The Bankruptcy Abuse Prevention and Consumer Protection Act, which was signed into law in 2005, makes student loan debt exempt from discharge in most situations, and individuals who seek relief from educational loan obligations are generally required to establish undue hardship by passing the Brunner test. However, Minnesota is one of a handful of states where bankruptcy courts apply the totality of circumstances test instead of the Brunner test.
Debt is a topic of considerable discussion among many Minnesota residents. Nationally, especially as the presidential cycle is again rolling around, it's debated in terms of the type of programs the government should and should not fund. On the personal level, most individuals understand living debt free is a desirable goal yet also realize that is impossible but for a select few. The salient issue then becomes delineating between good debt and bad debt and working diligently to avoid the latter.
To be eligible to file for Chapter 13 bankruptcy, a Minnesota consumer must have less than $1,184,200 in secured debt and less than $394,725 in unsecured debt. A debtor must also establish that he or she has filed his or her state and federal tax returns for the past four years. Failure to do so could result in a person having a case delayed or dismissed. However, there is no income limit for those who are looking to file for Chapter 13 protection.
Americans under the age of 30 owe about $1.05 trillion in overall debt, and they owe a variety of lenders such as credit card and mortgage companies. However, the biggest concern is the amount of student loan balances that young Americans carry. There are roughly 44 million Americans who owe a combined total of $1.5 trillion in such debt. For those under 30, it can delay their plans to get married or buy a home.
Minnesota residents have likely inquired about discharging student loans. They may have found that student loans are not usually able to be discharged in a bankruptcy. However, as with all things, there are some exceptions.
It appears that consumers in Minnesota and around the country are taking on more debt as the economy continues to grow. Total consumer debt in the United States has grown for 16 consecutive quarters and is now approaching $14 trillion according to the New York Federal Reserve's second quarter Household Debt and Credit Report. However, consumers seem to be coping with this increased debt load as default rates are essentially flat and credit card delinquencies are actually falling.
Minnesotans who are struggling under the weight of their debt may benefit by filing for personal bankruptcy protection. However, it is important for people to understand several things about personal bankruptcy before they file so that they might avoid making mistakes.
Minnesota fans of rapper Lil' Kim may have heard that she is having financial problems. Lil' Kim filed for Chapter 13 bankruptcy just days before foreclosure on her mansion in New Jersey.
Couples and individuals in Minnesota who are struggling with debt may decide to look into bankruptcy as a form of debt relief. While bankruptcy can be a good option for those who need to better manage their financial obligations, the process is not capable of eliminating every type of debt.
If a debtor in Minnesota files for Chapter 13 bankruptcy, it may allow for a cram down of a vacation or investment property. What this means is that the market value of the home becomes a secured debt. The difference between the market value and what is left on a mortgage becomes an unsecured debt. In most cases, this is not true for the first lien on a primary residence.