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.
About a month after a personal bankruptcy is filed, whether it’s a Chapter 7 or a Chapter 13, there is a hearing they call the “First Meeting of Creditors.” Most of the time I just call it the “hearing”, although the official name is “First Meeting of Creditors.” I think “hearing” is a more accurate term because for one thing, in the vast majority of cases, the last thing you will ever see at one of these events is a creditor. The creditors are invited to appear, but they know it’s a waste of their time and almost never show up.
“Hearing” is also a good way to describe what happens. The process is presided over by either the bankruptcy Trustee or a lawyer on the staff of the bankruptcy Trustee. This Trustee is not a judge, but from my perspective he or she might was well be. Nobody has more power or influence over how the case goes than the Trustee. The person who filed the bankruptcy is put under oath and asked a series of questions. Depending on the answers, things can expand into even more questions. In a simple case it might only take ten minutes. But I have seen complicated cases where it has taken over an hour; and in those more complicated cases it can easily take more than one sitting.
Traditionally these hearings/Meetings of Creditors always took place at a federal courthouse or some other location like a federal courthouse, depending on the county in which the Debtor lived. I would put on my traditional lawyer outfit, including my lawyer shoes, and head for the designated location. I had it down to a science. I knew where I wanted to park and where I wanted to meet my clients before the hearing. It was usually kind of fun, because I would see my lawyer friends there. This was the norm. It was how things were done.
Covid Hit and Everything Changed
In early 2020 when Covid hit the whole process changed dramatically. The Trustees started conducting these hearings remotely by Zoom or some similar method. Everyone assumed this change was temporary and we’d be back to the courthouses when the virus passed. It never occurred to any of us that the change might become permanent. There may have been jokes about it becoming permanent, but nobody considered it a serious possibility – at first.
But I did start noticing that not going downtown saved time, and grief and parking money. People including the Trustees started to like doing it remotely, so did I. Many of my clients said they didn’t want to go downtown and expressed relief that we were not going to have to. My clients could stay home if they wanted to and do the hearing from there; but it has always been my preference to have them come to my office for the hearing. Even if we are not going down to a courthouse, I still think there is a tremendous benefit to being physically present in the same room with my clients when this hearing takes place. As I have always done, I like to meet early before the hearing with my clients and do preparation. I almost always know approximately what the Trustee will be asking. I want to go over the expected questions with my client and have my client as ready as possible.
When Are We Going Back to In-Person? Never!
Late last year as I usually do I attended the Bankruptcy Institute, a big series of classes and talks put on by Minnesota Continuing Legal Education. I was assuming that one of the things I would learn would be what the plans were for returning to in-person hearings for the Meetings of Creditors. In-person hearings were already taking place before the judges for the more complicated matters such as motions, adversary proceedings and reaffirmation agreements. Instead what I heard was that the switch to remote for the Meetings of Creditors was going to be made permanent. A nationwide protocol for doing it by Zoom on a permanent basis was going to be promulgated some time in 2023.
My Lawyer Shoes Continue to Gather Dust
Usually I manage to avoid those in-person hearings in front of the judges. Those tend to only be required if something has gone wrong with the case. If the case is put together well, we should be able to stay away from the judges. So these days I am only dressing like a lawyer from the waist up. It may be a long time if ever that I again have to wear the pants that come with my suit. The same goes for my lawyer wingtip shoes, which have been gathering dust in the corner of my bedroom. Maybe I’ll just have to wear the pants and the shoes some time for the heck of it.
After going for a couple of years without any of my Google reviews disappearing, I noticed that some were being removed starting November 15, 2022. As soon as I saw that a purge was in progress, I attempted to create a printout of all my reviews so I would have a record of what was disappearing. After the smoke settled, I went to review the printout. To my disappointment I saw that I had only captured the first couple lines of each review. Except for one, which I had already reproduced in full on my reviews page, the full text of the missing reviews was irretrievably gone. In total since November 15th I have lost nine reviews. What follows is a summary of the opening lines from eight of those reviews which I regret, except for one, is all I managed to preserve:
“Honestly, I don’t even know where to start with my review because there were so many incredible things about my experience with david Kelly. He came into my life during an extremely stressful time and managed to make me feel 90% better….”
“I definitely recommend anyone going through bankruptcy to go with Dave Kelly as their lawyer. He was professional in answering our questions and gave us a straightforward and thorough overview of the bankrupty process. ..”
I cannot express how satisfied and appreciative I am with the work of Dave. I started my online search for a great attorney and that is what I found. Dave’s website and YouTube videos were extremely helpful and very thorough. I have to say …..”
“David is a fantastic attorney. I had previously spoke with one of the larger firms in the area and did not like the way they moved the cases through very quickly and did not seem very personal to talk with. I felt like the larger firm only ….”
“Dave worked on my Chapter 13 bankruptcy with me. Filing for bankruptcy was one of the least comfortable things I’ve ever had to do. Bankruptcy was not something I came to lightly, I tried everything I could think of on my own before I …..”
“I was very lucky to get a lawyer that was Professional as well as someone who really cared about helping me out. I don’t believe that anyone wants to get a bankruptcy ever. It a little embarrassing, even in bad times that you can’t pay your ….”
“He was very professional and understanding of my situation. He was never pushy and always communicated very well. He never made me feel stupid or ashamed for filing and also made it very welcoming and comfortable. I’d highly recommend David to anyone who is considering filing. You won’t be disappointed.”
“David has the experience and decades of knowledge and proven results that got me through the process (with ease) of my chapter 7 bankruptcy.”
Quirky Standards and Requirements
Over the years I have lost well over 100 reviews which disappeared into Google’s bit bucket. Sadly they had all given me five stars. They can’t be retrieved. They are gone forever. Google seems to have very strict standards as to what reviews it allows to be posted. Some reviews are only there for a day or two before Google deletes them forever. Others can stay up for several months or even a couple of years before they disappear.
A couple of clients have given me five stars and posted simply “Thank you Dave.” Google didn’t like that and instantly removed their reviews, almost before I had a chance to notice. Another client kept having his review removed because he could not refrain from putting in too many superlatives about how great he thought I was. Webster defines “superlative” as an “exaggerated expression especially of praise.” What Google seems to be looking for in a review is a simple, toned down statement of what your experience was.
Most Common Reason Reviews Disappear
The reasons a Google review may disappear are certainly many. But the single most common reason seems to be lack of activity on the reviewer’s Google account. If you set up a Google account, use it to post a review, and then use that account for nothing else ever, the folks at Google will delete the account for inactivity after a year or two. Once the account is deleted, the reviews posted with that account are gone as well.
I can only speculate as to why the reviews are gone. My comments about superlatives and everything else above is just a guess. I’ve been complaining to Google. All I get is an automated response that doesn’t really tell me anything. Words like heartless and cruel come to mind. All I can say is that it s painful to see this happening. These were people who I knew and cases I cared about.
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.
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.
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.
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.
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:
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.
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.
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.
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.