The "BANKRUPTCY REFORM
ACT"
AT A GLANCE
Kelly
Law Office
1013 Ford Road
Minnetonka, MN 55305
Phone: (952) 544-6356
Fax: (952) 546-3690
Mobile: (612) 735-3797
dave@kelly-law.com
YOU ARE PROBABLY STILL ELIGIBLE
Since the "new law" went into effect in late 2005, I have helped dozens of clients qualify to file either Chapter 7 or Chapter 13. While the paperwork has become a lot more complicated, I am finding that most people who need to are still able to file. I care about people who are in financial difficulty, and I get a lot of satisfaction from helping them. If you are wondering whether you can meet the new standards, please call me. I am serious about doing everything I can to help you qualify for relief under the bankruptcy laws.
It might not be as hard as you think. The means test, which is perhaps the most fearsome part of the new law, only applies in consumer Chapter 7 bankruptcies and to those who are above the median income for the state in which they live. The median income figures for Minnesota are on the Chapter 7 page. Most of our clients have always had income below these figures, and are affected in only small ways if at all by the provisions of the new law.
Another good thing is that if the debts are not mostly consumer debts but are primarily business-related, the means test is not required. I have already had several clients who were involved in failed businesses and who have been very relieved to hear this. If you need a bankruptcy because a business venture has gone bad, the harshest parts of the new law do not apply to you. Apparently those who wrote this legislation wanted to be sure not to discourage new entrepreneurs by removing their safety net.
FEATURES OF THE NEW LAW LAW:
The features of the new legislation most likely to affect my clients appear to be the following:
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First, to be eligible for bankruptcy relief of any sort, an approved Financial Counseling course is required within six months prior to filing. Then before the discharge is granted, another course called the Financial Management course is required.
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Secondly, there is a current monthly income requirement. If it is not more than the median income for the State of Minnesota, you can file a Chapter 7. If if is more, there is a complicated "means test" formula which is applied.
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The means test formula looks like this: A debtor can file Chapter 7 if his income less expenses times 60 is less than $6,000. A debtor cannot file Chapter 7 if his income less expenses times 60 is greater than $10,000. If the income less expenses times 60 is between $6,000 and $10,000, it must be less than 25% of the nonpriority unsecured claims. Unless our math in wrong, it seems that what this means is that anyone who can afford a payment of $167.67 per month or more toward their debts is required to do a Chapter 13 and not a Chapter 7; and many will be required to do a Chapter 13 even if all they can afford is as litt expenses are allowable in working the means test formula are specified by the government. It is not your actual expense, but what the government says is reasonable. For example, someone with a high mortgage payment may not be allowed to claim all of it. Folks in such a situation may find themselves as a practical matter unable to file a 7 because they don't qualify, and also unable to file a 13 because in fact they can't afford it. They may be forced to live in the shadows hiding from creditors. What would this be like? Ask someone who is now classified as a "dead beat dad."
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If your income is above the median - as measured by looking at your cash flow for the past six months - and if you can't pass the means test, then your only option is a Chapter 13. And the bill appears to require that the Chapter 13 provide for a five year payment plan.
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The court would be allowed to convert a Chapter 7 case to a Chapter 13 based on income and other factors. Under existing law, such a conversion only takes place if the debtor asks for it. Apparently under the proposed law, one could file a Chapter 7 and wind up with a Chapter 13 involuntarily.
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The homestead exemption is capped at $136,875.00 if the home was acquired during the four year period preceding the filing of the bankruptcy. If you have lived in your home more than four years, the $200,000 homestead exemption provided under Minnesota statutes still applies .
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Before being given a discharge, be it in Chapter 7 or Chapter 13, attendance at another Financial Counseling Course is required. Yes, you have to go twice. The requirement to take the second course seems very easy to forget, and we have found ourselves having to send out urgent reminders about it. Not taking the second course by the deadline means the case will be thrown out.
Where to get the credit
counseling:
Prior to filing of either a Chapter 7 or a Chapter 13, a certificate of completion of an informational consumer credit counseling program is required. Here is a link to the list of the providers that have been approved for providing this program in Minnesota. Prior to being discharged, another course is required, for which the same agencies have also been approved. The easy way to complete the programs is either on line or by phone, or a combination of phone and on line. I have had very good experience with Family Means, which has a location near my office in Minnetonka, Minnesota.
I also like moneymanagement.org. At moneymanagement.org, the initial program usually only takes about an hour when done on line and by telephone. If you let me sign you up and get you a user name and password, the cost is only $40 per course.
Kelly Law Office represents bankruptcy clients throughout the Twin Cities - Minneapolis, Minnesota area including Champlin, Crystal Bay, Dayton, Eden Prairie, Excelsior, Hamel, Hopkins, Howard Lake, Long Lake, Loretto, Maple Plain, Minneapolis, Minnetonka Beach, Minnetonka, Mound, Navarre, Osseo, Rogers, Saint Bonifacius, Saint Paul, Spring Park, Wayzata, Young America, Bloomington, Edina, St. Louis Park, Wayzata, Plymouth, Maple Grove, Brooklyn Park, Anoka, Shakopee, Hastings, Eagan, Burnsville, Buffalo, Waverly, Montrose, Hennepin County, Anoka County, Carver County, Scott County, Ramsey County, Dakota County, and Wright County.
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