When people hear the word “bankruptcy,” they may imagine a situation where their possessions must be sold to pay off their debts. However, Chapter 13 is aimed at reorganizing debt rather than eliminating it through the liquidation of assets. Below is an overview of the Chapter 13 bankruptcy process for Minnesota.
Deciding whether to file bankruptcy is a difficult and complex question. Before filing you should consult an experienced bankruptcy attorney to ensure your rights are protected.
- Prior to filing for Chapter 13 bankruptcy, Minnesota debtors have to receive a briefing from approved credit counseling agency. Most agencies provide this briefing over the phone or online. The course typically takes about 90 minutes to complete. This course must be taken within the 180 days before the petition is filed with the court.
- After you have completed counseling, your attorney may file a bankruptcy petition with the federal bankruptcy court. Upon filing, your attorney will present on your behalf a list of creditors and the amount of money owed to them, your source of income, a list of your assets, and a detailed breakdown of your living expenses. Once the petition is filed, an automatic stay goes into effect which will prevent creditors from attempting to collect on the debts owed. Actions like garnishments, repossessions, and foreclosures have to stop when your case is filed, and this is often the biggest source of immediate relief.
- Within 15 days of filing your petition, a plan of repayment must be submitted. The plan is basically a 3-4 page summary that tells the court and all of your creditors how the payments you make over the course of the plan will be distributed. Your debts are put in separate categories, and each category of debt gets a different treatment. How much your plan has to pay is based primarily on how much money is left after paying your living expenses that are detailed in your petition. No two plans are exactly alike, as no two financial lives are exactly alike. Within 30 days of filing, you must start to make payments to your trustee, even if the plan is not yet approved by the court.
- The meeting of creditors, also called a 341 meeting, is held 20-40 days after you file bankruptcy. The hearing itself is relatively informal, and the judge in your case is not present. Your attorney goes to the hearing with you, but you answer all the questions about your finances. During this meeting, the debtor is required to appear and testify, under oath, about their financial condition, assets, and debts. The trustee will direct the meeting and ask most of the questions, but creditors may also attend and question the debtor. Typically, creditors will attend if there are questions about the proposed repayment plan.
- Next, a bankruptcy judge determines whether your proposed plan is feasible and if it meets the criteria for confirmation during a confirmation hearing. The court has the final say in determining the legitimacy of the plan. However, creditors may object to the proposed plan if they believe any of the rules the plan must follow are not being met. If the plan meets the required bankruptcy codes and is fair, it will be approved.
- Finally, it is the responsibility of the debtor to meet the terms of the repayment plan. The debtor may not miss any payments. After three to five years, if the repayment plan criteria is met, a judge will discharge the debtor. The debtor will be absolved of any remaining dischargeable balances. Exactly how long your plan agrees to make payments for and what debts, if any, would survive or be changed by the bankruptcy varies based on the individual plan.
Consult a Skilled Minnesota Bankruptcy Lawyer
Nobody is immune to financial burdens. Even those of us who prepare for possible financial hardship may find themselves in dire straits due to expensive medical bills or sudden unemployment. If you are experiencing financial hardship in the Twin Cities, Minneapolis, and St. Paul communities, Martin and Hedervare PLLC can help. Call our firm at (651) 243-2974 or contact us online today to schedule your risk-free consultation.