired of dealing with creditors who continue to call you in spite of your inability to pay, contact Walker & Walker, PLLC at one of their offices which are located in Blaine, Brooklyn Park, Minneapolis and St. Paul Minnesota.