Common Bankruptcy Myths

Everyone will know that I filed for bankruptcy...
While filing for bankruptcy is a matter of public record, people generally won't find this information unless they are looking for it.

All of my debts will be wiped out in Chapter 7 bankruptcy...
Sadly, not every debt is able to be discharged. Non-dischargeable debts include, but are not limited to: child support, some types of taxes, student loans (unless there is "undue hardship"), and debts incurred fraudulently.

I will lose everything that I have...
There are exemptions put into place to protect parts of your life. Exemptions are laws that specify amounts and types of property that you can keep from creditors. Some of the most common exemptions are for your car, clothing, your house, household goods, and money in qualified retirement plans. The majority of people who file bankruptcy don't lose anything.

I'll never have good credit again... 
You can begin to rebuild your credit simply by paying the bills on time. You can also apply for a secured credit card. The best way to build good credit is to use only 10 percent of your available credit. Keeping your debt to income ration low is best.

I will have to file bankruptcy with my spouse...
It's not always necessary for spouses to file bankruptcy together, but it could be in your best interest. If you and your spouse share many of the debts, it's better to file together. However, if only one spouse is responsible for most of the debt, it may be better for just that spouse to file. Your bankruptcy attorney will help you determine this.

I don't want to include all of my creditors in my bankruptcy...
When filing for bankruptcy, all creditors must be listed. However, you can pay any creditor you wish after you file bankruptcy, even though you may not be legally required to do so. For instance, you can continue to make payments on a car loan or a mortgage in order to keep the car or the house.

I can only file bankruptcy once...
While there are limitations, you may file more than once. Chapter 7 bankruptcy can be filed once every 8 years. Chapter 13 bankruptcy can be filed every 2 years. If you filed Chapter 7 bankruptcy the first time and would like to file for chapter 13 next, 4 years must pass between filings. If you filed Chapter 13 first and want to file Chapter 7 next, 6 years must pass between filings.

I can max out all of my credit cards before I file for bankruptcy...
This would be considered fraudulent and may jeopardize your dischargeability. It's best to stop using your credit cards if you think that you may need to file bankruptcy.

I have to have a certain amount of debt before I can file...
There is no minimum amount of debt a person must have to file for bankruptcy. If the debt is beyond your ability to repay, you can file for bankruptcy if it's the best choice for your financial situation.

You should always consult and work with an experienced attorney when filing for bankruptcy. If you have any questions surrounding these common myths regarding filing for bankruptcy, contact Minnesota bankruptcy attorney Gregory Wald at (952) 921-5802.

How Credit Card Use Can Affect Your Bankruptcy

If you plan on filing for bankruptcy, it is never a good idea to run up credit cards immediately beforehand. While it may be tempting, using your credit cards directly before filing for bankruptcy can lead to complications that include not being able to discharge that portion of your debt.

Generally, credit card debt is dischargeable through filing for bankruptcy. However, fraudulent debt is not. If you run up credit card debt with the intention of discharging it in bankruptcy, it is a fraud against your creditors and they may ask the court not to discharge the debt. You should be especially careful not to charge as much as $600.00 on a single card for luxury items within 90 days prior to filing bankruptcy. Also avoid cash advances on a single credit card of $875.00 or more within 70 day before filing bankruptcy, because in both situations, the court must presume that you incurred the debt fraudulently.

Additionally, some creditors will look at overall credit card usage in the 6 to 12 months prior to filing and object to a discharge if the charges are excessive and appear to be done in contemplation of bankruptcy. So the best practice is not to use any credit cards once you have met with an attorney and/or know you plan to file bankruptcy.

Once you have consulted with an attorney, be sure to inform your them of any purchases of $600 or more that you’ve made on your credit cards because in most instances it may be in your better interest to delay filing until after the 90 day presumption period has passed.

If you purchase necessities like food and diapers on your credit cards within 90 days prior to filing bankruptcy, your credit card company probably will not complain. However, you should stop making charges of all types once you have made the decision to file bankruptcy.

In some cases, it makes sense to incur debt with the intention of filing bankruptcy. For instance, if you car needs to be replaced, it may make sense to finance a dependable replacement vehicle before you file bankruptcy. However, you should always obtain the advice of a bankruptcy attorney before taking any financial steps in contemplation of filing bankruptcy case.

If you are unsure about any purchases you’ve made within the 90 days before you are planning on filing for bankruptcy and are wondering if your credit card debt can be discharged, consult with bankruptcy attorney Gregory J. Wald for more information.

Gregory J. Wald, Attorney at Law
1500 Northland Plaza
3800 American Boulevard West
Bloomington, MN 55431
Telephone: 952-921-5802
Toll Free: 1-866-747-1130
Fax: 952-831-1346
BankruptcyMinn.com
Gwald314@msn.com

Tax Debt Relief And Bankruptcy

If you have an income tax debt, and are filing for bankruptcy, that may be eligible for discharge under Chapter 7 or Chapter 13 of the Bankruptcy Code.

The difference between a Chapter 7 bankruptcy and a Chapter 13 bankruptcy is that Chapter 7 allows for a full discharge of permitted debts while Chapter 13 issues a payment plan to repay some debts, with the rest of the permitted debts being discharged. Keep in mind, not all tax debts are able to be discharged in bankruptcy, but taxes that are eligible to be discharged in a Chapter 7 are also eligible for discharge in Chapter 13. When you file for bankruptcy, your tax debts must meet a certain standard in order to be discharged.

The criteria for income tax debt to be discharged are:

• All tax debt must be from income taxes 
• The tax debt must be part of a tax return that was due at least three years prior to the taxpayer filing for bankruptcy. The due date includes any extensions. 
• The tax return has to have been filed at least two before the taxpayer files for bankruptcy. This date starts when the return was actually filed. 
• The tax assessment that the IRS sent you has to be at least 240 days old. 
• The tax return cannot be fraudulent. 
• The taxpayer cannot be guilty of tax evasion. 

Some of the tax debt that is not dischargeable is for taxes for which no returns have been filed. While the IRS routinely assesses taxes on un-filed returns, these tax liabilities cannot be discharged until the taxpayer files a return for the year in question. The return must be filed by the taxpayer. A commissioner-filed return does not qualify.

If you file for Chapter 13 bankruptcy, money owed to the IRS that does not meet the qualifications to be discharged can be repaid through a payment plan that lasts anywhere between three and five years without penalties or continuing interest. (Although in some cases interest and penalties must be paid if there is a tax lien). One of the benefits of filing a Chapter 13 bankruptcy is if the IRS rejected your previous payment plan, this is a way to get them to accept one.

It is recommended that you speak with your attorney regarding this matter before deciding between filing Chapter 7 or Chapter 13 to get rid of or aid with the burden of tax debt.

Gregory J. Wald, Attorney at Law
1500 Northland Plaza
3800 American Boulevard West
Bloomington, MN 55431
Telephone: 952-921-5802
Toll Free: 1-866-747-1130
Fax: 952-831-1346
BankruptcyMinn.com
Gwald314@msn.com

Repairing Your Credit After Bankruptcy

Having good credit after bankruptcy is possible, you could even obtain a good credit score within several years of your bankruptcy case being discharged. The first step is receiving the notification from the courts that all of your debt has been discharged. This form will be titled “Discharge of Debtor.” Keep this form in a safe place because you may need to show this to creditors as proof your debts are gone.

• Review your credit reports and score closely and clear up any errors. Request your credit report from each of the three major credit agencies. Make sure that all of your debts are listed as “discharged.” Some creditors will not play by the rules. If you notice that some of your debts are not listed as discharged, contact your Bankruptcy Attorney Gregory J. Wald. 
• The easiest way to reestablish credit is with a secured credit card. A secured card is a card that is backed by a deposit of cash as collateral. The deposit amount is the amount of credit you will be allotted. Be sure to ask whether the card reports to all three major credit bureaus. If not, find another bank that does so. Typically in 12 to 24 months you will be able to open a more traditional credit card.
• It is good practice to keep your credit card balances below 30% of your credit limit, even if they are paid off in full each month. The lower the balance and the higher the limit, the faster your credit score improves.
• Pay your utility bills and rent on time. This will go a long way in assisting to rebuild your credit. Delinquencies have the largest negative effect on your credit score.
• Get a gas store card. These types of cards can be easier to get than a regular credit card and if you are trying to establish credit history, these small monthly payments can be a great help in boosting your credit score.

By following a few of these steps and by making your monthly payments on time, you will be back on the road to having good credit.


Gregory J. Wald, Attorney at Law
1500 Northland Plaza
3800 American Boulevard West
Bloomington, MN 55431
Telephone: 952-921-5802
Toll Free: 1-866-747-1130
Fax: 952-831-1346
BankruptcyMinn.com
Gwald314@msn.com

Bankruptcy The Second Time Around

If you have already filed for bankruptcy and you find yourself struggling with debt again, you may be eligible to file for bankruptcy a second time -- if certain criteria are met.

There are two main types of bankruptcy, Chapter 7 and Chapter 13. You are able to file more than once under each type of bankruptcy, however federal laws set into place in 2005 have made it more difficult. While there is no limit to how often you can refile, filing too closely together can be a waste of time if you would like your debt discharged.

If you initially filed for Chapter 7 bankruptcy (which eliminates most debt) in 2005 you will be eligible to file Chapter 7 again in 2013. Part of the criteria is that you wait at least 8 years between filing. However, if your second filing is for Chapter 13 (which restructures debt), you only have to wait 4 years rather than 8. The time periods between filings are measured from filing date to filing date and not the date your debt was discharged.

If your first filing was Chapter 13, you only have to wait 2 years before filing for Chapter 13 again. If you plan on your second filing being Chapter 7 this time, then 6 years must pass between filings.

There are exceptions to these time periods. If you are considering filing bankruptcy for the second time, contact Minnesota Bankruptcy Attorney Gregory Wald for more information.

Co-signers and Bankruptcy

Bankruptcy provides a fresh start for many, but what happens when some of your secured debt, such as a vehicle, has a co-signer? If you are planning on filing for Chapter 7 bankruptcy, and in doing so surrendering secured property, you should understand that the protection of bankruptcy only covers the person filing, not the co-signing party.

Lets say that your sweet Granny Ann helped you to get a new car by co-signing on the loan with you. After a few years you realize that your auto loan payments are just too high and you are drowning in debt. When you decide to file for Chapter 7, even though you have surrendered the vehicle, sweet Granny Ann is still legally responsible for the remaining balance. However, if sweet Granny Ann also decides to file for Chapter 7 bankruptcy, she could then discharge her own legal responsibility for the remaining balance.

This is the reason that most married couples are urged to file a joint petition. However, if a married couple does not have any joint debt then it may not be necessary to file bankruptcy together. In Minnesota, you are not automatically liable for all of your spouse's debts, but you are responsible for your spouse's debts incurred during the marriage for necessities of life, including medical bills.

In a scenario where the person filing for bankruptcy is the co-signer on a debt, lets say it’s sweet Granny Ann and she co-signed with you on your car, she must still list the vehicle and debt in her bankruptcy. She would be able to explain on her schedule that the vehicle actually belongs to her grandchild and that her grandchild makes all of the payments. This typically does not affect the contract between the grandchild and the lender, this would just eliminate Granny Ann’s duty as a co-signer.

There are many complex circumstances and legal issues that can effect co-signers when filing for bankruptcy. Contact Minnesota bankruptcy Attorney Gregory J. Wald today if you have questions about this matter or would like to set up a consultation.

The Difference Between Secured and Unsecured Debt

The type of debt you have plays an important role in what happens if you default on a loan.

Secured Debt is any debt that is backed by some sort of physical property, such as a car loan or a mortgage. The car loan is secured by the car itself and the mortgage is secured by the home.

In the event you fall behind on your payments on a secured debt, your creditor has the right to take back the property (repossess), sell it and apply the proceeds to the debt that you owe. Additionally, you may still have a balance owed even after the sale of the item is applied to the debt.

Dealing with your secured debt in bankruptcy can be done one of two ways. The first way is by filing for Chapter 7 bankruptcy and returning the item so that you no longer have to make payments on it. The other option is to restructure your payments by filing for Chapter 13 bankruptcy and keeping the item. Either way, with any secured debt the creditor gets something in return.

Unsecured Debt is typically a debt you incur to obtain goods and services. It can be medical debt, a student loan, a credit card or a personal loan. Essentially, there is no collateral tied to the debt. With this type of debt the creditor won't be able to repossess the item you purchased but they are able to take legal action or garnish your wages to recover a balance owed.

Filing for bankruptcy can ease the burden of both secured and unsecured debt. Filing for bankruptcy may even help you keep your car, stop wage garnishments, and remove some or all of your debt. Contact Minnesota Bankruptcy Attorney Gregory Wald for more detailed information specific to your situation.