The decision to file bankruptcy is a difficult one. This difficulty lies in the fact that there seems to be a stigma attached to filing bankruptcy. Individuals are afraid that everyone is going to find out about the bankruptcy and look down upon them for it. They are also afraid of the credit consequences that come along with filing bankruptcy.
While bankruptcy filings are public information, most individuals do not make it a point to see who has filed bankruptcy. As far as the credit consequences, bankruptcy does remain on your credit report for 10 years, but that does not mean you cannot acquire new credit within a matter of months after your debts have been discharged.
Anyone who has debt they cannot handle can qualify for bankruptcy, but what type they qualify for depends upon their income and the amount of debt. How this is determined is through the means test.
The means test is a measurement of a person’s ability to repay their debt and your Minneapolis bankruptcy attorney performs this assessment. Most individuals who file Chapter 7 bankruptcy simply do not have the income or the assets to pay back their debt. Someone who files Chapter 13 does have some disposable income that can be used. This means they can enter into a repayment plan with the court that enables them to pay back all or part of their debt over 36 to 60 months. Assets are not touched unless the payment plan is in default. In the meantime, you may be able to protect your home from foreclosure and your automobile from repossession.
Assets may be used to satisfy debt that is owed to creditors. If an asset exceeds the exempt dollar amount, it may be seized so it can be sold to pay back a creditor. In Minnesota, a person filing bankruptcy can choose to take federal exemptions of state exemptions, but they cannot do both. Here are some examples of Minnesota state exemptions:
- The Minnesota homestead exemption is $390,000, but that amount is increased to $975,000 if the homestead is used in agriculture. The amount of land cannot exceed ½ acre within a city or 160 elsewhere. A husband and wife filing bankruptcy may not double this exemption.
- An automobile’s value cannot exceed $4,600 and not more than $46,000 if it has been modified to accommodate a person with a disability.
- Jewelry, appliances, radios, and furniture is exempt up to $10,350.
- Clothing, food, utensils, one watch, livestock, crops, produce, and farm machines are exempt up to $13,000.
The list goes on from here. While the above are Minnesota exemptions, someone may find that federal exemptions benefit them more, so they may choose those. Your attorney will review your exemption options with you before determining what assets you can keep and what you may lose, if any.
When you are burdened with unmanageable debt, you have to do something about it. Not doing something about debt can lead to liens, repossessions, and lawsuits. Bankruptcy can be the answer to avoiding these problems. Fortunately, Paul Ross & Associates can help you understand the bankruptcy process and can make it as easy as possible for you. Call for a free consultation at 952-448-3333.