We’ve written a series of blog posts answering common questions regarding bankruptcy in Wisconsin, and how it can impact your finances. Call (262) 827-0375

As Pandemic Programs Begin to Expire, Personal Bankruptcies Are Expected to Rise

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A Debt Tsunami Is Coming

As legislation designed to cushion the effects of the COVID pandemic expires after Christmas, filings for personal bankruptcy will undoubtedly soar. Congress was unable to agree on extending stimulus payments, and nobody has received that money in several months. Main Street has been harder hit than Wall Street so far, and deferments on payments for borrowed money–mortgages, student loans, automobile loans and credit card debt–are all due to expire just after Christmas. Bah! Humbug!

So far, many lenders have been flexible about calling in their debts, but they won’t stay that way for long, and when these debt deferment grace periods end, a lot of them will be competing for a lot less money than the total accumulated debt. It’s only at this point that most of us will get an idea of just how costly the COVID pandemic and our responses to it have been. And at this point, too, the competition among debtors to recover as much of what they are owed as they can will have begun.

What Does This Mean for You?

It means that it pays to be realistic and proactive about your prospects for paying back your debt. One portion of our economy that will certainly not lack for business will be the courts and law firms. In many cases, dockets have become backlogged, because COVID has kept lawyers, court employees, and juries at home out of caution. But although financial proceedings don’t typically require juries, the courts that deal with litigating debt settlements will be absolutely swamped.

If you have debt obligations that you feel have gotten beyond your control, you are not alone. In fact, you are one of a great many who have been swept up in circumstances beyond their control. A lot of people ended up ringing up credit card debt at high rates of interest, just to get by. As lenders crack down, people who’ve put off filing for bankruptcy will also begin filing in large numbers. It’s best to get out in front of events if you can. The folks at Burr Law can help you decide whether to file, and taking into consideration your circumstances and the laws of your state, under what chapter to file.

Chapter 7

Most bankruptcies are filed under Chapter 7. Chapter 7 bankruptcy eliminates all unsecured personal debt, such as credit card debt, personal loans, and medical bills. Auto loan debts, mortgage debts, and tax debts still remain. Personal property may be sold to satisfy obligations, though what gets liquidated depends on the state. On the other hand, many people are surprised at what they may be allowed to keep, and sometimes funds are available to help meet the costs of filing. A Chapter 7 filing will remain on your credit report for 10 years, but programs exist to minimize the effects, and it is possible to rehabilitate credit more rapidly if you are strategic and disciplined about it.

Chapter 13

Under Chapter 13, you reorganize and consolidate your debt payments. In this case, your personal property may be protected so long as you meet your newly renegotiated debt obligations. it is typically significantly more expensive to file for Chapter 13 protection, but depending on your situation, it may be the best approach. Chapter 13 filings will remain part of your credit history for 7 years.

Get Professional Advice

Let the folks at Burr Law help you. They’ve seen everything there is to see in bankruptcy, and they’ve helped thousands of clients move on as painlessly as possible. The one thing they haven’t seen before, though, is the sheer magnitude of cases that are likely soon to hit the courts. They are here to help. Make up your mind to call them now, so that you’re not stuck waiting for an enormous number of cases to make their way through the courts prior to yours.

What Are Your Debt Relief Options?

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No matter what, your bills arrive every month, and whether you’ve lost income because of COVID-19, or had a recent health crisis and incurred more debt, your financial obligations remain. If you are beginning to feel crushed by them, it’s time to explore debt relief possibilities. What are your debt relief options? In this post, we’ll explore a number of them.

COVID-Caused Hardship Relief

Although Congress has not passed another stimulus bill yet, the suspension of payments for student loans has been extended until 2021. You don’t need to do anything; direct withdrawals from your account will not occur and you will not accrue interest during this time. Many credit card companies and other lenders have also independently adopted programs to help those struggling due to the pandemic. These include loan extensions, reduced interest rates, and deferred repayments. In order to receive this kind of hardship relief, you may need to prove your hardship with documentation, and there may be other consequences including having your credit card frozen or your account closed. If your difficulties are directly due to COVID-19 and you can see that your situation will improve when the pandemic abates, these may be good options for you to pursue.

Consolidation Loan

A debt consolidation loan combines multiple debt payments into one monthly payment. That monthly payment is often lower than the individual payments combined, and the interest you pay is often lower as well. You will maintain your access to credit, though incurring more debt increases the likelihood of the debt consolidation failing. If the debt consolidation loan is secured, then you risk losing your collateral, usually your car or other significant tangible property. One thing, in particular, to beware of is cross-collateralization. If your loan contains a cross-collateralization clause, you may find yourself losing something you didn’t know you were risking. A cross-collateralization clause lets the lender take other property it has financed if you default on the debt consolidation loan. For example, if you get your debt consolidation loan through the same bank that financed your car, under the cross-collateralization clause, if you default on the debt consolidation loan, the bank could repossess your car—even if the car payments are current.

Debt Management Plans

Some people go to an agency that creates a debt management plan for them and negotiates with the credit card companies on your behalf. It’s important for you to know that agreeing to a debt management plan comes with a number of hidden costs – monetary and otherwise. You will be expected to pay an enrollment fee as well as a monthly fee for each credit card on the plan. Also, most credit card companies will require that an account entering into a debt management plan be closed, so you lose your access to credit. And the fact that you’re engaged in a debt management plan will be noted on your credit report. Most debt management plans run for three to five years (the same time frame as Chapter 13 Bankruptcy), and at least half of clients do not successfully complete the plan.

Negative Tax Consequences

Depending on your financial condition, any money you save from debt relief services such as debt consolidation may be considered income by the IRS, which means you pay taxes on it. Credit card companies and other creditors may report settled debt to the IRS, which the IRS considers income.

Bankruptcy

There are two types of bankruptcy you can pursue: Chapter 13 and Chapter 7. Chapter 7 is means tested, so you need to make no more than your state’s median household income ($67,355 for Wisconsin – 2019). If you qualify for Chapter 7 bankruptcy, your unsecured debt can be completely eliminated. The whole process takes about four months, and then you can start over with a clean slate. While it is known as “Liquidation” Bankruptcy, there are exemptions, and most people keep their car and house. Chapter 13 bankruptcy works by having a court approved agreement negotiated between creditors and debtors. There are no income ceilings to qualify for Chapter 13, and the moment you file, there is an automatic stay on all collection action. Chapter 13 bankruptcy agreements generally last from three to five years.

If you need debt relief, contact the experts at Burr Law. We will talk you through all of your options and help you decide what is best for your specific situation.

Medical Debt During a Pandemic

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For many Americans, COVID-19 has been a perfect financial storm. Lockdowns have cost income and opportunity, and some who had been climbing out of the hole financially have had to rely on credit to get them through as the federal government has been unable to reach an accord on extending benefits. At the end of the year, a moratorium on foreclosures and evictions concludes, even as political uncertainty clouds the prospects of economic recovery. Other suspensions of debt payment, including student loan payments, are also coming to a close.

For Americans struggling with medical debt, health issues, and often depression, exacerbated by isolation and deferral of scheduled health maintenance during the pandemic, this combination of factors has added up to the perfect storm. If you’re one of those who has had to be hospitalized for treatment for COVID-19, its impact on your financial well-being may have been almost as severe as on your health. According to statistics, the median hospital stay for CoVid patients who have survived has been from 10 to 13 days. Even if you have insurance, high deductibles may have cast you deep into debt.

State departments of insurance have been working closely with medical facilities to provide some relief, but mitigation efforts vary widely depending on the hospitals and the insurers. For the uninsured, the CARES Act is supposed to cover the costs. If your hospital takes money from the CARES Act Providers Relief Fund for your treatment, they are barred by law from seeking any further compensation. But not every hospital will attempt to take what is offered by the Fund. Some will prefer to attempt to recover more money for treatment by billing the patient directly, without regard to whether they have the means to cover the bill or not. If they don’t seek payment from the government, then the patient is liable for the debt.

People who are recovering from serious illness often lack the psychic resources to aggressively defend their financial interests. Often, particularly under present circumstances, they push it off until that future date when they feel more capable of dealing with unpleasant circumstances, and that is perfectly understandable. But a word of advice: When the new year arrives, and a lot of people who have been able to put off the unpleasantness of dealing with their debt suddenly find themselves on the receiving end of legal notices, or suddenly find their bank accounts seized or their wages garnished, there will be an avalanche of filings for bankruptcy. It is best, if that seems your best avenue to get out from under crippling debt obligations, to file as soon as possible.

You can be sure that lenders who have been put off will flood the courts with new filings. In the meanwhile, many of them have been busy trying to get out in front of matters, since most kinds of consumer debt collection have not been affected, though it takes time for filings to move through already burdened courts. You can also be sure that there will be an avalanche of bankruptcy filings at that time. The experts at Burr Law can help you make the decisions that will discharge your obligations with as little pain and loss to you as possible, and get you on your way to economic recovery as quickly as may be, whether that involves filing under Chapter 7 or Chapter 13.

Do yourself a favor, and call the experts at Burr Law. They will lay things out simply for you and help you make the decisions that will put you in position to get the Debt Monster off your back, so you can begin to breathe freely again.

You are not alone. Give Burr Law a call.

Fears of Bankruptcy

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Often conscientious people delay getting the help they need, not so much out of pride as out of shame at having to ask for help. But bankruptcy exists for a reason. For every person who abuses the process, there are many who simply need the financial relief that bankruptcy provides. As with depression, or anxiety, or bereavement, there is no shame in seeking the help you need.

It’s not unusual for a bankruptcy attorney to see a client who comes to the office with a big box or bag full of unopened bills, because things have gotten so out of hand they have simply shunted it all aside in order to get on as best they can with getting through each day. It is often a positive feedback loop of avoidance leading to more debt, leading to more avoidance and more debt.

On the other hand, people may just be too optimistic about their financial outlook, thinking that they are going to get a grip on their debt when they get a new job, or when their partner gets a raise, or when their business takes off. Sometimes, avoiding dealing with debt may entail a combination, as strange as it may sound, of shame, guilt, mental paralysis, and unwarranted optimism. Whatever the reasons may be, and however it is experienced, it can be crippling, both emotionally and financially.

Have a Bit of Self-Compassion

In some cases, it may be possible to dig out of debt through a combination of debt forgiveness and structured payments, and by reducing expenditures, and through other measures, but when financial counsellors see people trying to dig out by doing things that are injurious to their long-term financial health–with potential impacts on their emotional and physical well being–they are quick to counsel clients to look at bankruptcy. For example clients may begin to liquidate retirement funds that normally would be protected in bankruptcy in order to meet their debt obligations. A stroke of fortune may make someone rich. A stroke of misfortune may likewise put someone in financial straits. Who knows what people are dealing with? Divorce, bereavement, medical bills, a spell of unemployment, a bad investment . . . lots of things might knock someone off their stride.

If you have been making yourself, and perhaps those around you, miserable because of debt, the time to seek counselling is now. There is no stigma, except what you lay on yourself, in seeking bankruptcy if that is what you need to do. And the settlement may not be as harsh as you think. Most people who file for the most common form of bankruptcy, Chapter 7, are able to keep their personal possessions, some of the equity and their homes, and often several thousand dollars in equity for a vehicle. What is covered varies state to state. If there are other assets that might not be protected under Chapter 7, Chapter 13 might be an option.

It’s possible in short order to get secured lines of credit that will help you begin to re-establish your ratings, though a bankruptcy will stay in your credit reports for up to 10 years. With positive steps, though, improvement can be rapid. Credit-building loans are often available from banks and Credit Unions to help get folks back on their feet. Some people who discharge their debt through bankruptcy are eligible for FHA or VA home loans in as little as 2 years. Need a new vehicle? You will probably pay higher interest, but consider how the interest is compounding on your credit card debt!

In short, there is no reason to remain under this cloud.

The Time Is Now

If not to seek bankruptcy, at least to get advice. Why? It’s more urgent than ever due to current events. Lots of folks have lost their businesses and livelihoods during the pandemic. To this point, foreclosures and other kinds of debt resolution have been held off by debt moratorium legislation, and some people have gotten by on those $600 federal payments. But when those protections and those payments end, credit counsellors, lawyers, and courts are going to be flooded with cases that require resolution. It’s best to get the advice you need, and to file if you should, as soon as possible.

Experience has shown that those who file earlier than later end up with better long-term results, but even if you’ve put off dealing with a financial hole that you just can’t seem to dig out of for a long time, it’s best to bite the bullet. Many people have been down this road before you. The vast majority have gone on to have happy lives and watch that road-bump grow smaller and smaller in the rear-view mirror. They have felt the great relief that getting that burden off their shoulders brings.

The bankruptcy experts at Burr Law stand ready to help you get into the clear as quickly and painlessly as possible. They want to help you put this chapter behind you, and get on with your life. The life you deserve.

Bankruptcy exists for a reason! It exists to help people like you.

Consumer Credit Bankruptcy

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What Is Consumer Credit?

Although any type of personal loan could be labeled consumer credit, the term is usually used to describe unsecured debt that is taken on to buy everyday goods and services. Credit cards issued by banks or other financial institutions, department store cards, gas cards–are all examples of revolving credit. Installment loans are another kind of consumer credit, and the most common installment credit example is an auto loan. Consumer credit is not usually used to describe the purchase of a house; that’s considered a long-term investment and is usually purchased with a secured mortgage loan.

Consumer Credit Causing Financial Distress

If you find yourself struggling every month to pay each of your credit cards as well as your department store cards, your gas cards, and make your car payments (not to mention continuing to live), your situation is not unusual. The average American had a credit card balance of $6,200 in 2019, according to Experian. And revolving credit with its high interest means disaster for those who can’t pay the balance in full every month. That means you continue to accrue additional interest charges from month to month. The average annual percentage rate on all credit cards was 20.21% as of August 2020. Department store credit cards averaged 24.22%. A single late payment can boost your interest rate even higher.

Bankruptcy Can Offer Relief

If your consumer credit obligations are driving you to the breaking point, then bankruptcy may be your wisest option. In Chapter 7 bankruptcy, consumer credit debt can be entirely eliminated. You also have the option of filing for Chapter 13 bankruptcy where you enter into an agreement with your creditors to repay a portion of your debt over 3 to 5 years.

Chapter 7

Chapter 7 bankruptcy is also called Liquidation Bankruptcy, but don’t let that name scare you off. While it is designed to repay a portion of your debts through the sale of your assets, there are exemptions, and the experts at Burr Law can make sure your car and your home remain yours. The truth is that using exemptions to their fullest, you can derive the benefit of eliminating consumer credit debt while retaining your most valuable possessions. There is no minimum or maximum amount of debt needed to file a Chapter 7 bankruptcy. There is an income status requirement, though. Your income needs to be equal to or below Wisconsin’s median income, which in 2018 was $62,629.

Chapter 13

Chapter 13 bankruptcy functions more like a reorganization. A trustee assigned by the bankruptcy court draws up a plan whereby you repay a portion of your debts over the course of 3 to 5 years. Your creditors then need to agree to the plan, and the bankruptcy court approves it. With this type of bankruptcy you will retain your car and your house as well. There is no income status requirement, though there is a maximum debt level. To be eligible to file for Chapter 13 bankruptcy, you must have no more than $394,725 in consumer credit debt and you also can have no more than $1,184,200 in secured debts, which includes mortgages and car loans.

Consumer credit obligations can be crushing, but they don’t have to be. Reach out to the professionals at Burr Law to discuss your financial situation. It may be that bankruptcy can entirely clear your consumer credit debt, or that it can be made into something manageable. You won’t know how close you are to relief unless you call now.

Can You File Bankruptcy Without Your Spouse?

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The short answer here is: yes, you can. But should you? Bankruptcy law is complicated and every family’s situation is different, so it’s best to consult with one of the experts at Burr Law if you are thinking about bankruptcy with or without your spouse. Here are some considerations to contemplate.

How Long Have You Been Married?

Wisconsin is a community property state. That means that property and debts accrued during the marriage are deemed jointly held in the law.

If you’ve been married quite a while, then filing jointly will allow both of you to eliminate your separate debts as well as those held jointly. It also means that both of you will participate in the decision making process. And you’ll be able to double your exemptions when you file jointly, thereby letting you retain property that you might otherwise lose.

If you’ve been married a short time, it might be a good idea for one spouse only to file for bankruptcy. This is especially true if one partner carries all or most of the debt. And if you’ve been married for a short time, you may not own any substantial property together. In this instance, filing for bankruptcy without your spouse will let the partner who isn’t having debt trouble retain any separate property and maintain a good credit rating.

Who Has The Debt?

If both you and your spouse are experiencing financial difficulties, it’s best to file jointly. With a joint filing, the property of both spouses is included in the bankruptcy estate, and all debts of both spouses are part of the filing. Filing jointly also means you complete one set of forms, incur only one filing fee, and pay one lawyer. When both of you are feeling overwhelmed with debt, filing jointly for bankruptcy gives you both a clean slate to begin anew.

If only one of you has debt, and you’ve been married a long time, filing for bankruptcy without your spouse could actually hurt them a great deal. While bankruptcy will clear all of your debts, because Wisconsin is a community property state, your spouse will remain liable for debts incurred during the course of the marriage. It’s only when one partner has most of the debt and you haven’t been married very long that filing for bankruptcy without your spouse would be a good idea.

Have You Filed Bankruptcy Before?

A separate filing may be unavoidable in certain situations. If one partner went through a Chapter 7 bankruptcy within the past 8 years or a Chapter 13 one within the past 6 years, that spouse will not be able to file another Chapter 7 bankruptcy. So if you’ve been married 5 years and your spouse went through a Chapter 7 bankruptcy 7 years ago, you cannot include your spouse in your bankruptcy filing.

These are only some general examples of situations. If you are thinking about filing bankruptcy without your spouse, contact the experts at Burr Law who can listen to your unique situation and recommend the best course of action.

File Bankruptcy Without a Lawyer: 3 Reasons You Shouldn’t

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When you feel overwhelmed by debt, it’s wise to consider bankruptcy. However, if those same feelings of drowning in debt prevent you from seeking professional help with your bankruptcy, you are doing yourself and your family a grave disservice. Bankruptcy is complicated; it even has its own judicial system. Bankruptcy involves negotiation with all interested parties, and it is unlikely that you will manage to get the kind of terms with corporate entities that an attorney can. Errors that an ordinary person can easily make can have huge implications, even including case dismissal. So even if it feels counter-intuitive to engage an attorney to pursue bankruptcy on your behalf, it’s the best course of action. Bankruptcy without a lawyer is a bad idea.

Bankruptcy is Complicated

There are three different kinds of bankruptcy that an individual can file, each named after the Chapter of the Bankruptcy Code that describes it. Chapter 7 is the most common. It is generally known as Liquidation Bankruptcy, and a Trustee appointed by the Court sells your assets to satisfy a portion of your debt. Chapter 13 bankruptcy is available to individuals and businesses with a consistent income and there are caps on the amount of debt you can have. Under Chapter 13, a plan is created to pay back as much debt as reasonably possible over the next three to five years, taking into account your financial situation. Chapter 11 bankruptcy is usually used by businesses, but can be accessed by individuals. Like Chapter 13, it arranged for partial payments of debts over 3 to 5 years, but the Court does not require an outside administrator. It’s also noteworthy that there is an entire legal system dedicated to bankruptcy. Not every attorney is an expert in bankruptcy law; those at Burr Law are.

Bankruptcy Negotiations Need Professionals

With Chapter 7, there are exemptions to what assets must be sold to satisfy your debts. Having one of the expert attorneys at Burr Law means that you can be sure that all of your property that can possibly be exempt from liquidation will be.

There is also an income status requirement; your income needs to be equal to or below Wisconsin’s median income, which in 2018 was $62,629. Again, there are ways to calculate your income that can work to your advantage, especially if you are near the limit for filing Chapter 7. Burr Law attorneys know how to help with that. With Chapter 13 and Chapter 11, the repayment plan is made with you, your creditors, and the Court. Isn’t it probable that one of the professionals at Burr Law would make sure that your interests are served best over the next 3 to 5 years? With professional help, unsecured debt can be totally or partially eliminated, and assets (like your house) can be protected.

Bankruptcy Legal Process

The paperwork involved in initiating, pursuing, and successfully concluding a bankruptcy suit is enormous and intricate. There are all kinds of deadlines that must be met for different aspects of your bankruptcy case in order for it to proceed. For Instance, you can file your bankruptcy petition without all documentation in place, but then if you fail to submit the entirety of required documentation within 14 days, your case will be dismissed. With the experts from Burr Law on your side, you’ll have the confidence that every bit of paperwork will be done and every single court deadline will be met.

Deciding to declare bankruptcy may be the smartest decision for your situation. But bankruptcy without a lawyer is simply stupid. Isn’t it worth it to have professionals working on your behalf?

Bankruptcy in Retail Stores: How the Process Works

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Retail stores have been struggling since the advent of TV shopping networks and online shopping. Now, with most retail businesses closed down for weeks due to COVID-19, the situation may have become really dire. Many retail businesses may be considering bankruptcy. This post explores the bankruptcy process for retail stores, and complications that may arise because of the pandemic.

Different Types of Bankruptcy

Most businesses choose to file Chapter 11 bankruptcy rather than Chapter 7. Chapter 7 is a straight forward liquidation proceeding where all assets are sold off and creditors paid as much as possible from those funds. The court appoints a trustee who conducts the liquidation. Chapter 11 bankruptcy is a reorganization of the business that allows it to continue to trade in the marketplace while repaying creditors. Generally, the business itself proposes the reorganization plan. It is also possible to file for Chapter 11 bankruptcy more than once, without an onerous waiting period. This is informally called Chapter 22 bankruptcy. We will concentrate on the Chapter 11 process here.

Typical Court Process

When a retail business is considering bankruptcy, the obvious first step is consultation with expert attorneys. The professionals at Burr Law have years of experience dealing with bankruptcy and can guide you through the complexities of the process. When you file for Chapter 11 relief in bankruptcy court, no trustee is appointed. Instead, you become the Debtor in Possession (DIP). You have the exclusive right to propose a reorganization plan for at least 4 months and up to 18 months. Once you do so, your creditors need to agree to the plan, and the court needs to approve it. That is called confirmation and in doing so, the court will decide whether the plan demonstrates 4 factors: feasibility, good faith, best interests of the creditors, and fairness. The whole thing usually takes between 6 months to 2 years.

Typical Business Process

Because you are the DIP, you continue to run your business. With expert advice, you can decide what product lines to discontinue, what marketing strategies to change, and whether some stores need to close. The bankruptcy court must approve any sale of assets, lease agreements, and financing arrangements (mortgages or other secured financing). Usually, it takes 4 months to plan and run a going-out-of-business sale, so there’s a lot of analysis and decision making that needs to happen in a short amount of time. The key, though, is that you get to make those decisions, not the bankruptcy court.

COVID Complications

The aftermath of this pandemic creates unique difficulties for both the court and the business parts of the bankruptcy procedure. Experts anticipate that the numbers of bankruptcy will rise significantly, both personal and business. That means that the bankruptcy court will be flooded with cases, and delays due to packed court schedules may result. Bankruptcy judges may feel pressured to rush through cases, causing precipitous decisions detrimental to those involved. On the business side, with many states still imposing retail store closures, going-out-of-business sales simply cannot happen. And the kind of predictive analysis required to decide about customer traffic and buying behavior will be extremely difficult.

Best Advice: File Now

As a retail business in financial trouble, it may be wisest to file now. You may be able to avoid the overcrowded bankruptcy court schedule, or be at the top of the list. And with the Wisconsin Supreme Court decision, stores are able to open and hold those important going-out-of-business sales, except for some local restrictions. The bankruptcy experts at Burr Law can help you navigate the process.

How Will the New Stimulus Bill Affect Bankruptcy?

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On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law. This follows the Small Business Reorganization Act (SBRA) that took effect in February 2020. Both of these measures have an impact on those contemplating bankruptcy, or already in the bankruptcy process. Across the United States, people have more household debt now than at the height of the recession – $14.15 trillion as of the fourth quarter of 2019 compared to $12.68 trillion during the third quarter of 2008. And now, millions of Americans are losing their jobs because of the COVID-19 pandemic. Since March 15, nearly 10 million people have filed first-time jobless claims; many of them may be looking to bankruptcy for relief.

CARES Direct Payments

Included in the CARES Act are one-time payments to qualifying individuals of $1200 for anyone making under $75,000 annually, and $500 for each dependent child. If you have made more than $75,000, but less than $99,999, you will still receive a payment, though it will be less than $1,200. The amounts of the direct payments for individuals making more than $75,000 and couples making more than $150,000 will decrease $5 based on every $100 an individual makes over $75,000. An individual with an income of $76,000, for example, would receive a $1150 payment.

CARES and Bankruptcy

Chapter 7

The CARES Act makes temporary changes to bankruptcy law. Those filing under Chapter 7 need to meet a means test; they must not make more than their state’s median household income. For Wisconsin, that is $62,629 (as of 2018). The CARES Act excludes the direct payment from that calculation. So for a debtor just on the borderline, this extra income will not count as “current monthly income” when determining eligibility to file Chapter 7 bankruptcy.

Chapter 13 – Disposable Income

For those who have filed Chapter 13 bankruptcy, these direct payments will not count as “disposable income” for purposes of Chapter 13 plan confirmation. Those debtors are also now permitted to seek modifications of their confirmed Chapter 13 plans if “the debtor is experiencing or has experienced a material financial hardship due, directly or indirectly, to the coronavirus disease 2019 (COVID-19) pandemic.” The modification can be approved after notice and a hearing.

Chapter 13 – Extended Payment Plan

Debtors experiencing such hardships because of the COVID-19 pandemic are also allowed to extend their plan payments for up to seven years after the time that the first payment under their original confirmed plan was due. So if you had a repayment plan of three years, it can be extended another four years. This means that the payments you are currently responsible for would decrease, perhaps substantially..

SBRA and Bankruptcy

The SBRA amends Chapter 11 and creates Subchapter V which applies both to small businesses and to individuals. It significantly increases the amount to qualify for the bankruptcy process. Debtors can have up to $7,500,000 in secured and unsecured debt and still qualify to proceed under this streamlined bankruptcy process. Previously, the debt limit was $2,725,625. With 38 states in complete lockdown and all “nonessential” businesses closed to the public, small business owners can be feeling desperate. For many small business owners who are facing a sudden and dramatic drop in income, this may bring some hope. Small businesses filing under Subchapter V may have a clearer way to obtain relief and maintain their ownership of the business.

The measures that the federal government has put in place to protect the economy during this COVID-19 pandemic can provide some substantial relief to those considering or in the process of bankruptcy proceedings. It’s important to remember, though, that the provisions are temporary. These changes expire precisely one year after their introduction. So as of March 27, 2021, they end. If you are experiencing financial hardship, the CARES Act and SBRA may mean that it is the best time for you to file for bankruptcy. Consult one of the experts at Burr Law for guidance.

Who Pays for Bankruptcies? How Bankruptcies Work

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When you’re in desperate financial distress, bankruptcy can be a lifeline. When you declare personal bankruptcy using Chapter 7 under the Bankruptcy Code, you can eliminate all of your unsecured debt (credit card debt, medical debt, etc.). If it’s not possible for you to file under Chapter 7, you can file under Chapter 13. Your unsecured debt will not be eliminated, but it will be greatly reduced and you will have three to five years to pay back that lower amount.

Declaring bankruptcy, however, means instigating a court procedure, and there are certain costs associated with that.

Court Costs

There is an entirely separate court system for bankruptcy and these courts need to be maintained, and the personnel paid. Part of that cost comes from the filing fee that the person filing for bankruptcy (the petitioner) pays. Currently, the national bankruptcy fee is $335 to file for a Chapter 7 bankruptcy. If you are unable to pay that amount in full at the time of filing, you can pay in four installments within 120 days of the date of filing. In other words, you can pay approximately $84 a month for four months. There are provisions to waive the fee entirely if your family income is below 150% of the federal poverty guidelines. As of January 17, 2020, the federal poverty guideline for a family of four in Wisconsin is $39,300. There is also a small fee for the bankruptcy trustee. The filing fee for Chapter 13 is $310.

Credit Counseling Course Costs

When you file for bankruptcy, you must agree to participate in a credit counseling course at the beginning of the procedure, and a debtor education course at its conclusion. The cost of these courses varies widely. Some can be as inexpensive as $10, while some can cost about $60. You must attend a court-approved course. So you can expect to spend an additional $20 to $120. If you have been granted a filing fee waiver due to your low income, course costs are often waived as well.

Attorney Costs

You are not required to use an attorney when you file for bankruptcy, but it would be foolish not to do so. Bankruptcy is extremely complicated and any mistakes can have long-term, serious consequences for you and your family. Having an attorney responsible for the paperwork necessary helps assure mistakes are not made. There are ways to mitigate attorney fees, and certainly, consulting with a firm that specializes in bankruptcy law, like Burr Law, is a sensible course of action. We would be able to assess the nature of your situation, and anticipate the complexity of your case. So we would be able to give you a clear idea of what your attorney costs might be. While only 5% of Chapter 7 bankruptcy proceedings were challenged by a creditor in 2019, if that happens, litigation would obviously increase attorney costs as well.

Cost/Benefit Analysis

It is important to keep the costs associated with bankruptcy in the proper perspective. When you are being buried under a mountain of debt, the logic of incurring a small additional obligation should be apparent. Here at Burr Law we will work with you to make sure that you derive all possible benefits from filing for bankruptcy and still retain the financial means to restart your life.