Chapter 7 Bankruptcy MN  


Qualifying for Chapter 7 in MN
What is Chapter 7 Bankruptcy?
The Bankruptcy Discharge
Credit Counseling Requirements



Qualifying for Chapter 7


Under the 2005 statute, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), all the factors which applied before still apply as to whether you qualify for Chapter 7. This includes the requirement that your actual income compared to your actual expenses leaves no room for a payment under a Chapter 13 plan. However, added to that is a difficult means test that many have trouble satisfying. The good news, however, is that:


The means test applies only to consumer bankruptcies. If your debts are primarily business in nature, the means test provisions don't apply to you. Your debts are "primarily business" if more than half of your debt, going literally by how much you owe, was incurred in connection with self-employment or in connection with a business enterprise. In calculating the percentage of business debt, student loans, home mortgages and automobile loans are ordinarily considered to be consumer debts. This makes it hard to classify most cases as primarily business, even when the failure of a business is the reason for the need to file bankruptcy. 


Assuming we are talking about debts which are primarily consumer debts, the means test will not be applied to anyone who has an income below the median for the state in which they live.  The median in each state is based upon the number of people in the household.  So one of the first questions is, where is your income compared to the median.


Here is a list of median annual income numbers as provided by the U.S. Trustee's office for residents of Minnesota. These are usually updated about every six months on April 1st and November 1st. The following figures are from the April 1, 2024 update, based on data from the U.S. Census Bureau. I'm glad to report that the numbers are up substantially for all household sizes. For example, the median for a household of one is up by $2,859. Historically these numbers have tended to go up most of the time, but not always. 


One person: $  72,319
Two people: $  93,855
Three people: $117,426
Four people: $141,903
Add $9,900 for each individual in excess of 4


If the annual gross income for your household is below the applicable number listed above, in most cases you should be able to file Chapter 7 without worrying about the means test.  If you have a household income above the median, you may be able to pass the means test as long as you are not too far above the median.  The means test involves complicated calculations, based in part on the actual facts of the case and based in part on IRS and Census Bureau statistics.  It takes the best software available, together with the judgment of a good lawyer, to get the numbers right. It's not unusual for the United States Trustee's office to dispute the calculations, particularly since the rules or the interpretation of the rules are undergoing constant change.  Under no circumstances should you try to do the means test calculations by yourself.


What is Chapter 7 Bankruptcy? 


This is the kind of bankruptcy which is the usually first choice of individuals who are in serious financial difficulty. It is very well suited to consumer debts, and it often works well for people whose debts relate more to self-employment or small business. It is commonly called a "straight" bankruptcy, and is also often referred to as a "liquidation." The bankruptcy court appoints a trustee who reviews the debtor's list of assets looking for what the debtor has available for distribution to creditors. Those would be only the assets that the debtor is unable to claim as exempt.  If some assets are available, the creditors are notified. Those who submit claim forms will be given their proportionate share of the available assets, but that is ordinarily all they are going to receive. 


Most assets which are basic necessities of life are exempt from seizure by the trustee either under federal or state statutes, and a skillful bankruptcy lawyer can help most clients claim almost everything they own as exempt. If there is some large asset which is not going to be exempt, the Chapter 7 bankruptcy may be a bad idea. One of the other types of bankruptcy such as a Chapter 13 wage earner plan may be more helpful. The most important task for the lawyer in a Chapter 7 bankruptcy is to make sure that the assets are protected under the exemptions to the greatest extent possible. That brings us to the next question.  


The Bankruptcy Discharge


If a debt has been incurred through fraud or a number of other really nasty forms of conduct, such as injuring someone by drunk driving, the creditor may have grounds to  file an objection. If no such objections are filed, the next step is that the bankruptcy court issues an order called a "Discharge" which states that the debts are gone, and orders the creditors to leave the debtor alone. Unlike the probate court example, the bankrupt person gets to start over again in this life free of the past financial problems. It's a fresh art, and the improvement in some debtors' circumstances can be almost like magic.


The Credit Counseling Requirement  


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 this program. 


The fastest and easiest way to complete the programs may be to sign up at a web site where it can be done on line and over the telephone.  There are quite a few of these.  My favorite on line service has been the Debt Education and Certification Foundation.  They call themselves "DECAF" and operate with a headquarters in or near Dallas, Texas.  Since it's on line, of course, we don't care where they are. All we care about is that their program is approved by the Justice Department for Bankruptcy filings in Minnesota.  The fee is usually about $40 per course if your lawyer registers you for the course; otherwise it's a bit more. Plan on spending about two hours in total doing the on line and the over the telephone portions of the course. You don't have to do it all at once.  You can do a little at a time at your own pace.  DECAF is open 24 hours a day, seven days a week. There's no room here for excuses about not being able to find a good time to get it done.


For a free consultation by telephone call


Marsh Run


Kelly Law Office

10520 Wayzata Blvd. #100

Minnetonka, MN 55305


The information you obtain at this site is for general information purposes only and is not legal advice. You should consult an attorney of your choice for individual advice regarding your own situation. The use of the Internet for communications with the firm will not establish an attorney-client relationship.  I am a debt relief agency.  I help people file for relief under the federal bankrupty code.


North side of I-394 just east of Hopkins Crossroad. Serving Minneapolis St. Paul area with easy access from western suburbs including Minnetonka, St. Louis Park, Golden Valley, Hopkins, Plymouth.  Also available by appointment only at 8421 Wayzata Blvd., second floor, St. Louis Park, MN 55426. 


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