Protecting minor children

I have decided to add a document to the estate plans I prepare for people who have minor children.  As I am sure you know, children under age 18 are not able to do many things.  

If you cannot manage things for your children because you are in a coma and the child's other parent cannot manage things either, you can designate a temporary or standby custodian.

If I have prepared a will or trust for you in the past and I did not give you the paperwork needed to designate such a custodian, please call me and I will give you the necessary paperwork.  I will need the following: 

your name, your spouses name (if applicable), the name, address and telephone number of the custodian, and the names and birthdates of your children.  

As always, feel to contact me by phone at 320-252-4473 or by email.

Chapter 13 does not require you to pay all of your debts

 There are several kinds of bankruptcy, but the ones individuals use most often are chapter 7 and chapter 13.  In chapter 13 we can do a lot of useful things.  For instance, if you are behind on a house payment or a car payment we can use chapter 13 to catch up the missed payments over time.  If you financed your car more than two and a half years ago we can have you pay the value of the car if that is less than the full amount  you owe.  Generally speaking you do not give up any assets when you file chapter 13 (unless you want to!) but if that asset is not "exempt" you may have to pay the current value of that asset.

However, one of the great benefits of chapter 13 is that it places all of your unsecured debt into a pool.  ("unsecured debt" is, for instance, most credit cards and medical bills).  You do not have to pay your unsecured debts in full in a chapter 13.   Instead, you have to pay your "surplus monthly income" to the trustee, and the trustee splits that amount up between all of your creditors.

For example, say you are $8,000.00 behind on your house payment, and have another $20,000.00 of credit card debt.  Let's also say that when we do your budget you have $400.00 per month of "surplus".  Your chapter 13 plan would therefore have you pay your regular house payment becoming due after the case is filed plus $400.00 per month for 36 months, for a total of $14,00.00.*  The trustee would pay the $8,000.00 catch up payment to the mortgage company, and after trustee fees and attorneys fees are paid the unsecured creditors would split what's left.

Each case is a little different, which is why I am happy to meet with you at no charge to discuss your options.  Feel free to call me at 320-252-4473.

*  Many assumptions in this example, including that you are below "median income" -- $74,083 for a household of one, $94,966 for a household of two.  This amount is adjusted periodically.

Sam Calvert is a "debt relief agency" and helps people file for relief under the Bankruptcy Code.

Insight into the business of debt collection.

 I ran across a news story about a debt buyer which has an office here in Minnesota, Jefferson Capital Inc.  The news story said that the company wanted to issue stock. I took a look at the prospectus and found the following:

During the three months ended March 31, 2025, we invested $175.2 million to acquire receivable portfolios, with face values aggregating $2,757.4 million, for an average purchase price of 6.4% of face value. The amount invested in receivable portfolios increased $73.8 million, or 72.8%, compared with the $101.4 million invested during the three months ended March 31, 2024, to acquire receivable portfolios with face values aggregating $1,519.4 million, for an average purchase price of 6.7% of face value. During the year ended December 31, 2024, we invested $723.3 million to acquire receivable portfolios, with face values aggregating $9,837.1 million, for an average purchase price of 7.4% of face value. The amount invested in receivable portfolios increased $192.4 million, or 36.2%, compared with the $530.9 million invested during the year ended December 31, 2023, to acquire receivable portfolios with face values aggregating $14,828.5 million, for an average purchase price of 3.6% of face value.

In other words, they buy a debt for less than a dime on the dollar.  So, if they can collect even one-fifth of the amount of the debt, they have about tripled their money.  It must cost them something to collect the debt so maybe they only double their money.

This may help explain the aggressiveness of some debt collectors.

Watch out for mortgage foreclosure scams

The Minnesota Star-Tribune had an interesting article on December 27, 2024.  Here is a link:

https://www.startribune.com/foreclosure-mortgage-delinquency-scam-late-payment-past-due-assistance-counselor/601199370

A couple of paragraphs caught my eye--

“They say, ‘Pay your mortgage funds to us, and we will work with the mortgage lender to secure a better rate,’” he said. “Asking for money up front is by far the biggest red flag. Any reputable foreclosure-assistance organization is not going to charge up-front fees.”

Another common ploy comes with a promise of a “forensic audit,” meaning scouring mortgage documents in hopes of finding errors that will void the terms of the mortgage or enable renegotiating more favorable terms."

It be incredibly frustrating to deal with the "loss mitigation" teams at the mortgage company or the mortgage servicer.  I have had many clients tell me that they sent paperwork that the servicer claims they never got, and that they get repeated requests for the same information.  However, you should not have to pay for that service.

Two things I wish the article had mentioned.  First, Lutheran Social Services has a contract to help people in Greater Minnesota deal with foreclosure.  Their assistance would be free.

Second, and dear to my heart of course, the writer did not mention that Chapter 13 bankruptcy can be used to catch up a delinquent mortgage.  You have to make the regular scheduled payment plus a  catch-up payment to the trustee, but if you are behind because of a temporary loss of income, Chapter 13 can be a very useful tool.

As always, feel free to call me to discuss your legal issues.   My number is:  320-252-4473

No one wants to file for bankruptcy, but if you're heading in that direction, delaying the inevitable may only make things worse

 

I came across this article on the American Bankruptcy Institute and thought I would pass the first several paragraphs of the article along.  It was originally on the CBS News website, posted Nov. 20, 2024:

"No one wants to file for bankruptcy, but if you're heading in that direction, delaying the inevitable may only make things worse.

But those struggling to stay financially afloat should consider the option sooner rather than later, advise experts who study when and why people file.

"When a consumer feels financial pressure, the last thing on their mind is seeking bankruptcy protection," said Michael Hunter, vice president, business development, at Epiq Aacer, a provider of bankruptcy information and partner to the American Bankruptcy Institute, or ABI. Most people don't file until 18 to 24 months after they've incurred financial hardship, Hunter said.

Researchers, over decades of interviewing thousands of people who've declared personal bankruptcy, have found that about two-thirds of individual filers struggle with paying their debts for up to five years before seeking help.

"The common response is people are struggling with their debt for more than two years" before seeking a legal remedy, Robert Lawless, a professor at the University of Illinois College of Law, told CBS MoneyWatch.

"People misunderstand bankruptcy and wait too long to see a bankruptcy lawyer. Most people would benefit by going earlier," said Lawless, a co-principal investigator in the Consumer Bankruptcy Project, launched in 1981 by a group of academics including Senator Elizabeth Warren, D-Mass., a law school professor at the time.

When to file for bankruptcy

Because of the stigma and shame that Americans attach to bankruptcy, people turn to it as a last resort — oftentimes after they have plowed through retirement funds and other assets that would be have been shielded from creditors by filing for debt relief.

"If you are raiding pension or other retirement assets, that is a red flag," said Lawless, noting those funds are protected from creditors in bankruptcy. Borrowing money to cover current expenses is another warning sign, he offered.

"It makes sense to file if a creditor is going to be able to take away something you need," said Pamela Foohey, a professor of law at the University of Georgia School of Law in Athens. "If a person is dealing with a wage garnishment that is harming their lives, or if a lender is threatening to repossess your car. If there's no other way to get a car that will fit your budget, filing could be a way to keep your car, or keep your house."

Otherwise the broad answer is to first address how they might solve the cause of their financial distress before filing for bankruptcy. "It doesn't help to find a better-paying job if after bankruptcy more is going out than coming in," said Lawless.

"If you lost your job, file after you found a new job; if you have a health crisis, you file after you've gotten better to discharge all of the medical debt that you've racked up," said Foohey.

If someone undergoes a change in their family situation, whether it's a divorce or the birth of twins, she advises that they first figure out how they're going to manage going forward on a budget after the debt is discharged.

"Bankruptcy does one thing, it gets rid of debt. It doesn't find you a job, it doesn't put money in your pocket," said Lawless. ...."

Feel free to call me to discuss matters.  My number is:  320-252-4473.  Congress says I have to tell you that I am a debt relief agency and help people filed for bankruptcy.

They Were Ashamed About Their Debt. Bankruptcy Gave Them a Second Chance.

I came across an article in the New York Times by Rachel Bussel, (dated Nov. 4 2024) that I thought was worth sharing.  So the following is not original to me.  The article is longer.

Many people who should consider filing for bankruptcy avoid doing so out of shame or fear it could ruin their credit. But it can provide much-needed relief.

In my 20s, while attending law school at New York University by day and concerts by night, I racked up over $30,000 in credit card debt. I wasn’t thinking about my credit score; I was solely living in the moment.

 After three years, I left law school without graduating. The $40,000 salary for my administrative assistant day job barely covered rent and student loans. I made minimum payments on my credit cards, cringing as hefty interest rates ballooned my balance.

 A friend whom I confessed all this to advised me to “never declare bankruptcy,” citing a bad experience. He was older and, I assumed, wiser, so I took his words to heart, crossing that option off my list.

Instead, I consolidated my debt with a service that promised to streamline the repayment process. But because my monthly income wasn’t high enough to pay extra toward the principal, I didn’t make much headway after several years of making payments. So I researched bankruptcy options, discovered that I was eligible and decided to file. The process was far less painful than I had anticipated, wiping my debt slate clean.

I regret not filing sooner. Many people avoid filing for bankruptcy out of shame and embarrassment around their financial circumstances, because they receive poor advice or because they’re too proud. But bankruptcy may be a prudent option to eliminate burdensome debt, save a home from foreclosure and end collection calls

As always, if I can be of help discussing or dealing with your financial issues, call me at  320-252-4473

Sam Calvert

Congress requires me to say that I am a debt relief agency and help people file for relief under the Bankruptcy Code.

Mom co-signed for me. Now what?

 From time to time  I run into a person (we'll call him Bob) who has a loan which was co-signed by someone, usually a parent (we'll call the co-signer Mom). So, what happens if Bob files bankruptcy?

Well, if the debt is unsecured, in a chapter 7 Bob's debt is wiped out but the co-signer is still liable for the debt.  After the bankruptcy is filed, Bob is free to pay the debt if he wants to, or he is free to give money to Mom and Mom can pay the debt.  But the lender is free to try to collect from Mom in the meanwhile.

But in a chapter 13, there is something called "the co-debtor stay" for consumer loans (11 U.S.C. Sec. 1301).  What that means is that if Bob got the benefit of the loan, and if Bob promises to pay the co-signed debt in full through the chapter 13, the lender has to sit back and accept payments and leave the co-signer alone.

On the other hand, if Bob does not  pay the co-signed debt in full, the lender can ask the court for permission to go after the co-signer.

The real moral of the story is:  Don't co-sign for someone else's loan.  If you refuse to do so, you won't have to worry about the co-debtor stay!

As always, if I can be of help, call me at 320-252-4473.

Don't pay mom back!

 Actually, the headline should say:  "Don't pay mom back before filing".

In the paperwork that is filed with your bankruptcy paperwork, we have to list any payments that you have made to "insiders" within the year before filing the bankruptcy.  And at the trustee meeting the trustee will ask about payments to relatives or friends. 

So, what is an "insider"?  Relatives and business "partners" are insiders.  Close friends may be insiders.  (A definition is below.)

If you owe mom money and  have paid mom $600 or more dollars (payments of less than $600 are exempt) within the year prior to filing bankruptcy, the trustee may very well sue them to get the money back.  The trustee will then subtract his fees from the amount he gets and divide up the remainder amongst all your creditors. 

One of the theories of bankruptcy law is that similar creditors should be treated in a similar manner.  If you "prefer" one unsecured creditor over all of your other unsecured creditors, that  preferential transfer must be disclosed and can be reversed.

You can't "forget" to mention this in your paperwork, because you are signing the papers under penalty of perjury.  And the money is probably traceable, anyway.

Notice that I said "unsecured" creditor.  Your car payment or house payment are payments on secured debts and would not be subject to this. 

However, the good news is that after you file, you can pay mom back without a problem.  You may hear someone say that doing so brings all the debts back, and even if that were true in 1960 or so, that has not been true since the Bankruptcy Code became effective in 1979

As always, if you have questions, feel free to call me at 320-252-4473.

Sam Calvert

The definition of "insider" for individuals is below:

The term "insider" includes-

(A) if the debtor is an individual-

(i) relative of the debtor or of a general partner of the debtor;

(ii) partnership in which the debtor is a general partner;

(iii) general partner of the debtor; or

(iv) corporation of which the debtor is a director, officer, or person in control;

New Law Helps People

You can't always write that headline, of course, but I think it applies to a law passed by the Minnesota Legislature in 2024.  Chapter 114 updated exemption laws in Minnesota.  (An exemption law means that a creditor cannot take a specific item).  Among other things the new law did the following:

a)  the exemption for a motor vehicle is $10,000 (more if modified to be handicapped accessible);

b)  there is now a jewelry exemption of $3,062.50 (formerly it was only "wedding rings")

c)  there is now an exemption of $3,000 for tools, snow removal equipment and lawnmowers

d)  there is now an exemption of $1,000 for pets.

All of these increases or new exemptions are effective ".. August 1, 2024, and appl[y] to causes of action commenced on or after that date."  I am not sure what that means.  Does it mean if the debt arose before August 1, 2024 you are stuck with the old exemptions?  Or does it mean that if a lawsuit or garnishment or bankruptcy is filed after August 1, 2024 that the new exemptions apply?  I assume we will get some court decisions fairly soon on that point.  

Whatever it means this is good news going forward.

As always, if you have questions feel free to contact me at 320-252-4473.

New unhappy decision in chapter 13 cases

 In In re Goetz, 2024 WL 998765 (8th Cir. Mar. 8, 2024), the Eighth Circuit Court of Appeals gave bankruptcy 13 debtors reason to be concerned about conversions from chapter 13 to chapter 7.

On August 19, 2020, the debtor Machele Goetz (“Debtor”) filed a chapter 13 bankruptcy petition and plan. At that time, she owned a residence worth $130,000 and claimed the full $15,000 homestead exemption under Missouri law. The lender held a roughly $107,000 lien against the residence. Liquidation of the residence on the date of the petition would have resulted in no recovery for the bankruptcy estate.

On April 5, 2022, Debtor converted her case from chapter 13 to chapter 7. Between the chapter 13 filing and the date of the conversion order, Debtor’s residence had increased in value by $75,000. Liquidation of the residence on the date of conversion would have resulted in a recovery of roughly $62,000 for the bankruptcy estate. 

The Bankruptcy Court for the Western District of Missouri held that, pursuant to 11 U.S.C. § 348(f)(1)(A) and § 541, the post-petition, pre-conversion increase in equity in Debtor’s residence became property of her converted bankruptcy estate. The Bankruptcy Appellate Panel for the Eighth Circuit affirmed and Debtor appealed.

In affirming, the Eighth Circuit Court of Appeals (“Eighth Circuit”) looked to the text of § 348(f)(1)(A) that states, for a chapter 13 case converted to chapter 7, the “property of the estate in the converted case shall consist of property of the estate, as of the date of filing of the petition, that remains in the possession of or is under the control of the debtor on the date of conversion.” The  Eighth Circuit held that the post-petition, pre-conversion increase in Debtor’s equity was property of the converted estate, as proceeds “from property of the estate” under § 541(a)(6), and Debtor had effective control of the equity because she still possessed her residence on the date of conversion. 

In Minnesota, the state homestead exemption is significantly higher than the Missouri homestead exemption. As such, for a case converted from chapter 13 to chapter 7, the Goetz decision may have little impact for a post-petition, pre-conversion increase in equity in a debtor’s residence protected by the Minnesota homestead exemption; however, the decision could impact a post-petition, pre-conversion increase in equity in non-exempt property of the estate. 

What paperwork is needed to file bankruptcy?

Before I can file a bankruptcy, I need an amazing/annoying amount of paperwork.  WE CAN MEET AND TALK BEFORE YOU BRING ALL OF THIS, but I will eventually need the following to prepare the case:

Paystubs covering the seven months before we meet

A record of non-paystub income by month for the seven months before we meet (for example, Social Security, VA payments, side jobs)

Tax return for the tax year just ended (when prepared)

Tax return for the prior tax year 

Bank statements for each account for the last six months 

Divorce decree, if applicable

Address and phone number of DSO (support or alimony) obligee if applicable

Legal description of any land you own or are buying or have an interest in (copy of deed)

Mortgage statement for any mortgage against your land.

Appraisal, if you have one

Credit Counseling certificate if already done

Copies of titles for car/boat/etc.

Bills (or copies of bills)

A monthly budget showing how you spend your money (but not deducting payments on credit cards we are going to get rid of )

Monthly car loan statement or coupon book (if applicable)

Most recent 401K / 403(B) / IRA statements  

A statement showing any life insurance policies that have cash surrender value

Driver's license or other government picture identification

Social Security card, or W-2 or 1099 with your full Social Security number on it

If  you are being sued, a copy of the complaint.

Even if you have lost or don't have some of these items, there's often a way to get the information. 

Getting this information helps both of us to understand your financial situation and make some plans about what to do.

Again, we can discuss your situation in general terms without all of the above, but it is more productive to have it in hand when we meet.

Feel free to call me at:  320-252-44373

Who will know about my bankruptcy?

 People often ask me who will know about their bankruptcy filing.

Just like most court proceedings, a bankruptcy filing is technically "public information".  However, being public information does not mean that it is "publicized".

When we filing bankruptcy, we put together what amounts to a mailing list and file that with the court.  The court system then sends a notice by mail or electronically to those who are listed on the mailing list.  And the credit bureaus (Experian, Transunion, Equifax) will pick up the filing and include it in a credit report (for up to ten years after filing). 

If you look at the "legal notices" section of your local newspaper, you will see mortgage foreclosures, and probate notices and certificates of assumed name, among other notices.  Those are there because a statute requires that information to be  published at the expense of the person or company placing the notice.  But no one pays the newspaper to publish a bankruptcy notice, so those notices are NOT published in the local paper. If you look in the notices of, for instance, the Sauk Rapids Herald, you will not see any bankruptcy notices.

On Mondays the Star Tribune and Pioneer Press publish a list of bankruptcies, but the list is only for those who look like businesses.  For instance "Doug Peterson, d/b/a Doug's Auto Body" might be listed.  But it is very unlikely that the Star Tribute and Pioneer Press would list just "Doug Peterson".  There are specialist newspapers, such as Finance and Commerce, in the Metro area, that list bankruptcies.  And for some reason the Duluth News Tribune seems to publish filing information for cases which are filed in Duluth.  But other than those, I am not aware of any Minnesota newspaper that publishes bankruptcy notices. 

If someone subscribes to the PACER system they can look up a case, but they have to be a subscriber and they have to pay a fee to do so (if the lookups exceed a certain amount per calendar quarter) and they have to look for your case specifically.

Also, a bankruptcy is in the federal court system, not the state court system.  Nothing will be automatically filed in the courthouse in the county in which you live (St. Cloud for Stearns County, Foley for Benton County, etc.).  So anyone looking in your local courthouse will not learn of your bankruptcy filing from those records, unless there was a specific reason to file a bankruptcy notice in a specific case.

I hope this eases your concern about how public your "public record" would be.

As always, if you have questions, feel free to call me at  320-252-4473.

They filed bankruptcy? (Baseball edition)

We are a little more than halfway through the baseball season.  We can hope the Twins make it to the playoffs AND that they don't have to face the Yankees.

Nowadays major league baseball players make a lot of money.  The minimum salary is $720,000 in 2023;  players like Byron Buxton and Carlos Correa make much, much more.

But baseball players are just people;  and like all people they can, and sometimes do, get into financial difficulty.

The following well-known players have filed bankruptcy:

Tony Gwynn (Padres), chapter 7, 1987

Lenny Dykstra (Mets and Phillies), chapter 11, 2009

Jack Clark (Giants, Cardinals, others), chapter 7, 2018

Gaylord Perry (Giants, seven other teams), chapter 7, 1986

Graig Nettles (Yankees, Twins, four other teams), chapter 11, 1988,

Rollie Fingers (As, Padres, Brewers), chapter 7, 1989

Jose Canseco (As, six other teams), chapter 7, 2012.

I hope you're not in financial trouble.  But if you are, just like the baseball players listed above, bankruptcy may help you through a  tough spot..  Feel free to call me at 320-252-4473.

About credit cards

 Long ago I wrote the following post:  

Clients often ask if they should stop paying their credit card bills before we file their bankruptcy case.

There are at least two issues.  The case to continue payments is that there is an argument that the more "lates" you have on your credit report, the lower your credit score will be. 

The counter argument is that if you need to file bankruptcy, you need to be saving your money to, for instance, catch up your home mortgage payments.  Money paid to the credit card company is gone and you are not going to get it back.

There is another "legal" issue, which is as follows:  Bankruptcy trustees are on the lookout for payments to unsecured creditors which exceed $600 per creditor in the 90 days before the case was filed (one year for 'insiders'-- basically, people who are relatives or close friends.)  The reason is that such a payment may be a "preference".  I usually say that there is nothing immoral, illegal or fattening about a preference, but the point from the trustee's standpoint is that he or she can recover the preferential payments and earn a commission for doing so.

So, you don't get the money back and the company you paid doesn't get to keep the money. Sort of a lose-lose proposition.

So, I think as a general matter, once you have decided that you have to file bankruptcy, stop paying the credit cards.

A related question is whether any of your credit cards will still be usable after your case is filed.  My thought is that you should expect your cards to be closed.  Many card companies subscribe to services such as AACER which every day access the bankruptcy court website to see if Social Security number such-and-such filed bankruptcy that day.  AACER then notifies the card company about that filing so that the card company can match that Social Security number to their account number.  Once they match your Social Security number to their account number, they can close your account.

As usual, there are exceptions to every rule;  be sure to ask about your specific question by calling me at 320-252-4473.

About "living wills"

 A while ago I came across a very short and simple "living will" published by the Twin Cities Medical Society.  "Living will" is an older term;  we call it "advance directive" or "health care directive" now.  

An advance directive is defined as:  Advance directives are legal documents that provide instructions for medical care and only go into effect if you cannot communicate your own wishes.

The Twin Cities Medical Society has now transferred its work on advance directives to a group called "Light the Legacy".  The address for that is https://www.lightthelegacy.org and you can download several versions of the advance directive at that site.  One of the versions is very simple:  You fill in your name, birth date, the name and relationship and phone number of the person you want to talk for yourself;  and then you sign the form and have your signature notarized or witnessed.  The form is literally one side of one sheet of paper, with instructions and suggestions on the back.  There are versions in English, Somali, Vietnamese, Chinese, Hmong, Russian and Spanish

The site includes a longer, eight-page version if you are willing to go into more detail about your wishes and hopes.

If you come to my office I will give you the short form -- free!  

I am also looking into a video version of a health care directive through an organization called Mideo.  Their website is:  https://mideohealth.com/ "Their website says:  MIDEO® is created via a facilitated medical evaluation with a licensed medical provider. From that evaluation a medical prescription for your care is created. It is then recorded and placed in our secure servers. We utilize ID cards called MIDEO ID cards and ask that they be kept with your insurance Cards and drivers license in your wallet or purse. You also receive a MIDEO Magnet for your refrigerator as we often train paramedics to look on the side of your refrigerator for your living will or advance directive."

There is apparently a cost, which may be covered by health insurance or Medicare.

I encourage you to at least have a paper short-form health care directive as part of your planning process.

sam calvert attorney at law client results foreclosure 720p

Some student loans to be forgiven

 A class action suit in California seems to provide that about 200,000 students who attended 151 particular colleges would have their Direct Loan or their FFEL loan and who filed requests for borrower defense will have their student loan automatically forgiven.

You should check to see if your institution is on this list!

Of interest to Minnesotans I see Capella University, Brown Institute and Minnesota School of Business on this list.

This is a little hard to read in this format;  if you send me your email address I will send you an easier-to-read copy of the list.

NOTE:  This is NOT the plan by the Biden Administration to forgive $10,000 worth of loans -- that is an entirely different issue.

But I love my credit union!

 Many of the people I meet have their accounts at a credit union.  Usually they like their credit union and assume that the credit union likes them back.  And that may be true, generally.

But I recently came across a credit card agreement from a local credit union, for a Visa card.

On the second page of the agreement was this language:

THE GRANTING OF THIS SECURITY INTEREST IS A CONDITION FOR THE ISSUANCE OF CREDIT UNDER THIS AGREEMENT.

YOU SPECIFICALLY GRANT US A CONSENSUAL SECURITY INTEREST IN ALL INDIVIDUAL AND JOINT ACCOUNTS YOU HAVE WITH US NOW AND IN THE FUTURE TO SECURE REPAYMENT OF CREDIT EXTENDED UNDER THIS AGREEMENT. YOU ALSO AGREE THAT WE HAVE SIMILAR STATUTORY LIEN RIGHTS UNDER STATE AND/OR FEDERAL LAW. IF YOU ARE IN DEFAULT, WE CAN APPLY YOUR SHARES TO THE AMOUNT YOU OWE.

Shares and deposits in an Individual Retirement Account or any other account that would lose special tax treatment under state or federal law if given are not subject to this security interest.

If you have other loans with us, collateral securing such loans will also secure your obligations under this Agreement, unless that other collateral is your principal residence or non-purchase money household goods.

On the face of it, this means that if you have a credit card through that credit union, and if you have your wages or other income deposited into a checking or savings account at that same credit union, your money could be taken by the credit union and applied to your Visa card.

And if you file bankruptcy the credit union may freeze the funds on deposit on the day of filing and try to apply them to the Visa bill.

This is just another reason to not keep your money in the same place you owe money to!

Is bankruptcy for me?

 

Bankruptcy is often feared, and the decision to file for bankruptcy can be a difficult choice.  But, bankruptcy can be necessary for someone facing overwhelming debt, because it can give them a fresh start financially.  If you wonder whether bankruptcy is the right choice for you, let’s talk.

 The two most common types of bankruptcies are Chapter 7 and Chapter 13.  (Chapter 12 is for farmers, Chapter 11 is generally for businesses):

Chapter 7:   In chapter 7 you may have to give up or buy back your “non-exempt” assets.   However, in very many cases there are no “non-exempt” assets.  A chapter 7 may remain on your credit report for 10 years, but usually you can obtain credit cards and auto loans soon after bankruptcy, although your interest rate may not be as good as if you had perfect credit.  I see people who filed bankruptcy getting perfectly routine home loans a few years after their case.

Chapter 13:   Sometimes known as “wage earned” bankruptcy, a Chapter 13 can restructure your debts, catching up mortgage payments, re-writing car loans, etc.  A chapter 13 lasts between three and five years, but ordinarily you do not lose any assets that you want to keep. A Chapter 13 filing can remain on your credit report for up to seven years.  

 I am often asked how bankruptcy will affect a credit score.  Usually, the credit score is already poor because you are overloaded with debt and may be in collection. If so, bankruptcy probably won’t sink your score a lot more and because it stops the reporting of future late payments you may be able to rebuild your credit faster.

 Once your bankruptcy is over, you likely can get credit in the future.  But that will depend on your income and how you handle credit after filing.  For instance, you can get a secured credit card and use that to show that you are responsible in making payments on time.  You want to not overload yourself with credit card debt in the future, however.

Debt problems can feel overwhelming.  Being broke is tough.  Being broke can be hard on marriages.  Bankruptcy lets you shed old debt.  Good resources for budgeting after bankruptcy are The Village Family Services (800-450-4019) or Lutheran Social Services (888-577-2227) or, in the St. Cloud area, Caritas (320-650-1550).

I understand being in debt is stressful, but I’ve helped many, many people through the process.

Call me for a no-obligation discussion of your situation at 320-252-4473.

Bankruptcy Trustee -- Foe or Enemy?

When you file a chapter 7 bankruptcy, the United States Trustee (which is a part of the Department of Justice that oversees bankruptcy cases) appoints a person whose title is "trustee". The US Trustee will invariably select someone for "the private panel of trustees" -- a list of people who are pre-qualified to serve.  Technically your creditors could elect a different person at the first meeting of creditors, but I have never seen that happen.  By the way, what I am saying here is about trustees in a chapter 7 case.  In other chapters there are trustees, but they function very differently.

The job of a chapter  7 trustee is to interview you (currently by Zoom or phone) and to locate and sell assets to pay your creditors.  The trustee will look at the paperwork you file with the court, and will ask questions at the trustee meeting.  I would say that there are three basic types of  questions:  

a)  you have little or no equity in your home, so you can use the federal exemptions.  The trustee's  questions are going to be pretty basic. 

b)  you have a lot of equity in your home -- over $27000 or so for an individual or $55,000 for a couple.  In that case you are likely to use the state exemptions, and the trustee will probe to see if you have things that cannot be protected by the state exemptions, such as guns, boats, tax refunds, etc.  This is because the trustee can take those items from you and sell them, although a trustee will ordinarily negotiate with us about selling them back to you.

c)  you have a complicated farm or business;  the trustee will spend a fair amount of time asking  you about individual assets.

In any of these three types of questions, the trustee will also ask if you have given something valuable to a relative or paid an unsecured creditor.  The reason is that if you have done so, the trustee is likely going to be able to go to the person who got the gift, or whom you paid, and try to get the money back from them.

For conducting this interview the trustee gets $60 (paid from the $338 filing fee paid to the court. There is a separate fund that sometimes pays trustees a little more.)  However, the trustee also gets a commission on the money he earns from collecting assets and selling them.  The commission rate is 25% of the first $5,000.00;   10% of the next $45,000;  5% of the next $950,000;  and 3% of anything over $1,000,000.00.  In addition, trustees frequently hire themselves to act as attorney at a rate of $350 an hour or so.

Frankly, in a huge majority of the cases the trustee gets $60 and nothing more;  but if the trustee sees that you have non-exempt assets  you can expect them to bore in on you.  That's why we meet and talk about your case;   that's why we put together detailed lists of what you own.  If you are accurate in telling me what you own and what it is worth, we can usually predict very closely what a trustee will and won't go after.

As always, each case is a little different.  Feel free to call me at 320-252-4473 to discuss your particular situation.