Minnesota Chapter 13

Chapter 13 bankruptcy is often times referred to as a “wage earners” bankruptcy. A Minnesota chapter 13 bankruptcy is a bankruptcy that allows an individual to repay some of their debt through a plan. The bankruptcy plan will typically provide creditors with a payout ranging from 10% to 100% depending on the financial situation of the individual filing for bankruptcy.

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.