November 1st Median Income Surprises

I just received word that the US Trustee’s office has again released new median income numbers for Minnesota.  If you want to file a Chapter 7 bankruptcy, it is best if your household income is below these medians for your household size.  

​The new number for a household of one is $66,334 per year.  For a household of two it’s $84,207; for a household of three $105,800; and for a household of four is up to $130,852.

The numbers are based on data from the U.S. Census Bureau.  The figures have increased for a household of one and for a household of four, but have gone down for households of two and three. The increase for a household of one was about $800 per year, and for a household of four it was about $5,000 per year.  But for a household of two it has gone down by $645 and for a household of three it’s down by $2,151. Certainly it’s a mixed bag this time. If you thought you might not be eligible for Chapter 7, look again. The history here seems to be that every time they do an update, the numbers go up at least a little bit; although that was not the case in all categories this time.. 

​People who were not eligible before for a Chapter 7 bankruptcy might be eligible now.  I do free telephone consultations.  952-544-6356.  Wouldn’t hurt to check with me to see if you qualify.

Children’s Bank Accounts At Risk in Chapter 7 Bankruptcy

Kid's savings accounts

By Dave Kelly, Minnesota Bankruptcy Lawyer

Recently a potential client made a hasty exit from my office after I explained that the accounts that had been set up for the children could be at risk in a Chapter 7 bankruptcy. What kind of account you set up for your children, how much you put in it and when can all make a big difference. I feel a blog post on this subject coming on. At least one post, maybe two. If you have bank accounts for your children, be sure you tell your lawyer about them.

Please note that in this article I am talking only about Chapter 7 bankruptcy. Chapter 13 bankruptcy is a whole other topic. Some of the problems described here could be more easily resolved in a Chapter 13.

529 College Savings Accounts

A 529 savings account may be the safest way to save money for your children’s college. Much like a 401K, the money you put in should be tax deductible. Such accounts are not always protected when you file bankruptcy. You have to look at how much you deposited and how long ago that was.

Any amount deposited more than two years before filing the bankruptcy should be protected. Funds that were deposited between two years and one year before the filing date are protected up to $6,425. Any more than that belongs to the bankruptcy estate and probably will be claimed by the bankruptcy trustee. AND any amount deposited within one year before filing the bankruptcy is not protected at all. Again, that amount will be claimed by the bankruptcy trustee.

Uniform Transfer to Minors Act (UTMA) Accounts

These are accounts set up under state law. The account is in the child’s name and is held under the child’s social security number. In your bankruptcy papers it would typically be listed under property held for another. The law requires, however, that an adult be named as the custodian of the account. The adult will manage the account until the child turns 18, then the money can be claimed by the child. How safe or unsafe the money in one of these accounts is depends on when the money was put in and by whom.

As a general rule, if the money in the account came from Grandma or some other third party, it should be safe. Because it never was your money. It would be best if you had records that can prove it never was your money. If you put the money in and now you want to file a bankruptcy, there could be a problem. Minnesota has a fraudulent conveyance statute that has a six year look back period. If that was money that you could have used to pay your debts but you put it in the child’s account instead, the bankruptcy trustee might be able to claw it back out of that account.

Joint Savings Account with Your Child

Of the accounts I am talking about here, this could be the most difficult kind. Your name is on the account along with the child, so how do your prove it’s not yours. For one thing it has to be listed in the bankruptcy petition along with all the other accounts your name is on. If the money did come from you, there is the same “fraudulent conveyance” problem I mentioned above. If the money came from a third party, however, like Grandma, I hope you have good records to prove that. Minnesota does have a statute that says money in a joint account belongs to the person who deposited it. If the money never was yours and you can prove it, the account is probably safe. It would help if the amount is relatively small. The larger the balance, the more likely it is that the trustee would try to make an attempt to grab it.

What if the Money in the Account is from Social Security?

Some children receive a Social Security benefit because their parent has died or or disabled. This money, however, is supposed to be available to the child’s custodian to pay for the child’s living expenses. Social Security money is generally exempt and can’t be touched. But it better be in an account where you can prove that’s what it is. Assuming you are the child’s custodian, it would be best if you were using at least some of it for the child’s expenses. If you just bank the whole thing and never touch any of it, you could appear to not be making your best efforts to avoid bankruptcy. The trustee might not be able to touch the money, but I fear the trustee could object that the case is not being filed in good faith. No such objection has ever happened in any case of mine, but I can’t promise it would never happen if the facts were lined up as I just described.

Conclusion

I have had many cases involving children’s savings accounts fly through with no problem. But as you can see, there are a lot of ifs, buts and maybes concerning these accounts. Don’t assume you know what to do or how to handle these. You need to have the accounts reviewed by an experienced lawyer well in advance of any bankruptcy filing.

Better call Dave. 952-544-6356.

Public Service Student Loan Forgiveness Deadline – October 31st

By Dave Kelly, Minnesota Bankruptcy Lawyer

Student loans are very hard to get rid of in bankruptcy, but there are all sorts of other programs that might help. One of these is the Public Service Loan Forgiveness program. Apparently the public service student loan debt forgiveness program was expanded about a year ago in many respects. One is that almost any employment for a government agency counts toward the program. This includes military service and employment for any state, federal or local government entity. This includes teachers at public schools. You can find all the details of the changes here at the Department of Education web site.

This morning I received an email from the Veteran’s administration about the deadline to apply for the program. A detailed article on the Veteran Administration web site lays out a lot more good detail and is easier to read than the page from the Department of Education. In the VA article it appears that there are links to information on where and how to do an application. The deadline to apply is coming up on October 31st of this year. Only a few weeks are left. If you have student loans and are a veteran or a government employee or a teacher, you might want to check this out.

I am certainly not an expert concerning student loans, but this looks important to me. I thought I would do what I could to spread the word. Good luck.

Welcome to My Youtube Channel

welcome to Dave's bankruptcy Youtube channel

By Dave Kelly, Minnesota Bankruptcy Attorney

Youtube recommends that every channel should have a welcome video. The video designated as the welcome video will be the first thing a person sees when they go to a particular channel. The video should be a short statement of what the channel is about and what information can be found there. My channel has videos going back to 2007; but until now there was no welcome video. I just uploaded it a few days ago, and here it is:

Information you can find on my Youtube channel includes but is not limited to the following:

Going to jail for debt
Bank accounts – which ones should be closed
Questions to expect at the hearing
Documents you will be required to produce
What about rental properties in bankruptcy
Property that is exempt
What does bankruptcy cost
Debt settlement programs
7 things to not do before bankruptcy
7 things you should consider doing before bankruptcy

You will also find a lot of information about how to qualify for bankruptcy and what kind of bankruptcy you might qualify for.

It looks like my videos are attracting quite a bit of traffic. Youtube is peppering my videos with all sorts of commercials over which I have no control and from which I don’t get a cent. In order to get paid anything at all from the advertising revenue, they require a lot more subscribers than I currently have. So please do me a favor. If you find my channel helpful at all, PLEASE SUBSCRIBE.

Fresh Increases in Minnesota State Exemptions

Exempt property claim form

By Dave Kelly, Minnesota Bankruptcy Lawyer

In a Chapter 7 bankruptcy if you want to keep your assets and belongings, they have to be claimed as exempt under an applicable exemption law. In Minnesota there are two exemption laws to choose from, the federal list and the state list. I have written a lot elsewhere about why one would choose one list or the other. That is not my topic here. I just want to talk about how most of the state exemptions are going up in a few days. The federal exemptions were increased on April 1st this year. I covered that in a recent blog post.

On July 1st in even numbered years, certain parts of the Minnesota state exemptions are updated to keep up with inflation. Since this year is even numbered, we are about to have another update. I am glad to see that all the numbers which can be changed are going up.

Summary of Minnesota Exemption Increases

  • Household furniture, household goods increased from $11,250.00 to $11,700.00.
  • Wedding rings increased from $3,062.50 to $3,185.00.
  • Tools of the trade increased from $12,500.00 to $13,000.00.
  • Life insurance benefits increased from $50,000.00 to $52,000.00.
  • Additional dependent insurance benefits increased from $12,500.00 to $13,000.00.
  • Motor vehicle increased from $5,000.00 to $5,200.00.
  • Insurance policies increased from $10,000.00 to $10,400.00.
  • Employee benefits (retirement accounts) increased from $75,000.00 to $78,000.00.
  • Homestead (limited to 160 acres) increased from $450,000.00 to $480,000.00.
  • Homestead used primarily for agriculture increased from $1,125,000.00 to $1,200,000.00.

Our Minnesota State Exemptions Remain Far from Perfect

For a more complete rundown on how this all works, take a look at my exemptions page. These state exemptions leave a lot to be desired. They have a lot of gaps which seem to always allow the bankruptcy trustees to require my clients to buy back some of their stuff. Most jewelry is not exempt. Most electronics are not exempt. There is no exemption that covers tax refunds, and there are issues with money in bank accounts. I have ranted about this on this blog before. The legislature needs to fix it but they don’t.

The Minnesota state exemptions are primarily good for one thing. They allow you to protect lots of equity in your homestead, unlike the federal exemptions which are very limited in that area. I don’t think any of the increases here have kept up with the real rate of inflation; so in fact we seem to be loosing ground.

If you don’t properly claim any asset as exempt, you risk losing it to the trustee. It’s tricky and risky and should not be attempted without a lawyer.

Qualifying For Chapter 7 and Protecting Assets now Easier

By David Kelly, Minnesota Bankruptcy Attorney

Easier Qualifying for Chapter 7 Bankruptcy in Minnesota

The primary requirement for being able to file a Chapter 7 bankruptcy is to have your income below a certain level. Stated most simply, to qualify for Chapter 7 you want your income to be lower than the median income for your household size in your state. These levels are set by the Department of Justice, US Trustee’s Office; and new, higher numbers came out recently on April 1st. If your income is slightly above the median, there is a means test that you might be able to pass which would allow you to still file a Chapter 7. Doing the means test, however, can sometimes be an invitation to a close scrutiny of the case. Being below the median is best. Here are the April 2022 numbers and how much they just went up.

Minnesota Median Household Income April 2022

One person:    $  65,514 — Up $2,490

Two people:    $  86,358 — Up $3,875

Three people:  $ 106,445 — Up $4,776

Four people:   $ 125,753 — Up $5,533

Five people:   $ 135,653 — Up $6,543

Six people:    $ 145,553 — Up $7,443

More information at https://mn-bankruptcy.com/chapter7.html

Easier Protection for Your Stuff in Minnesota Chapter 7

As soon as you file a Chapter 7 bankruptcy, the court appoints a trustee whose job it is to find assets that can be used to pay all or part of your debt. You really want the trustee to not be able to find any assets, or certainly not much for assets. The way to keep your assets away from the trustee is to claim them as exempt. What you can claim as exempt and how much is obviously very important. In Minnesota you have a choice between a state exemption list and a federal exemption list. In this post I am only talking about the federal list. The federal exemptions just went up in every category. Here are a few typical items and how much they went up. These are just a few examples. It is not anywhere near a complete list.

April 2022 Federal Exemptions

Household goods  $14,875  -  Up $1,475

Car              $ 4,450  -  Up $  450

Tools of Trade   $ 2,800  -  Up $  175

Cash value of
Life Insurance   $14,875  -  Up $1,475

Catch-all        $15,425  -  Up $1,525

More information at https://mn-bankruptcy.com/exemptions.html

There is now word on the street that a round of increases to the Minnesota state exemption list is being contemplated for July 1, 2022. Watch my blog for news about that.

Top 7 TO DO’s Before Bankruptcy: Item 7 – Avoid High Bank Balances if Expecting Garnishment

Notice of Levy

By David J. Kelly, Minnesota Bankruptcy Attorney

This is the final post in my series on the top seven things you should probably be doing if you are considering a Chapter 7 or a Chapter 13 bankruptcy. I don’t intend to help you with a do it yourself bankruptcy. My purpose is to introduce topics for you to discuss with your lawyer. Don’t try this by yourself.

Bank Accounts Can be Frozen Without Advance Notice

Let’s say you have been sued by a creditor. The judgment has been entered and now the creditor is looking for assets to seize. To garnish your wages the creditor has to give you a ten day notice – or at least is supposed to. But in Minnesota no advance notice is required before a garnishment of a checking or savings account. If the creditor garnishes your bank account, the first you may hear about it is when your bank or credit union notifies you that the account is frozen. Before you even get notified by your bank or credit union, you may notice that your checks are bouncing, your payments are not going through, and the pay check that was recently deposited is now beyond your reach.

You Must Claim All or Part of the Account as Exempt to Get Access to Your Account Again

More than likely all or a good part of the money in your account is exempt and cannot be taken by the creditor. After the account is frozen, you will be (or are supposed to be) given an Exemption Form that you can use to claim your exemptions. You might not receive this for a few days after the account is frozen. Then you have to fill it out and send it back to the creditor’s lawyer. Once the lawyer receives it, he or she is supposed to release to you that part of the money in the account which is exempt. Days can pass, even a couple of weeks, before this process is completed. Then you can use your account again, minus whatever amount the creditor took out of it. More accurately stated, you can use your account again until the next time the creditor garnishes it.

Avoiding or Minimizing the Freezing of Your Bank Account

Maybe this can’t be avoided, but the problem can be minimized. One thing you can do is what I suggested in Item 3 of this series: Move your money to a bank that will be harder to find. Creditor’s attorneys often send out a shotgun blast of garnishment notices to all the major banks. They don’t know where you bank, but chances are that if you are using one of the larger banks your account will get caught in the net. People have been surprised and asked me how the creditor knew where they banked. The answer is that the creditor didn’t know, they just got lucky. I love the little banks that nobody has heard of. Any bank whose name starts with “State Bank of ….” is probably a good bet.

Another thing you can do is just keep the bank balance as low as possible. The creditor can only freeze what is in the account. This might involve making cash withdrawals and cash deposits as needed to cover the things that must be paid out of the checking account. The back and forth movement of cash may look suspicious to a bankruptcy trustee. The trustees are always looking for evidence that money is being hidden. You and your lawyer might have to explain why this is being done. But once the trustee understands that this is merely an effort to avoid or minimize garnishment, it should be OK. We will have to be careful to accurately disclose the cash on hand in your bankruptcy forms. All assets have to be disclosed.

No One Size Fits All Solutions

This topic is something you are going to have to discuss with your lawyer. Cash can be harder to claim as exempt than money in the bank, at least in a state exemption case. If you are using the state exemptions and not the federal exemptions, having large amounts of cash might be a really bad idea. You might be setting yourself up to have the bankruptcy trustee take your money, which is just as bad as having it garnished. There are no one size fits all solutions. Don’t do any of what I discuss here without being advised by your attorney.

Call Dave at 952-544-6356.

Top 7 TO DO’s before Bankruptcy: Item 6 – Be Open and Honest with Your Attorney

Your lawyer is on your side.

By David J. Kelly, Minnesota Bankruptcy Attorney

Please Just Tell me the Truth

Sorry, but there is no substitute for being forthcoming with your lawyer, even if it’s embarrassing or awkward to disclose certain information. Spending time at a casino ? I really need to know that. Living off relatives? Tell me all about it. Fired from your job? Better give me the whole unpleasant story. Been taken financial advantage of by a significant other? You don’t have to be shy with me. And there isn’t much I haven’t heard over the years. Many of the reviews say I’m not judgmental. I believe you can expect to find that this is true.

Let’s You and Me Stay Out of Jail

All your debts have to be disclosed. So do all your assets. Concealing a debt, an asset or some of your income is considered bankruptcy fraud. So is not being entirely truthful about what debts you have been paying and any relationship you might have with any particular creditor. It might seem innocent to you, and maybe it really is, but the law considers it a crime. No client of mine has ever gone to jail for bankruptcy fraud, and I would like to keep it that way. These days under current law, if my client is going to jail there’s a good chance I would be going with them. Let’s both of us stay out of jail.

Just tell me all about it. Very unlikely that it’s something I’ve never heard before.

Not the Time for Creativity

Don’t try to be creative. Because every dishonest scheme you can think of has already been thought of. No, you can’t sell your boat to your brother for a dollar. And you can’t have a friend hold some money for you. The bankruptcy trustees have the resources of the FBI available if they get suspicious. As a result, there isn’t anything they can’t find out.

Once the bankruptcy is filed, your right of privacy is pretty much gone with respect to any of the information required for the case – and that’s most everything there is to know about you. Even if there are not criminal charges, there are plenty of other sanctions. Your case could be dismissed without a discharge. The discharge could be denied for all or some of your debt. If you get a discharge, it could be revoked. And that asset you were trying to hide, whatever it is you probably are going to lose it.

Give Me a Chance to Solve the Problem

Your attorney is on your side. The information which I ask for is necessary to successfully file your bankruptcy case. If you would just be truthful with me, I can probably figure out a legal way to fix whatever you are thinking the problem might be. Most of the things people have lied to me about could have been dealt with successfully IF ONLY my client would have told me about it BEFORE the case was filed.

Disclaimer

I am a debt relief agency. I help people file for bankruptcy relief under the federal bankruptcy code. This post is for general information purposes only and does not create an attorney-client relationship. It is not legal advice. Seek the advice of the attorney of your choice concerning the details of your case.

Call Dave at 952-544-6356

Top 7 TO DO’S before Bankruptcy: Item 5 – Stay Current with Car Loan and Mortgage

Don't let this happen

By David J. Kelly, Minnesota Bankruptcy Attorney

This is the 5th in my series on the top seven things that you should be doing when you are seriously considering the filing of a Chapter 7 or a Chapter 13 bankruptcy. Here I talk about staying up to date with your rent, your mortgage and your car loan. In other words, pay your ordinary living expenses.

Most of my clients want to keep their house or want to continue living in their apartment. And most of my clients want to keep their car. If you are going to surrender your home, break your lease or surrender your car, that’s a different situation and you should probably disregard what I say here.

Bankruptcy Does Not Get Rid of Liens

Once the bankruptcy is finished the underlying debt should be gone but the lender’s lien on your car and your home will remain. This means that if you want to keep the house or car, you still have to make the payments – even though technically you don’t owe the debt any more. All the creditors are going to be under a court order which will tell them to leave you alone. This includes the debts you want to get rid of and the debts you want to keep paying. The creditors will all stop billing you. They might shut down your on line access to your accounts as well.

Keep Up House and Car Payments Even When the Bills Stop Coming

Most of the time, after the bankruptcy is over, the creditors you want to continue paying can be persuaded to start sending monthly statements again. If you reaffirm the debt you will start getting regular bills again once the bankruptcy is final. Whether you should reaffirm is a tricky subject which I have discussed elsewhere and won’t be dealing with here.

If you have not reaffirmed but want to keep paying, you can usually get the creditor to start sending what they call “informational statements.” They will look different than your bills used to. There is language in them which says something like “we know you don’t owe this because of the bankruptcy, but just in case you might want to pay voluntarily here’s the info about your account.

Do Not Pay Ahead

Keep up your payments but never pay extra. Do not pay ahead on your mortgage, rent or car loan or car lease. Paying ahead on things like that is considered to be hiding money. In Chapter 7 the trustee might go after the creditor or go after you to get the extra money back. In Chapter 13 you are proving you have money to spare and the trustee could want to raise your plan payment amount.

Listen to Your Attorney

I make a point of reminding my clients they have to continue paying these normal expenses. For some reason there seems to be a certain percentage who don’t hear me. They seem to think that since the bill stopped they don’t have to pay. Then when there is a threat to foreclose the house or send a tow truck for the car., my phone rings. I hear “oh I didn’t know I had to keep paying that.”

If you are far along in preparing to file a bankruptcy, I hope you have hired a lawyer. If you have not, it’s time you do that. What I say here may apply in most cases, but it might not apply in yours. Talk with your own lawyer about the details of your case.

Disclaimer

I am a debt relief agency. I help people file for bankruptcy relief under the federal bankruptcy code. This post is for general information purposes only and does not create an attorney-client relationship. It is not legal advice. Seek the advice of the attorney of your choice concerning the details of your case.

Call Dave at 952-544-6356

Top 7 TO DO’s Before Bankruptcy: Item 4 – Retain an Attorney

Real Bankruptcy Lawyer

By David J. Kelly, Minnesota Bankruptcy Attorney

Get Professional Advice

Filing a bankruptcy is a big step. You don’t want to do much or go very far before you consult a lawyer. In preparing to file your case, there may be some financial moves you should make. I cannot emphasize more strongly that you should not make any major changes of any kind without consulting a lawyer first. Be sure that the lawyer knows bankruptcy law – many do not. I often suggest that whoever you talk with should belong to the National Association of Consumer Bankruptcy Attorneys (NACBA) . Any attorney who is serious about learning what they are doing in the field of consumer bankruptcy would be a member. You need someone to consult. You need somebody to plan with. You can’t afford to make a mistake at this phase of things. It’s time for you to hire (“retain”) a bankruptcy lawyer.

Things You Can’t Do Without Retaining an Attorney First

Once you retain a lawyer, that is once the attorney-client relationship is brought into existence by means of a retainer agreement, you have the ability to do several things you could not do before.

For one thing, you can refer calls from bill collectors to you lawyer. I like to keep the bill collectors in the dark about what we are up to. But sometimes they may start calling your mother, or one of your children, or your place of employment. Sometimes they manage to be such a nuisance that you really need them to stop. Once your case is filed they will be under a court order to stop. But what can you do before the case is filed? Here’s what. Answer the phone. Tell whoever it is that you have retained an attorney to do a Chapter 7 or Chapter 13 bankruptcy and you have been advised to not speak with them. But then you give them your lawyer’s name and phone number and say they should call your lawyer. Normally that will be the last you hear from those people.

For another thing, you can set up a payment plan with the lawyer so you can get the attorney fee paid by the time the bankruptcy is ready to file. In Chapter 7 cases your attorney has to be paid before the case is filed. After the case is filed, if you owe money to your lawyer he or she is just another creditor who is forbidden from trying to collect from you. Since it usually takes a few weeks if not longer to prepare a case for filing, this is the perfect time to make payment arrangements for the attorney fee, court filing fee and perhaps also the credit report fee. In Chapter 13 cases the attorney fee can be paid as part of the Chapter 13 plan, but most attorneys still like to have a good part of their fee and costs paid before the case is filed.

And of course hiring a lawyer means you now have somebody to consult with and plan with as you go about the difficult job of planning and putting together your bankruptcy case.

Disclaimer

I am a debt relief agency. I help people file for bankruptcy relief under the federal bankruptcy code. This post is for general information purposes only and does not create an attorney-client relationship. It is not legal advice. Seek the advice of the attorney of your choice concerning the details of your case.

Call Dave at 952-544-6356

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