How to go Bankrupt

If you have ever watched the tv show The Office you may recall a time when character Michael Scott played by Steve Carell shouted in front of his collages “I declare BANKRUPTCY” and though all his debts would go away. Oscar another character reminded Michael that he couldn’t just declare bankruptcy and have debts go away. Here is a link to the scene: http://www.youtube.com/watch?v=hiCilTzhXrA

Many clients do not know how to file bankruptcy, when to file or if they should file bankruptcy. My office is always happy to talk to individuals who are having trouble with debt. We recommend bankruptcy only in cases where it is necessary. I bankruptcy is the best option you will be given the cost and a time line on the bankruptcy process. We will also take the time to answer your questions and go over the do’s and don’ts of bankruptcy.

Bankruptcy Laws In Minnesota

If you are filing for bankruptcy the rules are governed by the Federal Bankruptcy Laws. State laws may affect your bankruptcy filing for several reasons, the main reason being if you need to use the Minnesota exemptions. The primary reason or using the Minnesota exemptions are if you have equity in your homestead. The Minnesota homestead exemption currently allows you to use up to $360,000 to protect your home. You can also exempt retirement accounts for up to 1 million, using the federal exemptions. For most of our clients they will file using the federal bankruptcy exemptions.
I get asked on occasion is bankruptcy the right choice for me? The best answer is I do not know until I sit down and meet with the potential client to discuss all of the potential options. It is important to meet with you bankruptcy attorney to make sure that he or she understands your situation and can give you good advice. Bankruptcy law has a lot of traps that can cost clients money, so it is important to talk to your bankruptcy lawyer before making any repayments to friends or relatives.

What To Look For When Hiring Your Minnesota Bankruptcy Lawyer

If you are looking to hire a Minnesota lawyer you will want to ask how much experience that attorney has with your type of case. You also want to make sure that you and the attorney will be a good fit when it comes to working together to resolve your legal issues. Finally you should base you decision on who to hire on a number of factors, not just focusing on price. Most of the time when I buy the cheapest product, it is not the best. This is especially true in bankruptcy, where the cheapest bankruptcy service could cost you thousands of dollars in missed exemptions.

Jail for Debtors in Minnesota?

Although our founding fathers allowed redress of debt (bankruptcy) through Article 1, Section 8 of the Constitution, which effectively stopped debtors prison, debtors can still end up in jail.

A recent series in the Star Tribune: http://www.startribune.com/video/94499314.html#/94499314/video/1/sb has followed individuals who have been put in jail partly as a result of owing debts. The owing of money cannot cause the punishment of jail, but the failing to follow court orders can.

Many individual get lost in the legal morass and are unsure how to proceed. Instead of looking for help with an attorney they choose to ignore the problem. By ignoring the problem (not answering calls, not opening mail, not responding to court documents) these individuals have ended up in contempt of court.

Contempt can be purged if the debtor provides the disclosure of assets as required on the demand for disclosure, pays the bond (usually the amount of money owed to the creditor), pays the amount of the debt owed plus attorney fees and costs, or files for bankruptcy.

The key is to contact an attorney to discuss your situation. Never ignore documents from a court or creditor even if that creditor is harassing you.

Credit Repair After Bankruptcy

Obtaining future credit should be a big concern for individuals who are filing bankruptcy or who have filed bankruptcy. Although credit markets are tight we still live in a world of credit and credit is required to rent a car, flights, hotel rooms… Credit is also linked to insurance rates and the ability to buy cars and houses. Many potential filers think that bankruptcy will permanently rune their credit score. Bankruptcy will not permanently rune your credit score.
Here is a CNN.com segment regarding repair of credit after bankruptcy:

How to Bounce Back After Bankruptcy

Take a individual who has $30,000 in debt and earns $40,000 per year in income. To a creditor the income to debt ratio looks bad and the individual is likely not going to qualify for credit. Take the same individual who has filed bankruptcy, now the debt is $0 and the income is $40,000 per year. The income to debt ratio is good. Beyond the income to debt ratio a creditor will also know that the individual will not be able to file chapter 7 for eight years after a previous filing, so the creditor know that they stand a good chance in being repaid.

I have asked clients to call me to report what their score is after 6 months to a year after filing. All of the calls I have received the scores have gone up.