One of the most important features of bankruptcy to individuals and families is the automatic stay that goes into effect after filing for bankruptcy. The automatic stay should stop phone calls and letters from creditors. It will also stop all wage and bank garnishments from happening until the automatic stay is lifted or a discharge of debt is granted by the court. This provides some breathing room for families and individuals from creditors.

In most cases credit scores can be repaired within a few years of filing a chapter 7 bankruptcy, provided that all payments after bankruptcy are kept current. The actual bankruptcy will stay on a credit report for 10 years, but individuals will sometimes qualify for a mortgage two to three years following a bankruptcy.

Other types of debts will not be discharged through bankruptcy some of this debt included student loan debt, tax debt that is less than three years old, child support payments, spousal maintenance payments, and judgement debt incurred through intentional torts. The above lists regarding dischargeable debt does not include all debt and an attorney should be consulted regarding dischargeable and non-dischargable debt.

The bankruptcy laws changed in 2005 and one of the main additions to the law was the inclusion of a uniform income standard to determine if someone is eligible for a chapter 7 Bankruptcy. In Hennepin County Minnesota the income limit for filing a chapter 7 bankruptcy for a household changes depending upon how many people live in a household. The median income figures constantly change and an attorney should be consulted before filing for bankruptcy given the new income limitations.

An individual may still be eligible for a chapter 7 bankruptcy if they make over the median income but they must complete and pass the means test. The means test is a complicated formula and will allow a Chapter 7 bankruptcy discharge to be granted if an above median income individual has less than $100.00 of disposable income every month to pay back creditors. Not all payments can be deducted on the means test and a Minnesota bankruptcy lawyer should be consulted prior to filing a bankruptcy using the means test. The main deductions allowing an above median debtor to qualify for a chapter 7 bankruptcy using the means test are secured debt payments on homes and cars.

Once the decision has been made to file a chapter 7 bankruptcy the typical process is to retain an attorney to fill out the bankruptcy petition. The bankruptcy petition will include information regarding all of an individuals assets and debts. It will also give the court information regarding the individuals income.

After the bankruptcy petition is filed with the court the next step is a 341 meeting with the panel trustee who will be handling the chapter 7 bankruptcy. The typical 341 meeting takes five to fifteen minutes depending upon the complexity of the case. Creditors and the U.S. Trustee can object to your bankruptcy petition for sixty days after the 341 meeting. If no objection is filed by a creditor, the U.S. Trustee, or any other interested party the chapter 7 bankruptcy discharge should be granted.

It is important that credit cards not be used after deciding to file for a Chapter 7 bankruptcy. If credit cards are used in contemplation of filing for bankruptcy it is bankruptcy fraud, and would subject the individual to criminal penalties and the debt would not be discharged.

A chapter 13 bankruptcy is often a good option for individuals who have a steady source of income and happen to fall behind on their house or car payments. The chapter 13 plan allows an individual to catch up on past due house payments or car payment by making chapter 13 payments through the plan. One of the requirements to get a chapter 13 plan confirmed is that the debtor have some disposable income to pay to creditors.

The length of a typical chapter 13 bankruptcy is either 36 or 60 months. A 36 month payment plan is available for individuals whose income is below the median for the county where they live. If a debtor’s household is under the median income the repayment plan will be 36 months. If the debtor’s household income is over the median the debtor will have to make a 60 month repayment plan. The median income for the county is constantly changing and care need to be taken to make sure the proper repayment length is used.

A Minnesota chapter 13 case starts with the filing of a petition. Once the petition is filed with the court a 341 meeting (creditors meeting) is scheduled around 30 days later. This meeting should take between five and fifteen minutes depending upon the complexity of the case. The meeting is to verify that all information on the bankruptcy petition is accurate as of the date of filing. Creditors can appear at the 341 meeting, but in a typical chapter 13 case no creditors will appear at the meeting. The following information needs to be produced at a 341 meeting in Minnesota, picture identification, proof of social security card, most recent pay stub, and the bank statements including the balance on the date of filing.

After the 341 meeting the court sets a confirmation hearing on the chapter 13 plan. If everything looks good on the chapter 13 plan the court will approve the plan and the individual will then be responsible to make the regular plan payments for the duration of the plan in order to get a discharge. A Minnesota bankruptcy lawyer will be able to advise you regarding your estimated plan payments and the requirements to get a chapter 13 bankruptcy confirmed.

One of the main advantages of the chapter 13 bankruptcy over other forms of debt consolidation is that the credit card companies will not be able to charge interest during the chapter 13 plan. This allows an individual to pay off principal on credit card debts instead of interest only payments. In a typical chapter 13 bankruptcy case debtors are paying around 30% interest on any past due credit cards. On $100,000 in credit card debt at 30% that means that you must pay at least $30,000 per year just to stay even on the credit cards. This means that interest only payments are around $2500 per month just to keep the credit card balance from increasing. You should consult a Minnesota bankruptcy attorney to determine if a Chapter 13 bankruptcy is a good option for you.

The other advantage of a chapter 13 bankruptcy has over other debt consolidation programs is the creditors have to accept a confirmed plan. This is oftentimes not the case with a debt consolidation program through private agencies. In many cases the creditors will not accept the proposed repayment plan through the debt consolidation agency. If the creditor does not accept the repayment plan their only recourse will be to sue to collect the past due balance.

In many cases the debtor thinks that the debt consolidation program is working great for the first six months, until they receive a summons and complaint in the mail from a law office. Once they are sued is probably the first they have heard from the creditor in six to nine months, and they entire time they thought that payments were being made on the account. In these six to nine months the creditor is also adding interest and late fees to the balance until the account is finally charged off. The reason the debtor stops getting bills from the creditor is oftentimes the debt consolidation agency will send out a form letter to all the creditors instructing them to stop contacting the debtor. This means that the only way the creditor can contact the debtor is with a summons and complaint from a law firm.

The DIP will also need to have their attorney draft motions (sometimes referred to as first day motions) authorizing them to continue pay employees pre petition wage claims, motions to use cash collateral, motions to use the existing accounting system (if the DIP does not star new bank accounts), motions regarding DIP financing, motions to continue to pay vendors, and motions regarding utilities. Most of these motions should be granted by the bankruptcy court unless a creditor objects to any of the motions. A DIP must also comply with the local bankruptcy rules for the United State Bankruptcy Court for the District of Minnesota.

Once the first day motions have been decided by the bankruptcy court the DIP has 120 days to propose a plan or reorganization with the bankruptcy court. Along with the plan of reorganization the DIP must also provide a disclosure statement to the court. If this plan is approved by the creditors the DIP will need to stay current with the terms of the plan in order to continue with the Chapter 11 bankruptcy. The plan of reorganization can provide all creditors payment in full or it can provide partial payments to unsecured creditors. The main requirement being that all creditors in the same class are treated equally. A Minnesota bankruptcy attorney should be consulted before filing a chapter 11 bankruptcy, the process is complicated and requires a great deal of commitment from the attorney and the DIP.