Minnesota Chapter 7 bankruptcy Archives - Better Call Dave

April 14, 2023May 2, 2023

Big Bump in Median Incomes April 2023

By Dave Kelly, Minnesota Bankruptcy Attorney

Qualifying for a Straight Bankruptcy

The most common type of bankruptcy is Chapter 7. It also tends to be the most desirable form of bankruptcy. Often it is referred to as “straight bankruptcy.” It is the type of bankruptcy where usually you can get rid of all your unsecured debt in just a few months with minimal cost. There is typically no payment plan, just relief from your debt.

The best way to qualify for a Chapter 7 is to have annual income below the median for your household size in your state. If your income is a bit higher than that, you might still be able to qualify by passing a means test; but the means test is not all that easy. I would prefer to have your income below the median if we are going to do a Chapter 7. If it is much above the median, I would probably suggest a Chapter 13.

Meidan Income – A Moving Target

The US Trustee’s office has just announced the biggest increase in Minnesota median incomes for bankruptcy purposes that I can remember seeing. I calculate that the increases are around 8% for all the household sizes between one and four. Since these increases are supposedly based on a six month period, they seem to be thinking that median incomes in Minnesota have been increasing by 16% on an annual basis. I find that hard to believe, but I won’t complain.

Most years the median income numbers are adjusted on April 1st and again on November 1st. Sometimes they all go up, sometimes they all go down, sometimes the ups and downs are mixed, and sometimes they don’t change at all. Every state is different and is assigned their own set of numbers.

Latest Numbers for Minnesota

Here’s the exact Minnesota numbers as of the recent update copied from my Chapter 7 page:

One person: $ 71,643

Two people: $ 90,946

Three people: $ 114,267

Four people: $ 141,324

Add $9,900 for each individual in excess of4

For a household of one the increase is $5,309 per year. For a household of two it’s a $6,739 per year increase. It’s $8,467 for a household of three, and $$10, 472 for a household of four. If you thought you didn’t qualify for a Chapter 7 before, take another look. These numbers could make a big difference.

Call or text me at 952-544-6356. We can set up a time for a free telephone consultation to talk over the details of your case.

October 21, 2022November 22, 2022

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.

July 18, 2022September 13, 2022

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.

April 26, 2022June 3, 2022

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.

June 11, 2016June 11, 2016

Motorcycles, Boats or Horses Can be Toxic to your Chapter 7 or Chapter 13 Minnesota Bankruptcy

I recently posted on Google Plus about how certain things tend to be toxic to a possible bankruptcy. The most common one I see is a Harley Davidson. Other items in this category would include boats and horses, especially if they are fancy and not paid for. This statement resulted in questions being asked about exactly what I meant. If the problem is that a Harley, a boat or a horse are assets which would be lost in a Chapter 7 bankruptcy, then wouldn’t it be better for them to not be paid for. If they weren’t paid for, after all, they wouldn’t be much of an asset.

My answer was that such items make a bankruptcy difficult whether paid for or not. If they are paid for, they are assets that very likely would be lost in a Chapter 7 or would increase the required payments in a Chapter 13.

If they are not paid for, you have a situation where the Debtor will want to tell the bankruptcy trustee that he or she can’t afford to pay debts, except that somehow they CAN afford to keep paying for the Harley, the boat or the horses. This does not play well. The only thing to do if they really need the bankruptcy is to sell or surrender before filing, or state in the bankruptcy petition an intention to surrender the items after the case is filed.

Many have been the times when I have had a potential client disappear never to be heard from again when I said that the Harley has to go. There’s a whole subculture where any kind of misery is preferable to giving up the Harley. Boats are usually a bit easier to let go, but horses are also very hard to give up.

One exception might be a case with a 100% Chapter 13 plan. That would be a plan where 100% or the unsecured debts are to be paid. Since the bankruptcy trustee can’t ask for more than 100%, the Debtor would have more wiggle room when it came to something like keeping a motorcycle. Even then the trustee would not like it, but more than likely the trustee could not prevent it. I see very few cases where the payout is 100%. Most people who can afford to do that don’t need a bankruptcy.

This post is for general information purposes only, is not legal advice and does not create an attorney-client relationship. I am a Debt Relief Agency. I help people file for relief under the federal bankruptcy code.

June 10, 2015

What’s the Difference between a Debt and a Lien in Chapter 7 Bankruptcy?

I recently had a conversation with a person who had just received a discharge in a Chapter 7 bankruptcy. He had also received what he thought was a very weird item from his mortgage company. The mortgage company had sent him a form for his signature which would give them permission to start sending monthly statements again even though the mortgage debt had been discharged. In the fine print on the back of the discharge there is a court order requiring all creditors – including the mortgage company – to make no attempt of any kind to collect the debt. This includes mortgages, even if the homeowners want to keep the house. But most homeowners who have mortgages want to continue paying the mortgage so they can keep their home. Having a monthly mortgage statement helps a lot in keeping track of that, but without permission to start sending statements again, the mortgage companies tend to be afraid to do so.

The permission to restart monthly statements form DOES look a little weird. It usually will start off by saying something like: “Well, we know you’ve been discharged in a bankruptcy and you don’t owe this personally anymore, so don’t take this as attempt to collect a debt. We were just wondering if maybe, not that you actually owe this anymore, you might still like updates on the status of the mortgage, for information purposes only, in case you might still want to make some payments on a strictly voluntary basis – not that we would really want the money or anything like that.”

This odd language is the result of there being two seemingly contradictory facts for a homeowner with a mortgage following a Chapter 7 bankruptcy discharge. The first fact is that the personal obligation to pay the debt no longer exists. The second fact is that the lender still has a mortgage lien on the house, and if you don’t pay the mortgage that lender will foreclose.

In the phone conversation I felt a bit put on the spot. I was asked repeatedly to explain if the debt has been discharged, how can there still be a lien on the house that carries with it a right to foreclose. I tired to explain that a mortgage lien is actually a property right – a form of partial ownership – which the lender has. The bankruptcy discharge takes away the personal obligation to pay the debt, but it does nothing to the ownership interest. The discharge only affects personal obligations, not property interests.

So the bottom line is that when it comes to Chapter 7 bankruptcy, if you want to keep your house you better keep paying your mortgage or mortgages.

This was confirmed within the past few days by a decision of the U.S. Supreme Court issued on June 1, 2015. In the case of Bank of America v. Caulkett, the court ruled that mortgage liens cannot be stripped off in a Chapter 7 Bankruptcy. Under certain limited circumstances, the situation can be different in a Chapter 13 Bankruptcy. More about that in my page about keeping your house.

This post is for general information purposes only and is not legal advice. Interactions here do not create an attorney-client relationship. Consult your own attorney concerning the details of your case. I am a debt relief agency, helping people file for relief under the federal bankruptcy code.

October 10, 2014October 20, 2014

Don’t be Tricked by Misleading Bankruptcy Attorney Fee Advertising

Plan ahead before you sign the marriage license.

A lot of the advertising about attorney fees for bankruptcy is misleading – even tricky. Today I checked on a Google ad and the web page it leads to which says a certain law firm will file a bankruptcy after a payment toward the attorney fee of only $99. I found this to be not exactly accurate.

The web page says that $99 toward the attorney fee, along with the court filing fee and counseling program fees, would be all one would have to pay prior to filing. It was a slick web page, obviously done at considerable expense, where I found the following statement:

“You only have to pay the court filing fee of $335 and the credit report / credit course fees of $65 and an attorney fee of $99 to file.” It also said: “Only $99 Down, No Co-Signer Needed, File Now/Pay over Time, Affordable Payment Plans” in big blue letters.

I wondered how can these people can be doing this. I could never cover my office rent, malpractice insurance, phone and internet bills and office supplies if I didn’t charge a lot more than that. So I went to the bankruptcy court web site and ran a search for actual cases they had filed. This is not free, so I didn’t look very far. All I did was check the last two cases this law firm filed to see what the attorney fee had been. Attorney fees have to be disclosed on the bankruptcy petition. What I found was that for the last two cases they filed, both Chapter 7s, their fee was $990. And the court filings also said they had received all of the $990 before filing the case. That’s lower than what I would usually charge, but it’s a lot more than $99.

Now one thing you should understand about attorney fees in a Chapter 7 bankruptcy is this. If the attorney does not collect his or her fee prior to filing, any part of the fee that is still owing is just another debt in the bankruptcy case. The attorney is just another creditor. The attorney, like all the other creditors, is under an immediate court order requiring that he or she do nothing to try to collect. It is illegal and unethical for the attorney to collect anything from the client once the case is filed. That’s why you may see references to a co-signer in some advertising. The lawyer can still try to collect the fee from a co-signer as long as the co-signer is not his bankruptcy client. This of course puts the bankruptcy lawyer in the position of being a bill collector. I don’t EVER want to be a bill collector.

I went back to the web page thinking it must be referring to Chapter 13 bankruptcy only. When it comes to paying attorney fees after the case is filed, a Chapter 13 bankruptcy is a very different animal from a Chapter 7. If you file a Chapter 13 bankruptcy it is possible to pay part of the attorney fee through the Chapter 13 payment plan. I hit Control F to search the page and typed “13” into the search box. No mention of “13” or “Chapter 13” appears anywhere on the page. The page seems to be talking about Chapter 7. The only filing fee the page mentions is $335, which is the Chapter 7 court filing fee. The court filing fee for a Chapter 13 is slightly lower.

When I look at their web page I can see that it is very slick, and at the bottom is the name of a web development company that designed the page. I can remember a few years back when I hired a person to redesign my page. The person I hired started adding all sorts of new key words and content, which was submitted to me for review. There was a whole lot of it, and it was hard to keep up with what the designer was doing. Is it possible that the web designer wrote up this stuff while the law firm was not paying attention? It could happen. I’m now back to doing all my own web design work. I found that having my web page in the hands of a professional design and marketing person was scary.

So maybe they just have a busy marketing person who they can’t keep up with. Maybe it’s not entirely the law firm’s fault. But I do want to suggest to you that you should be very wary when you see something like this and don’t be taken in by it. If it seems to good to be true, it probably is.

This posting is for general information purposes only and is not legal advice. It does not create an attorney-client relationship. I am a debt relief agency. I help people file for relief under the federal bankruptcy code.

Dave Kelly, Kelly Law Office, Minnetonka, MN 952-544-6356

August 14, 2014August 14, 2014

Avoid Having your Bank Accounts Seized when you File Bankruptcy in MN

I don’t know what banks and credit unions are doing in other parts of the country. I speak here only of what I have seen and heard about here locally in Minnesota, and specifically just the Twin Cities area. Here in Minnesota, in the Twin Cities area, there is a substantial danger that your savings and checking accounts will be seized or frozen by your bank or credit union when you file a personal bankruptcy. I have always believed it to be a despicable thing to do. Some banks and credit unions are worse than others at doing this. When you choose a lawyer to handle your bankruptcy case, you might want to make sure that he or she is a person with enough experience to be aware of this problem and how to head it off before it happens.

The problem is this. If the bank or credit union is one or your creditors, you can expect that institution to seize your accounts as soon as they are notified of the bankruptcy. If this is not planned for it can result in quite a surprise – checks bouncing, a debit card that has stopped working, and the evaporation of money you thought you had. There are some banks that are worse than others when it comes to this problem. They might freeze your account even if they are not a creditor, especially if your account has a fairly large sum of money – something in excess of $3,000. I don’t want to mention them bank by name here, but I believe I did mention one in this video.

You should expect your bankruptcy attorney to coach and advise you as to how this is to be avoided. What I tell my clients is that if they have an account with a bank or credit union which they owe money to, that account should be closed well in advance of the filing of the bankruptcy case – whether it’s a Chapter 7 bankruptcy or a Chapter 13 bankruptcy. If you don’t close that account, the bank or credit union will claim a right of setoff against your money in the account, which is a fancy way of saying that they will seize the money. There are certain banks where all accounts should be closed if at all possible, whether you owe them money or not. Once they seize the money you won’t get it back – or at least usually won’t.

So the thing to do is to close all such accounts before you file your bankruptcy case. It takes planning of course. I’m not saying you should try to live without a checking account. What you need to do is open an account at a bank which is NOT one of your creditors, and get all your automatic deposits and automatic withdrawals up and running with the new account before we file your bankruptcy case. I believe that the best banks to use for this purpose are the small neighborhood banks – for example a bank with a name that starts with “State Bank of …” or “Citizens Bank of …” The process of getting the new account set up and getting the auto deposits and auto payments moved over to and set up at the new bank may take a few weeks, but I consider this to be part of the normal planning and preparation that goes into making your case as painless as possible.

June 18, 2014June 21, 2014

Hope you like the New Look of my Web Site

Well, it took about three weeks to complete, but I think I now have all the pages on my web site converted to the new design. I have tried to make the pages look brighter and more optimistic in color scheme and tone, and easier to read. In particular, I’ve tried to make the pages more friendly to mobile devices. A little over two years since I hired a gentleman to redesign my entire site. I must have liked the design he chose, because I said yes to it. But it certainly did not grow on me over time. The longer I looked at it the less I liked it. I started to feel that it was too dark and foreboding, almost Gothic, with it’s almost black background image and dark brown graphics. It seems to me that people with financial problems are probably already depressed enough without looking at something that gloomy. The other thing was that I was having trouble making changes and updating content.

There were many things about my own site that I could not figure out when it came to editing. I went back to the website creation software I had been using before I hired the expert – Microsoft Expression Web. I checked for updates and found that there were none. In fact Microsoft has discontinued the program and is now giving it away for free. I found a template that looked as if it could accommodate what I had in mind, and then went to work rebuilding the entire site one page at a time. It can be very tedious, but I started to enjoy it after while.

As I went along I updated all the content that needed updating, and added a bit more content here and there. I found errors in the HTML code that needed to be corrected, and did that. Then I tested the pages in Internet Explorer, Firefox and Chrome. For reasons I can’t understand things would look straight in one browser, and be not lined up right in another. I also tested the pages on my Samsung Galaxy and my Kindle Fire. Finally I started to launch the pages and the new images one item at a time.

Looks to me as if I have it all now. But if you see something that looks goofy, I wish you would let me know.

December 13, 2012November 11, 2022

What NOT to do while going Over the Fiscal Cliff

Most people I talk to have not heard of the “fiscal cliff.” Those who have believe it will not affect them. This includes a husband and wife I met with yesterday. But when I ran the numbers for them, based on a November 1st article in Forbes, I found that between the two of them their paycheck withholding should go up by about $438 per month. That is, the net take home pay for the two of them together will be $438 less per month starting January 2, 2012. That is just a few days from now. When I tried to warn them and suggested that they should be thinking about how they would deal with this, they blew me off. They are absolutely in denial about the prospect that this could ever happen. If we go over the fiscal cliff as scheduled, this should come as a heck of a shock.

My calculations assume, of course, that no steps will be taken to reduce the impact of the fiscal cliff.

From where I sit it looks like a majority of people are living right on the edge. For them a drop in take home pay like this will mean they no longer have the funds to pay their credit card debt. Often when people are in such a situation, they go to their employer and increase the number of exemptions they are claiming for withholding purposes on their paychecks. They claim more withholding exemptions than they should. Some increase the number of exemptions to the point that no taxes are being withheld at all, and for them all that is withheld is social security and medicare. This increases their take home pay, but it is at the cost of not having enough taken out to cover state and federal tax liability. The income which should have been withheld for taxes is then used to make payments on credit card debt. Often this is still not enough to get that credit card debt under control.

When it comes time to file their tax return, they find that they owe a tax debt which is too large for them to pay. Now on top of the credit card debt there is a substantial tax debt. Eventually they wind up in my office. I can help get rid of the credit card debt. But as long as the tax debt is less than three years old, there’s nothing I can do to help with the tax debt.

The worst creditors you can have are the IRS and the Minnesota Department of Revenue. In almost all circumstances, it is better to stop paying other debts before you stop or reduce the withholding of taxes from your pay check. Don’t fall for the temptation to unreasonably increase the exemptions you claim for withholding from your paycheck. That will work for a short time, and then you’ll really wish you hadn’t done that.

This post is for general information purposes only and should not be considered legal advice. You should consult the attorney of your choice concerning the details of our case. Reading or responding to this post does not create an attorney-client relationship. I am a debt relief agency helping people to file for relief under the federal bankruptcy code.