Author name: Elizabeth Rosar Chermack

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Bankruptcy and the Means Test

In previous posts I discussed some of the distinctions between Chapter 7 and Chapter 13 bankruptcy. The means test is an important element to both Chapter 7 and Chapter 13 bankruptcy (unless you are exempt from the means test). If you do not pass the means test, you will not qualify for a Chapter 7 bankruptcy. The means test determines the length of time of your Chapter 13 plan in a Chapter 13 bankruptcy. When new means test numbers are released, I tend to post about them on my blog. The means test numbers can be confusing. If your income is above the median income for your household size, it does not necessarily mean that you won’t qualify for a Chapter 7 bankruptcy. It also does not necessarily mean that you will be in a 5-year (instead of a 3-year) Chapter 13 plan. If your income is above the median income for your household size, then in order to determine: you will need to submit the “long form” means test. The long form means test is based on IRS standards. Additionally, certain expenses in the means test are based on your actual expenses. The means test can be very complicated. The forms themselves are not overly complicated, but the laws and standards behind the forms are. If you are submitting the long form means test, your attorney will likely require a large amount of documentation from you. Your attorney is not requiring that paperwork because they think it’s fun or because they are nosey; they are hoping to help you have the best possible chance at passing the means test. Elizabeth Rosar Chermack is a Minnesota Bankruptcy Attorney, and can help you analyze whether Chapter 7 or Chapter 13 bankruptcy is the right choice for you.   Call (952) 491-0390 or send an email to liz@chermacklaw.com to schedule a consultation. ATTORNEY ADVERTISING MATERIAL. The content of this website is for informational purposes only and is not intended as legal advice. No attorney/client relationship is formed by use of this website. Do not submit confidential information via this site unless and until there is a signed retainer contract on file.

Chapter 13 Bankruptcy: Payment Plan

In a previous post, I stated that many people who are considering bankruptcy are hoping to file a Chapter 7 bankruptcy. A Chapter 7 bankruptcy isn’t the best fit for all bankruptcy filers, though. In this post I will explain the basics of a Chapter 13 bankruptcy. There are similarities between Chapter 13 bankruptcy and Chapter 7 bankruptcy. In both cases, you have to file a bankruptcy petition with the Court and you need to meet with a bankruptcy trustee as part of the process. A Chapter 13 requires you to file additional paperwork with the Court: you need to file a Chapter 13 plan. In the Chapter 13 plan, you lay out your plan for paying back some or all of your debts during the next 3-5 years. In order to draft your Chapter 13 plan, your attorney will need information about your income and expenses, as well as your debts and assets. The kinds of debts and amounts of debts that you have (priority debts, secured debts, unsecured debts), and your assets (Would any of them be non-exempt in a Chapter 7 bankruptcy?), as well as your income and expenses, will determine your proposed Chapter 13 payment. Additionally, whether or not you pass the means test will determine whether your Chapter 13 plan will be a three-year or a five-year plan. Your Chapter 13 Plan will also need to be confirmed (approved) by the bankruptcy court. Elizabeth Rosar Chermack is a Minnesota Bankruptcy Attorney, and can help you analyze whether Chapter 7 or Chapter 13 bankruptcy is the right choice for you.   Call (952) 491-0390 or send an email to liz@chermacklaw.com to schedule a consultation. ATTORNEY ADVERTISING MATERIAL. The content of this website is for informational purposes only and is not intended as legal advice. No attorney/client relationship is formed by use of this website. Do not submit confidential information via this site unless and until there is a signed retainer contract on file.

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How do I change a Minnesota child custody order?

In Minnesota, Minnesota Statute Section 518.18 provides the law for changing a child custody order. The easiest way to modify a child custody order is by agreement. In other words, if both parents agree to change custody, it is going to be much easier to get an order from the Court that changes custody. Many times, though, parties are not in agreement about modifying custody. If that is the case, then you will need to bring a motion to change custody. You have to have a statutory basis for bring your motion. Two examples of a statutory reason to bring a motion to modify custody include: (1)  denial of or interference with parenting time; or (2) physical or emotional endangerment to the child. A party also must show that the modification is necessary to serve the best interests of the child. The process of trying to change a child custody order can be very slow and expensive. Although emergency orders may be issued in some cases, many cases take between six months to a year to be resolved. When you believe your child is endangered, the wait can be agonizing. In some cases, parents may try to contact Child Protective Services in order to report the abuse. Elizabeth Rosar Chermack is a Minnesota Family Law Attorney.  Call (952) 491-0390 or send an email to liz@chermacklaw.com to schedule a consultation with Liz. ATTORNEY ADVERTISING MATERIAL. The content of this website is for informational purposes only and is not intended as legal advice. No attorney/client relationship is formed by use of this website. Do not submit confidential information via this site unless and until there is a signed retainer contract on file.

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Contact Agreements and Adoption in Minnesota

Entering into a contact agreement prior to an adoption finalizing can be quite emotional. In some cases adoptive parents (who may already have the children living with them) have felt pressured to sign the contact agreement that is presented to them without seeking legal counsel. Signing a contact agreement without seeking legal counsel can be a costly (emotionally and financially) mistake. It is my belief that the current contact agreement “form” that many lawyers use does not contemplate all of the issues that can occur as a result of a contact agreement. Minnesota law provides guidance to parties as to who can enter into such an agreement and how to make such an agreement enforceable, but it does not provide information as to how to make a contact agreement that is in the child’s best interests and that will continue to be in the child’s best interests as he or she grows up. Every case is different and every child is different. In some cases it works for there to be a very open-ended contact agreement. In other cases, it may be best for the child’s safety to have a stricter or more narrow contact agreement (or no contact agreement at all). Like I said above, there is a contact agreement form that many Minnesota lawyers use. Although I think that this form is a good starting point, I have seen it presented in “as is” form to adoptive parents and the adoptive parents have felt pressured to sign it “as is” when had they been given an opportunity to discuss the agreement with an attorney, changes could have been made that would have been beneficial to all. Elizabeth Rosar Chermack is a Minnesota Adoption Attorney, with an office in Burnsville, and can represent you in reviewing your adoption contact agreement.  Call (952) 491-0390 or send an email to liz@chermacklaw.com to schedule a consultation with Liz. ATTORNEY ADVERTISING MATERIAL. The content of this website is for informational purposes only and is not intended as legal advice. No attorney/client relationship is formed by use of this website. Do not submit confidential information via this site unless and until there is a signed retainer contract on file.

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Stepparent Adoption in Minnesota

If you are a stepparent and want to adopt your stepchild, it is possible to do so. The easiest, most straightforward way to do so is when you have the agreement of the biological parent to consent to the adoption. For example, if you are a stepfather and you want to adopt your stepson, the easiest way to do so is if your stepson’s biological father is willing to agree (by signing a consent form) to the adoption. As part of the adoption, the biological parent can still enter into a “Communication and Contact Agreement.” In other words, just because they have consented to the adoption to taking place, the biological parent is not giving up their ability to ever talk to or see the child again. Cases in which the biological parent is not willing to consent to the adoption are not as straightforward. If your stepchild is 14 years old, or older, they will also have to consent to the adoption. Elizabeth Rosar Chermack is a Minnesota Adoption Attorney, with an office in Burnsville, and can represent you in your stepparent adoption.  Call (952) 491-0390 or send an email to liz@chermacklaw.com to schedule a consultation with Liz. ATTORNEY ADVERTISING MATERIAL. The content of this website is for informational purposes only and is not intended as legal advice. No attorney/client relationship is formed by use of this website. Do not submit confidential information via this site unless and until there is a signed retainer contract on file.

Changing custody or parenting time when both parents agree

If both parents agree that changing custody and/or parenting time is in the child’s best interest, then the parents will want to formalize that agreement and submit it to the Court for the Judge to sign and enter as an Order. This formal document is a “Stipulation and Order.” Sometimes parents might not think it’s necessary to go through that process. They might not think that they need the Court to be involved. They might not want to spend the money to have a document drafted and submitted to the Court. In my experience, though, it is best to formalize the new agreements and have them approved by the Court. This is because even though the parents might be getting along great right now and they agree to the changes now, if that co-parenting relationship changes and a parent changes their mind, the informal agreements are not an Order and are not enforceable. In my law practice, I will typically charge a lower flat fee to draft and submit a Stipulation and Order to Modify Custody and/or Parenting time if there is an agreement. Getting your agreements formalized so you have an enforceable order (and remember that enforceable orders typically lead to stability for children which is in their best interest) does not have to be an expensive undertaking. Elizabeth Rosar Chermack is a Burnsville lawyer, and can represent you in your change of custody and parenting time matter.  Call (952) 491-0390 or send an email to liz@chermacklaw.com to schedule a consultation with Liz. ATTORNEY ADVERTISING MATERIAL. The content of this website is for informational purposes only and is not intended as legal advice. No attorney/client relationship is formed by use of this website. Do not submit confidential information via this site unless and until there is a signed retainer contract on file.

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What if you can’t reach a divorce agreement?

In a previous post, I talked about getting divorced in Minnesota when you and your spouse are in agreement on all terms of your divorce. If you aren’t able to reach an agreement, then you are likely going to have a contested divorce. That does not mean that you have to be in court forever. It also doesn’t prevent you from eventually reaching a divorce settlement. The family court system in Minnesota is set up to encourage parties to try to reach an agreement. Parties can file for divorce without being in agreement as to how to resolve the divorce. You will still be given ample opportunity to negotiate a divorce settlement. For example, at your first court date after filing a contested divorce, you will have an opportunity to opt-in to Early Neutral Evaluation (ENE). If you are not able to reach a settlement at ENE, you may have a pre-trial or a temporary hearing. Eventually, if you and your spouse are not able to reach an agreement on all issues, you may end up going to trial and asking the Judge to decide those contested issues for you. As an attorney, I do not “churn” my clients’ cases for fees. If a client wants to proceed in a certain manner in their case, I do my best to let them know the possible costs of doing so: both the financial costs and the “real life” costs. Sometimes the only way for a case to resolve is by going to trial; for example, if the opposing party is not being honest, safe, or willing to comprise. However, going to trial is not typically what is best for families. It is expensive, and it leads to animosity and finger-pointing between the parties. When children are involved, it’s important to remember that you will still need to co-parent with this person even after the trial is over and the divorce is final.   Elizabeth Rosar Chermack, Attorney at Law, is a Minnesota divorce lawyer. Call (952) 491-0390 or send an email to liz@chermacklaw.com  to schedule a consultation with Elizabeth Rosar Chermack, Attorney at Law. ATTORNEY ADVERTISING MATERIAL. The content of this website is for informational purposes only and is not intended as legal advice. No attorney/client relationship is formed by use of this website. Do not submit confidential information via this site unless and until there is a signed retainer contract on file.

Divorced –  without having to go to Court

I offer an affordable flat fee rate for couples who are divorcing in Minnesota and who have reached agreement on all issues in their divorce case. I also offer a similar flat fee rate in uncontested custody cases. A lot of people wonder if they have to go to Court in order to get divorced. The answer is “not always.” In certain cases, parties can submit a Stipulation and proposed Judgment and Decree to the Court and get divorced without ever having to step foot into a courtroom (or a Zoom courtroom). See Minn. Stat. § 518.13, subd. 5. If you want to find out if you could get divorced without having to go to court, call (952) 491-0390 or send an email to liz@chermacklaw.com  to schedule a consultation with Elizabeth Rosar Chermack, Attorney at Law. ATTORNEY ADVERTISING MATERIAL. The content of this website is for informational purposes only and is not intended as legal advice. No attorney/client relationship is formed by use of this website. Do not submit confidential information via this site unless and until there is a signed retainer contract on file.

Antenuptial Agreements in Minnesota

It is not uncommon for couples who are contemplating marriage to enter into an Antenuptial Agreement (commonly referred to as a “prenup” or a “prenuptial agreement”). Minnesota law allows parties to enter into an antenuptial agreement. If a party is considering entering into an antenuptial agreement, the parties should each consult with an attorney as far in advance of the wedding as possible. Additionally, both parties should be represented by attorneys who are experienced in both family law AND drafting and reviewing antenuptial agreements. In order for a Minnesota antenuptial agreement to be enforceable, the agreement must be procedurally and substantively fair. Procedural fairness. Minn. Stat. §519.11 provides requirements that must be met in order for an antenuptial agreement to be enforceable. These requirements include a full disclosure of income and assets by both parties and that both parties have an opportunity to consult with an attorney. Minn. Stat. §519.11 contains additional requirements to those listed in the previous sentence, to ensure procedural fairness. Substantive fairness. The parties won’t know if their antenuptial agreement will be upheld by a court until and unless they ultimately end up divorcing. McKee-Johnson v. Johnson sets out a two-pronged test to determine whether an antenuptial agreement is enforceable: Elizabeth Rosar Chermack is a Family Law attorney who lives in Apple Valley, Minnesota, and can assist you with your Antenuptial Agreement. Call (952) 491-0390 or send an email to liz@chermacklaw.com to schedule a consultation with Liz. ATTORNEY ADVERTISING MATERIAL. The content of this website is for informational purposes only and is not intended as legal advice. No attorney/client relationship is formed by use of this website. Do not submit confidential information via this site unless and until there is a signed retainer contract on file.

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Choosing between Chapter 7 and Chapter 13 bankruptcy: liquidation and exemptions

Most people who come into my office with questions about bankruptcy and resolving their debts are familiar (on some level) with Chapter 7 bankruptcy. For most people who are considering filing bankruptcy, a Chapter 7 bankruptcy is the goal. A Chapter 7 bankruptcy is sometimes called a “liquidation bankruptcy” but the reality is that generally people do not have things with a whole lot of value to liquidate. When you file bankruptcy, everything that you own is “frozen” and becomes part of the bankruptcy estate. In theory, everything in the bankruptcy estate is sold and then the funds from the sale are divided up amongst your creditors. In reality, if everyone who filed bankruptcy lost EVERYTHING, there would be a lot of issues. For example, people who filed bankruptcy: Luckily, the bankruptcy code (and Minnesota law) protects people who file bankruptcy by allowing them to exempt certain things from the bankruptcy estate. When things are exempted from the bankruptcy estate, it means that you ultimately get to keep those assets. As I stated above, for most people who are looking at filing bankruptcy, a Chapter 7 bankruptcy is the goal. Why is that? Why would someone choose to file a Chapter 13 bankruptcy? Here are some of the possible reasons: Elizabeth Rosar Chermack is a Burnsville Bankruptcy Attorney, and can help you analyze whether Chapter 7 or Chapter 13 bankruptcy is the right choice for you.   Call (952) 491-0390 or send an email to liz@chermacklaw.com to schedule a consultation. ATTORNEY ADVERTISING MATERIAL. The content of this website is for informational purposes only and is not intended as legal advice. No attorney/client relationship is formed by use of this website. Do not submit confidential information via this site unless and until there is a signed retainer contract on file. Elizabeth Rosar Chermack, Attorney at Law, is a debt relief agency helping people to file for bankruptcy relief under the bankruptcy code.

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Property division in a Minnesota divorce

When a married couple is divorcing in Minnesota, their divorce decree must resolve the issue of property division. All assets and debts of the parties must be divided between the parties. Minnesota law requires that there be a “just and equitable division” of the parties’ marital property. In addition to determining the values of the parties’ marital property and determining what a “just and equitable division” of said property looks like, the following needs to be considered: Is there any nonmarital property? How is the value of that nonmarital property calculated? Will any nonmarital property be awarded to the other spouse in order to prevent “unfair hardship”? What is the valuation date? Minnesota law states the following in regards to the valuation date: “The court shall value marital assets for purposes of division between the parties as of the day of the initially scheduled prehearing settlement conference, unless a different date is agreed upon by the parties, or unless the court makes specific findings that another date of valuation is fair and equitable. If there is a substantial change in value of an asset between the date of valuation and the final distribution, the court may adjust the valuation of that asset as necessary to effect an equitable distribution.” In order to determine whether a proposed division of marital property is “just and equitable,” the parties need to make full disclosure of their assets and debts to one other. When one party is not being cooperative or honest, it becomes difficult to easily reach a “just and equitable” property settlement. Elizabeth Rosar Chermack is a lawyer with an office in Dakota County, and can represent you in your divorce.  Call (952) 491-0390 or send an email to liz@chermacklaw.com to schedule a consultation with Liz. ATTORNEY ADVERTISING MATERIAL. The content of this website is for informational purposes only and is not intended as legal advice. No attorney/client relationship is formed by use of this website. Do not submit confidential information via this site unless and until there is a signed retainer contract on file.

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Negotiating with Creditors

What do you do if you cannot afford to pay your creditors back in full, but it also doesn’t make sense to file bankruptcy? For example, if you owe $2,000 to a creditor, but you can’t afford to pay them in full – what do you do? In that situation, it really wouldn’t make sense to file bankruptcy, but that $2,000 debt is still out there and you need to figure out a plan so you can move forward with your life. In that case, you are most likely going to need to negotiate with the creditor. Many times people are so overwhelmed by their debts (especially when they know they cannot afford to pay them in full), that they try to put off dealing with them. That is very understandable; especially when you have tried to contact your creditors on your own and the creditors aren’t willing to work with you. It can also be difficult to negotiate with a creditor once they’ve started garnishing your wages. Some creditors will refuse to negotiate once they have a wage garnishment in place. It can also be difficult to negotiate with a creditor on your own, because unfortunately many creditors and collections agencies can be quite intimidating when you are talking with them on the phone about your own debts. If you are in a situation where you think it makes sense to consider negotiating with your creditors, it might make sense to consult with an attorney about your options, so you can figure out a plan to deal with your debts and move forward with your life. You will also want to consult with your accountant or CPA about what impact negotiating with your creditors may have on your tax liability. Elizabeth Rosar Chermack is a Burnsville Attorney, and can discuss your options with you in regards to negotiating with your creditors.  Call (952) 491-0390 or send an email to liz@chermacklaw.com to schedule a consultation with Liz. ATTORNEY ADVERTISING MATERIAL. The content of this website is for informational purposes only and is not intended as legal advice. No attorney/client relationship is formed by use of this website. Do not submit confidential information via this site unless and until there is a signed retainer contract on file.

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Initial Case Management Conference in Dakota County

In Dakota County (and many other counties in Minnesota), if you or your spouse have filed for divorce and opened a court file, but you have not yet reached agreement on all issues of your divorce, your first court date will likely be the Initial Case Management Conference (ICMC). You might be wondering what will happen at the ICMC. For a lot of people, it is their first time ever actually going to court, so it feels scary. Luckily, ICMC is not scary. You (or your attorney) will need to fill out the ICMC Data Sheet ahead of time, and will need to bring it to your ICMC along with any required documents (tax returns, paystubs, etc.). The main point of ICMC is to learn about different ways that your divorce can proceed. There are 2 different “tracks” by which your divorce can proceed: (1) the traditional litigation track; OR (2) the Early Neutral Evaluation (ENE) process. Parties are strongly encouraged to participate in the ENE process. During the ENE process, the parties (and their lawyers) meet with an evaluator (or more than one evaluator) to resolve their financial and/or custody and parenting time issues. A large majority of cases settle during or as a result of ENE. Choosing to participate in ENE instead of initially choosing the traditional litigation track tends to be more cost-effective as well. Elizabeth Rosar Chermack is a Dakota County Family Law Attorney, and can represent you in your divorce or custody case.   Call (952) 491-0390 or send an email to liz@chermacklaw.com to schedule a consultation with her. ATTORNEY ADVERTISING MATERIAL. The content of this website is for informational purposes only and is not intended as legal advice. No attorney/client relationship is formed by use of this website. Do not submit confidential information via this site unless and until there is a signed retainer contract on file.

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If my spouse & I agree on all the terms of our divorce, do I still need a lawyer?

Even if you and your spouse have reached an agreement on all the terms of your divorce, it is still important to consult with an attorney. On many occasions, I have consulted with someone who has reached an agreement with their spouse on many of the terms of their divorce, but they have forgotten about a couple of decisions that need to be made. An experienced attorney also has the ability to suggest specific language or wording to put into your divorce paperwork that will make things go more smoothly in the future. Unfortunately there have been times when people have decided not to consult with an attorney before getting divorced, and when they DIY-ed it, they left important things out of their paperwork. A year or two down the road, they find themselves in a dispute with their ex-spouse, and spending a lot of time, energy, and money on the post-decree dispute. Often the dispute could have been avoided if they had more carefully drafted their initial divorce paperwork. If you and your spouse are getting divorced in Minnesota, and you have reached an agreement on all areas of your divorce, you may be able to hire an attorney to represent you for a flat fee in an uncontested divorce. Elizabeth Rosar Chermack is a Minnesota Divorce Attorney, with an office in Burnsville, and can represent you in your divorce.  Call (952) 491-0390 or send an email to liz@chermacklaw.com to schedule a consultation with Liz. ATTORNEY ADVERTISING MATERIAL. The content of this website is for informational purposes only and is not intended as legal advice. No attorney/client relationship is formed by use of this website. Do not submit confidential information via this site unless and until there is a signed retainer contract on file.

If I file bankruptcy in Minnesota, can I keep my car?

When potential clients ask me questions about filing bankruptcy, one of their first few questions to me usually has to do with whether they can keep their car if they file bankruptcy. In order to answer that question, I need to get more information from them: 1) What other assets do they have? This will help me figure out whether we will be using the Minnesota exemptions or the federal exemptions. I explain the difference between the two types of exemptions during an initial consultation. 2) How much is their car worth? To figure out the value of their car, I have them look up the private party (not trade-in or retail value) on the Kelley Blue Book website. 3) Do they owe money on a car loan? If yes, which bank do they owe, AND how much do they owe? The reason for this question is two-fold. First, it helps me determine how much equity (if any) they have in the car. Second, we can talk about what might happen with their car loan after they file bankruptcy. I can’t make any promises to potential clients or to blog readers, but I can say that clients do not typically lose their car after filing bankruptcy unless they have wanted to surrender (lose/get rid of) their car.  Elizabeth Rosar Chermack is a Minnesota Bankruptcy Attorney, and can represent you in your bankruptcy matter.  Call (952) 491-0390 or send an email to liz@chermacklaw.com to schedule a consultation with Liz. ATTORNEY ADVERTISING MATERIAL. The content of this website is for informational purposes only and is not intended as legal advice. No attorney/client relationship is formed by use of this website. Do not submit confidential information via this site unless and until there is a signed retainer contract on file. Elizabeth Rosar Chermack, Attorney at Law, is a debt relief agency helping people to file for bankruptcy relief under the bankruptcy code.

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How can I afford to hire a bankruptcy attorney?

It’s pretty common for bankruptcy attorneys to hear the following from our potential clients: I need to file bankruptcy. I can’t afford to pay my creditors. How can I afford to pay for a bankruptcy attorney? Everyone’s situation is different, but here are some ways that people are able to afford to hire a bankruptcy attorney: 1) Tax refunds. From February until April it is pretty common for clients to pay to retain a bankruptcy attorney by using their tax refund. 2) Help from relatives or friends. Sometimes a client’s friend or family member will help them out by paying their fees. It is important to clarify whether they think the money being paid is a gift or a loan. If it’s a loan, you need to be very careful about when you pay it back, because you do not want the bankruptcy trustee suing your friend or relative to recover a preference. 3) Payment plans. Some attorneys offer a payment plan. The client pays the fees over a few months, and then they are able to file their case. Bankruptcy attorneys are not permitted to accept credit card payments from someone who is filing bankruptcy. In other words, if you are going to be filing bankruptcy, you cannot use your credit card to pay your bankruptcy attorney. Elizabeth Rosar Chermack is a Minnesota Bankruptcy Attorney, and can represent you in your bankruptcy matter.  Call (952) 491-0390 or send an email to liz@chermacklaw.com to schedule a consultation with Liz. ATTORNEY ADVERTISING MATERIAL. The content of this website is for informational purposes only and is not intended as legal advice. No attorney/client relationship is formed by use of this website. Do not submit confidential information via this site unless and until there is a signed retainer contract on file. Elizabeth Rosar Chermack, Attorney at Law, is a debt relief agency helping people to file for bankruptcy relief under the bankruptcy code.

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How to resolve joint debts and protect yourself in a divorce

In a previous post, I discussed the unfortunate fact that your divorce decree will not change your contract with your creditors. In other words, if you and your ex-spouse were both jointly liable on a Visa credit card, the divorce decree saying that your ex-spouse is liable for the debt owed to Visa does not change the underlying contract with Visa, meaning: if your ex-spouse doesn’t pay Visa, Visa will very likely try to collect that debt from you.  Here are some possible solutions to remove a party from a joint account: 1) New account with the same creditor. Sometimes, by talking to the creditor first, you can get them to issue a new account with just the liable (according to the divorce decree) party’s name on it. Creditors may not always be willing to do this, as it is obviously beneficial to them to have both of the joint debtors on the hook for the debt. However, some people have had success with this tactic. 2) Refinancing the debt. Find a creditor who is willing to refinance the outstanding debt into the liable (according to the divorce decree) party’s name. Be cautious in choosing this option that the payment terms (interest rate, number of monthly payments, amount of payments, etc.) are doable and that they make sense for you. It wouldn’t make sense to refinance from a 2% APR to a 12% APR if you didn’t have to, right? 3) Paying off the debt using marital assets. If the divorcing parties have enough assets to do so, the parties might choose to pay off their marital debts using their marital assets. That way neither party has to worry about the other party failing to make a payment on a joint credit account. 4) Extreme cases only: bankruptcy. Sometimes a divorcing couple will have a crippling amount of debt and at that point, it may make sense for one or both parties to file bankruptcy. In deciding whether to file an individual or joint bankruptcy and in deciding in whether to file before or after the divorce is finalized, it is important to know your spouse AND it is important to consult with both your divorce attorney and with a bankruptcy attorney. Resolving joint debts is a common issue that comes up in a divorce. It is important to know your spouse and how reliable they are when it comes to paying their debts before agreeing to something that could negatively impact your financial future. Additionally, because some of the above options may not be available for all people, you will want to do research early on in your divorce. In other words, it doesn’t do any good to agree that each party will refinance the joint debts for which they are responsible (according to the divorce decree) into their own name if it turns out that neither party is actually able to do so due to having bad credit or due to lending practices at the time of the divorce. In order to resolve the joint debts in the way that makes the most sense and in a way that protects you, you need to know what options are available for you on each debt. Elizabeth Rosar Chermack is a Minnesota Divorce and Bankruptcy Attorney, and can represent you in your case.   Call (952) 491-0390 or send an email to liz@chermacklaw.com to schedule a consultation. ATTORNEY ADVERTISING MATERIAL. The content of this website is for informational purposes only and is not intended as legal advice. No attorney/client relationship is formed by use of this website. Do not submit confidential information via this site unless and until there is a signed retainer contract on file. Elizabeth Rosar Chermack, Attorney at Law, is a debt relief agency helping people to file for bankruptcy relief under the bankruptcy code.

What happens to joint debts in a divorce?

Often times, a divorcing couple will have several creditors to whom they owe money. For example, let’s say the divorcing couple has the following consumer debts: – Target credit card $1,000 – Chase credit card $3,000 – Capital One credit card $4,000 In this case, the divorcing couple has $8,000 worth of consumer debt. For simplicity’s sake, let’s assume that the couple agrees that all $8,000 of that debt is “marital debt”, and let’s assume that both spouses are on each of the credit card accounts as a joint debtor. During the divorce process, Spouse 1 agrees that they will pay the debt to Target and to Chase. Spouse 2 agrees that they will pay the debt to Capital One. Eventually (or maybe rather quickly) the divorcing couple comes to an agreement on all issues pertaining to their divorce, and they sign a Stipulation and their attorneys submit it to the Court. The Judge signs a Judgment and Decree or a Divorce Decree (or what people often call their “divorce papers”) that orders Spouse 1 to pay Target and Chase and Spouse 2 to pay Capital One. The question that people often ask me is: what happens to Spouse 1 if Spouse 2 does not pay? The answer is that unfortunately the Judgment and Decree  does not change the parties’ contract with the creditor. So, in this case, if Spouse 2 doesn’t make payments to Capital One, Capital One could still come after Spouse 1, even though the divorce decree says that Spouse 2 is obligated to pay. Additionally, Spouse 1’s credit score will likely be damaged by Spouse 2 not making payments to the creditor (Spouse 2’s credit score also won’t be looking good). Spouse 1 will still have recourse. Spouse 1 can sue Spouse 2 in family court for not following the Judgment and Decree. Unfortunately, by the time that issue comes in front of a Judge, the damage may very well have already been done to Spouse 1. Elizabeth Rosar Chermack is a Minnesota Divorce and Bankruptcy Attorney, and can represent you in your case.   Call (952) 491-0390 or send an email to liz@chermacklaw.com to schedule a consultation. ATTORNEY ADVERTISING MATERIAL. The content of this website is for informational purposes only and is not intended as legal advice. No attorney/client relationship is formed by use of this website. Do not submit confidential information via this site unless and until there is a signed retainer contract on file. Elizabeth Rosar Chermack, Attorney at Law, is a debt relief agency helping people to file for bankruptcy relief under the bankruptcy code.

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Preferences and Why You Shouldn’t Pay Back a Relative or Friend Before Filing Bankruptcy

It is very common for people in dire financial situations to borrow money from relatives or friends. A lot of times, Debtors feel nervous about not paying back their relatives or friends before filing bankruptcy. If a Debtor pays back a relative or friend before filing bankruptcy, they could very likely end up regretting that decision. This is because of the definition of “preferences” under Section 547 of the Bankruptcy Code. There are 2 kinds of preferences with which Section 547 is concerned. The first type of preference is payments totaling $600 or more to any one creditor made during the 90 days before you file bankruptcy. The second kind of preference is any payment made to “insiders” in the year before you file bankruptcy. What is an “insider”? The term “insider” includes but is not limited to: relatives of the debtor; general partners of the debtor and their relatives; corporations of which the debtor is an officer, director, or person in control; officers, directors, and any owner of 5 percent or more of the voting or equity securities of a corporate debtor and their relatives; affiliates of the debtor and insiders of such affiliates; any managing agent of the debtor. 11 U.S.C. § 101. Whether certain payments qualify as preferences is something that you will need to discuss with your bankruptcy attorney.  Payments that may be considered preferences must be disclosed on your bankruptcy petition, on the Statement of Financial Affairs form. If you are at a point where you are thinking that you may have to file for bankruptcy, you should contact an attorney before paying back any insiders. Otherwise, if you do end up having to file bankruptcy, the bankruptcy trustee may be able to avoid those preference payments. That means that the trustee can demand those payments from your relative or friend – and the trustee may even sue them to get the money back from them. Elizabeth Rosar Chermack is a Burnsville Bankruptcy Attorney, and can represent you in your bankruptcy matter.  Call (952) 491-0390 or send an email to liz@chermacklaw.com to schedule a consultation with Liz. ATTORNEY ADVERTISING MATERIAL. The content of this website is for informational purposes only and is not intended as legal advice. No attorney/client relationship is formed by use of this website. Do not submit confidential information via this site unless and until there is a signed retainer contract on file. Elizabeth Rosar Chermack, Attorney at Law, is a debt relief agency helping people to file for bankruptcy relief under the bankruptcy code.

Median Income and the Means Test: Gross Income vs. Net Income

In a consumer bankruptcy case,  a person’s gross income is used to calculate whether the debtor is above or below the median income for means test purposes. People often confuse gross and net (or “take-home”) income, and that is understandable, because most people’s household budgets operate according to their take-home pay. However, when you are trying to determine whether your household income is above or below median income, it is determined according to your gross income – not your take-home pay. If you have self-employment income, in order to determine your income for means test purposes, you will need to have an up-to-date profit and loss statement. It is also very important for self-employed people to keep good records and documentation (think: bank statements, receipts, etc.). Elizabeth Rosar Chermack is a Minnesota Bankruptcy Attorney, and can represent you in your bankruptcy matter.  Call (952) 491-0390 or send an email to liz@chermacklaw.com to schedule a consultation with Liz. ATTORNEY ADVERTISING MATERIAL. The content of this website is for informational purposes only and is not intended as legal advice. No attorney/client relationship is formed by use of this website. Do not submit confidential information via this site unless and until there is a signed retainer contract on file. Elizabeth Rosar Chermack, Attorney at Law, is a debt relief agency helping people to file for bankruptcy relief under the bankruptcy code.

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Median Income and the Means Test

In 2005, BAPCPA (Bankruptcy Abuse Prevention and Consumer Protection Act) was passed. One “fun” part of BAPCPA is the application of the means test in a consumer case. If your household income (for the last 6 months before you file your bankruptcy petition) is below the median income for your household size in your state, then the means test is pretty easy. If your household income is above the median income, then the means test becomes more complicated. How do you know if your household income is above the median income for your state? Here is a link to where you can find the median income for means test purposes. If you are filing a consumer Chapter 7 Bankruptcy and your income is over the median income, the means test becomes a bit more complicated. Depending on the results of the means test in your case, you may not qualify for a Chapter 7 Bankruptcy, and may have to file a Chapter 13 bankruptcy instead. Elizabeth Rosar Chermack is a Minnesota Bankruptcy Attorney, and can represent you in your bankruptcy matter.  Call (952) 491-0390 or send an email to liz@chermacklaw.com to schedule a consultation with Liz. ATTORNEY ADVERTISING MATERIAL. The content of this website is for informational purposes only and is not intended as legal advice. No attorney/client relationship is formed by use of this website. Do not submit confidential information via this site unless and until there is a signed retainer contract on file. Elizabeth Rosar Chermack, Attorney at Law, is a debt relief agency helping people to file for bankruptcy relief under the bankruptcy code.

Are Your Tax Withholdings Correct?

One common issue in a bankruptcy case is whether the person filing bankruptcy will be able to keep their tax refund (many times it’s a refund that they haven’t yet received). Depending on what assets you have and which exemptions you are using (Minnesota state exemptions or the Federal exemptions) you may be able to keep your entire refund. I know that a lot of people like to receive large tax refunds, because it provides them with a lump sum of money once a year.  However, if you are regularly receiving large tax refunds, and you are also thinking that you might have to file bankruptcy, you might be providing the IRS with a nice interest-free loan to the detriment of your personal finances. If you don’t want to receive a large tax refund, you will need to change your withholdings. The IRS has a withholding calculator on its website. To see if you are withholding the right amount from your paychecks, start out by using the withholding calculator. It is also a good idea to double-check your results with an accountant or a CPA. If you change your withholdings so that you won’t get a tax refund, you won’t have to worry about exempting a large tax refund from the bankruptcy estate – and that means that you won’t have to worry about keeping your tax refund. Elizabeth Rosar Chermack is a Burnsville Bankruptcy Attorney, and can represent you in your bankruptcy matter.  Call (952) 491-0390 or send an email to liz@chermacklaw.com to schedule a consultation with Liz. ATTORNEY ADVERTISING MATERIAL. The content of this website is for informational purposes only and is not intended as legal advice. No attorney/client relationship is formed by use of this website. Do not submit confidential information via this site unless and until there is a signed retainer contract on file. Elizabeth Rosar Chermack, Attorney at Law, is a debt relief agency helping people to file for bankruptcy relief under the bankruptcy code.

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Bankruptcy and Your Retirement Savings

It is quite common for prospective clients to call my office and tell me that they are considering taking out a loan from their retirement account, or withdrawing money from their retirement account, in order to pay some of their creditors. I’ve also had people hire me to file their bankruptcy a year or so after doing this. Usually they took out that loan or withdrew that money in order to pay their creditors (and avoid filing bankruptcy). Yet, even after doing that, they are finding themselves in a situation where filing bankruptcy makes sense for them. My first piece of advice is: don’t do it! For most people, it’s usually not a good idea to take money out of their retirement accounts to pay their creditors. If you are going to withdraw money from your retirement account (even though I just told you it’s probably not a good idea) it is in your best interest to consult with an accountant or CPA first. I have seen people cash out their 401(k) or their IRA, and use all of that money to pay off some  of their creditors. Then, when tax time comes, they end up getting hit with a big tax bill. Usually they have not been withholding at a high enough rate to cover that tax bill, and they have spent all of the money that they withdrew, so they end up owing the IRS and the MN Department of Revenue a nice chunk of change – never a fun thing. Another downside to taking out a loan against your retirement account or withdrawing money from your retirement plan in order to pay your creditors is that the money in your retirement accounts is generally protected in a bankruptcy. It makes me really sad to see people cash in their retirement, only to end up filing bankruptcy. Also,  a loan that you take out against your 401(k) isn’t the sort of debt that can be “wiped out” in a bankruptcy, so that loan against your 401(k) doesn’t go away until you’ve paid it off. Elizabeth Rosar Chermack is a Minnesota Bankruptcy Attorney, and can represent you in your bankruptcy matter.  Call (952) 491-0390 or send an email to liz@chermacklaw.com to schedule a consultation with Liz. ATTORNEY ADVERTISING MATERIAL. The content of this website is for informational purposes only and is not intended as legal advice. No attorney/client relationship is formed by use of this website. Do not submit confidential information via this site unless and until there is a signed retainer contract on file. Elizabeth Rosar Chermack, Attorney at Law, is a debt relief agency helping people to file for bankruptcy relief under the bankruptcy code.

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Garnishment in MN

When I meet with people who are going through a financial rough patch, they are usually concerned about the possibility of their wages being garnished. In Minnesota, garnishment is governed by Minn. Stat. § 571.71 et seq Generally garnishment occurs after there has been a judgment, but garnishment is authorized without a judgment in certain circumstances. See Minn. Stat. § 571.71. See also Minn. Stat. § 571.93. Wages and bank accounts can be garnished. Certain property is exempt from garnishment in Minnesota. See Minn. Stat. § 550.37. One particularly important exemption is that “…the earnings or salary of a person who is a recipient of government assistance based on need, shall be exempt from all claims of creditors.” See Minn. Stat. § 550.37, subd. 14. It is common for people to be embarrassed about the possibility of their employer knowing about their financial difficulties (if their wages get garnished). I try to remind these people that if it happens, they probably are not the first employee to have their wages garnished, and they probably won’t be the last employee to have their wages garnished. Another common fear is the debtor’s fear of losing their job when their employer receives notice that the debtor’s wages are being garnished. Minnesota law protects employees from being discharged or disciplined due to a wage garnishment. See Minn. Stat. § 571.927. Elizabeth Rosar Chermack is a Minnesota Attorney and can represent you in your garnishment matter. Call (952) 491-0390 or send an email to liz@chermacklaw.com to schedule a consultation with Liz. ATTORNEY ADVERTISING MATERIAL. The content of this website is for informational purposes only and is not intended as legal advice. No attorney/client relationship is formed by use of this website. Do not submit confidential information via this site unless and until there is a signed retainer contract on file. Elizabeth Rosar Chermack, Attorney at Law, is a debt relief agency helping people to file for bankruptcy relief under the bankruptcy code.  

How Does Bankruptcy Affect Divorce-Related Debts?

If you or your spouse may file bankruptcy after you divorce, it is important to know how bankruptcy affects some common issues in divorces. Prior to 2005, a debtor who was able to show an inability to pay for property settlement debts was able to have those debts discharged in a bankruptcy. This is no longer the case, and thus every type of obligation to a spouse, former spouse, or child of the debtor is non-dischargeable. See 11 U.S.C. §523(a)(5). See also 11 U.S.C. §523(a)(15). This means that child support obligations, spousal maintenance (alimony), and property settlements are generally non-dischargeable in bankruptcy. From a practical standpoint, though, one spouse may still be “on the hook” for a debt that the other spouse is obligated to pay under the property settlement of the divorce decree. If the debt is in both spouses’ names, but the husband is obligated to pay for it under the divorce decree, if the husband doesn’t pay it, the wife will still have to answer to the creditors. Thus, if the husband is not paying the debt that he is obligated to pay under the divorce decree, and it is negatively affecting the wife’s credit, the wife may either need to pay that debt herself or file bankruptcy in order to begin to rebuild her credit. The wife may also have a cause of action for contempt against her husband. Marital liens in real estate become property of the bankruptcy estate, because the bankruptcy code provides that “all legal or equitable interests of the debtor in property as of the commencement of the case” are property of the bankruptcy estate. See 11 U.S.C. §541(a)(1).  This means that the trustee in a Chapter 7 bankruptcy case will often try to sell the marital lien interest. These liens may be sold at a discount. Thus, the debtor may be able to buy it back from the trustee. In a Chapter 13 bankruptcy, a debtor must pay all amounts that he or she is required to pay under a domestic support obligation. Such obligations become due and payable after the petition is filed, and failure to make those payments is grounds for dismissal or conversion of the case. See 11 U.S.C. §1307(c)(11). In order for a Chapter 13 plan to be confirmed, a debtor’s plan must provide for full payment of domestic support payments. This is because domestic support payments are a priority claim. See 11 U.S.C. §507(a)(1)(B). A Chapter 13 plan that does not provide for full payment of this priority claim is only allowed “if the plan provides that all of the debtor’s projected disposable income for a 5-year period beginning on the date that the first payment is due under the plan will be applied to make payments under the plan.” See 11 U.S.C. §1322(a)(4). In conclusion, bankruptcy generally does not have a huge impact on divorce-related debts, because of the protections provided by the bankruptcy code for spouses, former spouses, and children of the debtor. Elizabeth Rosar Chermack is a Minnesota Bankruptcy Attorney and a Minnesota Divorce Lawyer, and can represent you in your bankruptcy or divorce matter. Call (952) 491-0390 or send an email to liz@chermacklaw.com to schedule a consultation with Liz. ATTORNEY ADVERTISING MATERIAL. The content of this website is for informational purposes only and is not intended as legal advice. No attorney/client relationship is formed by use of this website. Do not submit confidential information via this site unless and until there is a signed retainer contract on file. Elizabeth Rosar Chermack, Attorney at Law, is a debt relief agency helping people to file for bankruptcy relief under the bankruptcy code.

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Minnesota Bankruptcy and Divorce: When to File Bankruptcy

If a divorcing couple decides that they need to file for bankruptcy, they have two more decisions to make: (1) Should they file before or after they divorce? (2) Should they file jointly? If the couple is filing for Chapter 7 bankruptcy and their debts are joint debts, it usually makes sense from a financial and emotional perspective to file jointly before they divorce. Why does it make sense from a financial perspective? Attorney Fees. The couple can hire one attorney to represent them in their joint bankruptcy case. Typically, bankruptcy attorneys charge less for a joint Chapter 7 bankruptcy case than they charge for two separate individual Chapter 7 cases. Filing Fee. A married couple filing a joint Chapter 7 bankruptcy petition will only have to pay for one court filing fee. If the two parties filed for Chapter 7 bankruptcy separately, they would each have to pay the court filing fee. Divorce legal fees. If the parties have filed for Chapter 7 bankruptcy jointly before beginning to work with their divorce attorneys, the parties will have less to decide (and argue about) during the divorce process. If the parties have accumulated a large amount of debt together, then that debt will have to be dealt with during the divorce process.  This generally results in higher legal fees. Means Test. In order to file for Chapter 7 bankruptcy, the party or parties must satisfy the means test. The means test is based on the party’s income. In order to pass the means test, the debtor’s income must be below the median income for the debtor’s household in the debtor’s state. If the parties file a joint bankruptcy petition before they divorce, it may be easier for them to satisfy the means test and be able to file for Chapter 7 bankruptcy, even though one of the parties may not have been able to satisfy the means test on their own. Property Exemptions. The parties will be able to exempt more property if they file jointly than if they file separately. Eliminating the problem of collection and contempt actions. Bankruptcy law does not allow a divorcee to discharge debts ordered in the divorce, but one problem that commonly comes up is a party’s failure to follow the divorce decree. For example, if the couple’s debts are marital debts, but they are only in one spouse’s name, the couple’s divorce decree will order the parties regarding the division of this debt. It is important to remember that this decree is valid and enforceable between the spouses and the divorce court. However, the divorce decree will not alter the parties’ contract with the creditor. Thus, if the debts are in the husband’s name, but the wife is ordered to pay part of these debts in the divorce decree, and the wife doesn’t pay her share, the husband is still “on the hook” with the creditor for those debts. The husband will be able to bring a contempt action against his ex-wife for her failure to comply with the divorce decree, but that will cost him money and take time. Also, if the ex-wife does not have the money to pay what she owes the creditor at that time, the husband’s credit will still be damaged and the creditor may take collection actions against him. Why does it make sense from an emotional perspective? Moving on with your life. Both divorce and bankruptcy are major life-altering events. If you are divorcing your spouse, and getting a “fresh start”, it might also be nice to have your debts discharged (if filing for bankruptcy makes sense in your situation). What are some of the downsides of filing Chapter 7 bankruptcy jointly before the divorce? The blame game. If issues arise during the bankruptcy process that may affect the outcome of the case (possible fraud, for example), the parties will likely play the “blame game” with each other. Individual needs. It may make sense for one spouse to use the state exemptions and the other spouse to use the federal exemptions. This cannot be done if the parties are filing a joint Chapter 7 bankruptcy. Cooperation and communication. People who are getting divorced are often doing so because the parties struggle with communication and are not able to cooperate. Filing a joint Chapter 7 bankruptcy requires the parties to cooperate with one another and to have good communication skills. Before a divorcing couple decides to file a joint Chapter 7 bankruptcy, they should evaluate their ability to act civilly towards one another. What about Chapter 13 bankruptcy? Generally, it is better for a divorcing couple to wait until after they divorce to file for Chapter 13 bankruptcy, and to file separately. Chapter 13 cases last a lot longer than Chapter 7 cases – they can last up to five (5) years. If the couple files jointly, then they will have to cooperate during that entire Chapter 13 case AND make joint payments. Elizabeth Rosar Chermack is a Minnesota Bankruptcy Attorney and Minnesota Divorce Attorney, and can represent you in your bankruptcy or divorce matter.  Call (952) 491-0390 or send an email to liz@chermacklaw.com to schedule a consultation with Liz. ATTORNEY ADVERTISING MATERIAL. The content of this website is for informational purposes only and is not intended as legal advice. No attorney/client relationship is formed by use of this website. Do not submit confidential information via this site unless and until there is a signed retainer contract on file. Elizabeth Rosar Chermack, Attorney at Law, is a debt relief agency helping people to file for bankruptcy relief under the bankruptcy code.

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Is Minnesota a Recourse State?

When a homeowner is worried that they might lose their house to foreclosure, they are usually also worried about whether their state is a “recourse” or “non-recourse” state. In a non-recourse state, if the funds from the sale of the mortgaged property (the house) are  not enough to cover the outstanding debt (the amount the homeowner owes on the mortgage), the mortgage-holder may not have recourse against the borrower (through a deficiency judgment) after foreclosure. In a recourse state, the homeowner remains responsible for any remaining debt through a deficiency judgment. Minnesota is generally considered to be a “non-recourse” state, although in certain situations mortgage-holders (or other creditors) may seek a deficiency judgment. Generally, if a foreclosure sale of a home is done by advertisement in Minnesota, no deficiency judgment is allowed. If, however, the homeowner has more than one mortgage on that property (a second mortgage or HELOC, for example), then that mortgage-holder may sue for a deficiency judgment. In Minnesota, most foreclosure sales are done by advertisement. Minnesota permits deficiency judgments in cases of a foreclosure by action. A foreclosure by action occurs when a lender forecloses on a property in court. This is a rare occurrence in Minnesota, but if your house is foreclosed on in this manner, it’s important to know that a deficiency judgment is permitted. Elizabeth Rosar Chermack is a Minnesota Lawyer who offers Foreclosure Options Consultations.  Call (952) 491-0390 or send an email to liz@chermacklaw.com to schedule a consultation with Liz. ATTORNEY ADVERTISING MATERIAL. The content of this website is for informational purposes only and is not intended as legal advice. No attorney/client relationship is formed by use of this website. Do not submit confidential information via this site unless and until there is a signed retainer contract on file.

Deficiency Judgments after Foreclosure in Minnesota

As I discussed in my posts about the different options for homeowners in “underwater” mortgages, Minnesota allows for deficiency judgments in some cases. See Minn. Stat. § 582.30. If your house is going into foreclosure, or you think that you may have to short sale your house, please consult with an attorney about it. There is a lot of mixed information out there about what happens when there is a deficiency after a foreclosure or short sale. It’s imperative to have accurate information when your financial future is at stake. Elizabeth Rosar Chermack is a Burnsville Attorney who offers Foreclosure Options Consultations.  Call (952) 491-0390 or send an email to liz@chermacklaw.com to schedule a consultation with Liz. ATTORNEY ADVERTISING MATERIAL. The content of this website is for informational purposes only and is not intended as legal advice. No attorney/client relationship is formed by use of this website. Do not submit confidential information via this site unless and until there is a signed retainer contract on file.

Options for Homeowners in Underwater Mortgages: When You Can’t Save Your House

If you are struggling to pay your mortgage due to a job loss or transfer, illness, or change in life circumstances (such as a divorce), you may not be able to save your house if you are in an underwater mortgage. Homeowners are “underwater” or have negative equity if they owe more on their mortgages than their homes are worth. In this post, I will discuss some of the options that are available for homeowners who are not able to save their homes. Sell your house and bring cash for the difference between the sale price and the mortgage balance to the closing. Unfortunately, this is not a realistic option for many people, especially once you include closing costs and realtor fees. On occasion, sellers in this situation have been able to secure a personal loan for the difference between the sale price and the mortgage balance, but this is quite rare. Deed in lieu of foreclosure.  Some homeowners are able to negotiate a deed in lieu of foreclosure with their lenders. In this case, the homeowner deeds the house back to the lender, in order to satisfy their mortgage and avoid foreclosure proceedings. Short sale. If the lender agrees to accept a short sale, a homeowner can sell their house for what it is currently worth, even if that is less than what they owe on their mortgage(s). The lender may not agree to forgive the deficiency (the difference between what the house sold for and the amount owed on the mortgage). Foreclosure. If you are no longer paying your mortgage, the lender will eventually begin the foreclosure process. Foreclosure is a legal process by which a bank, mortgage company, or other creditor takes a homeowner’s property in order to satisfy a debt. In Minnesota, there are two different methods of foreclosure: (1) Foreclosure by action. See Minn. Stat. § 581.01 et seq. (2) Foreclosure by advertisement. See Minn. Stat. § 580.01 et seq. Deficiency Judgment. Minnesota allows for deficiency judgments by mortgage holders (lenders) in certain cases. See Minn. Stat. § 582.30. A deficiency judgment is a judgment against a debtor (homeowner) whose foreclosure sale did not produce sufficient funds to pay the mortgage in full. Taxable Event. If you have a successful short sale and your mortgage bank decides to forgive the deficiency, this is normally a taxable event. This is also true in the case of a foreclosure or a deed in lieu of foreclosure. This is because debt forgiveness or cancelation is considered to be income by the IRS. You will want to consult with your tax advisor before moving forward with a foreclosure, short sale, or deed in lieu of foreclosure. Elizabeth Rosar Chermack is a Minnesota Attorney who offers Foreclosure Options Consultations.  Call (952) 491-0390 or send an email to liz@chermacklaw.com to schedule a consultation with Liz. ATTORNEY ADVERTISING MATERIAL. The content of this website is for informational purposes only and is not intended as legal advice. No attorney/client relationship is formed by use of this website. Do not submit confidential information via this site unless and until there is a signed retainer contract on file.

Options for Homeowners in Underwater Mortgages: Saving Your House

What do you do if you can’t sell your house for the amount that you owe on the mortgage? When you owe more than your house is worth, you are considered to be “underwater” or “upside down”. Another name for this situation is “having negative equity”. This post is the first of two about homeowners in underwater mortgages. In this post, I will discuss some of the options that are available for homeowners who are able to save their homes. Live there and continue paying your mortgage. If you can afford your mortgage payments, and you don’t have to move, then you should stay in your house and continue to pay your mortgage. Try not to focus on your home’s financial value. Instead, focus on the fact that you have a place to live, and that eventually you will have your house paid off. Rent it out. If you absolutely have to move, and you can’t afford to sell your home, you can become a landlord and rent it out. The rental income may not be enough to cover all of the expenses, so you should be prepared to have to pay some money out of pocket. You also might want to hire a property management company to maintain your rental property for you. Some cities require you to have a rental license, and you will also want to look into getting insurance. You should also make sure that your mortgage and your townhouse or condo association allow you to rent out your property. If you decide to rent out your house, you should be prepared to do some legwork on your own. I also recommend consulting with an attorney who practices landlord/tenant law before deciding to become a landlord. Loan Modification. You may be able to work with your lender to modify your mortgage. Elizabeth Rosar Chermack is a Minnesota Attorney who offers Foreclosure Options Consultations.  Call (952) 491-0390 or send an email to liz@chermacklaw.com to schedule a consultation with Liz. ATTORNEY ADVERTISING MATERIAL. The content of this website is for informational purposes only and is not intended as legal advice. No attorney/client relationship is formed by use of this website. Do not submit confidential information via this site unless and until there is a signed retainer contract on file.

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