We’ve written a series of blog posts answering common questions regarding Chapter 13 bankruptcy in Wisconsin and how it impacts your finances. Call (262) 827-0375

Wisconsin Bankruptcy Exemptions

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When you’re interested in filing for bankruptcy, there are a lot of factors to consider. Should you file Chapter 7 or Chapter 13? Or maybe even Chapter 11? Does it matter when you file? And often, most important to people is this question: Will I be able to keep my house, car, and other important personal property? The answer to that last question depends on whether or not those items are considered exempt from the bankruptcy proceedings. Because bankruptcy is nation-wide, there are certain exemptions that have been established at the federal level. Some states only allow those federal exemptions, others require you to use the state exemptions. Wisconsin is one of only 16 states that allows you to choose.

Residency Requirement

If you want to choose Wisconsin exemptions, you must have been a Wisconsin resident for about 2 ½ years. The law says that you must have lived in Wisconsin for at least 2 years, but it is not that clear-cut. If your domicile hasn’t been in the same state for over two years, the rules get more complicated. You’ll need to choose the state exemptions of the state that you lived in the longest during the 180 days immediately before the two years before filing. For example, if you plan to file on July 1, 2022, your two-and-a-half-year period would start January 1, 2019. Imagine that you were living in Iowa (for instance) on January 1, 2019 and moved to Wisconsin in May of that year. You would need to use Iowa state exemptions. If you moved to Wisconsin in March, though, you could choose to use Wisconsin exemptions or federal exemptions.

No Cherry-Picking

When deciding whether to use Wisconsin state exemptions or federal exemptions, it’s important to remember that it’s a slate of exemptions you’re choosing. You must accept all the exemptions in whichever slate you’ve gone with; you can’t pick a few from the Wisconsin list, and a few from the federal list to create the most advantageous situation for you. Given that fact, it’s wise to have one of the experts at Burr Law examine your particular situation to determine which set of exemptions most suits your needs.

What Are The Wisconsin Exemptions?

The most relevant Wisconsin exemptions are for your home, car, tools of your trade, and personal property. The homestead exemption in Wisconsin is $75,000 of the equity in the home, or $150,000 for joint filers. That compares to the federal exemption of $25,150 or $50,300 for joint filers. The exemption for your car is $4,000 (plus any unused portion of the $12,000 allowed for your personal property). Any tools of your trade (like business equipment, inventory, or actual tools) are at $15,000 compared to $2,525 for the federal exemption. Your personal property is exempt too, up to $12,000, as are your bank deposits up to $5,000. College savings accounts or tuition trust funds will not be touched. Only some retirement accounts apply, though. It really requires professional analysis to make the best choice.

Federal Nonbankruptcy Exemptions

The federal nonbankruptcy exemptions are federal exemption laws that exist outside of the Bankruptcy Code and protect property from creditors whether or not a bankruptcy case has been filed. By contrast, federal bankruptcy exemptions are listed in the Bankruptcy Code and provide protection only in a bankruptcy proceeding. If you are using Wisconsin state exemptions, you can still use the federal nonbankruptcy exemptions as a supplement for additional protection of your property, assuming you qualify for them. The qualifications vary, and the experts at Burr Law will be able to guide you in evaluating whether you can benefit from them. These federal nonbankruptcy exemptions include retirement benefits, death and disability benefits, survivor’s benefits, and other miscellaneous exemptions. Each has its own qualifications.

If you are filing for bankruptcy in the state of Wisconsin, you are fortunate to be able to decide whether the Wisconsin state exemptions or the federal exemptions will better protect your assets. The professionals at Burr Law have extensive experience in working with the exemptions, and will talk you through your options.

Does Bankruptcy Prevent Utility Shutoff?

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When your financial situation is overwhelming, it can happen that you fall behind on your regular bills, like utility payments. Being threatened with having your power cut off is really disturbing, and it may prompt you to think about the different ways you can deal with your money troubles. One thing that undoubtedly comes to mind is bankruptcy. Bankruptcy is a way of eliminating unsecured debt, and back utility bills fall into that category. If you are overdue on utility bills and are in danger of a shutoff, filing for Chapter 7 or Chapter 13 bankruptcy creates a bankruptcy stay that prohibits this shutoff for gas and electric. There are specific steps you need to take, though, in order for the power to remain on.

How It Works

As soon as you file a petition to begin the bankruptcy process, your utilities cannot be shut off for 20 days. It’s best if you complete all the bankruptcy paperwork at the same time that you submit the petition, but if you can’t, then be sure to do it within 14 days. That 20 day utility shutoff prevention period gives you almost 3 weeks of breathing room, and the professionals at Burr Law will be there to help you strategize your next moves.

What Happens With Your Utilities

The utility company (WE Energies) will send you a deposit letter approximately 20 days after filing the bankruptcy petition. You are required to pay this deposit. This is really important! If you do not pay it, then the utility company will shut you off. You need to pay the deposit and pay your gas and electric bill on time and in full for the next twelve months. These are the bills for the monthly usage, not the past due amounts. At the end of that 12 month period, the utility company will refund your deposit with interest.

Past Due Amounts Eliminated

A Chapter 7 bankruptcy takes anywhere from 3 to 6 months and at the end of it, all your unsecured debts will be discharged. That means that any past due amounts you owe to your utility company will be completely discharged (along with credit card debt, medical debt, and other unsecured debts). So bankruptcy will definitely prevent your utilities from being cut off for 20 days, and it can provide you a way to get rid of the debt you owe entirely.

Should You File or Not

Filing for bankruptcy is a big decision and if your primary concern is your utility bills, it is likely that a less radical solution can be found. When you have mounting medical debt, credit card debt, and other obligations along with your utility bills, then bankruptcy may be your best option. You can always consult with the professionals at Burr Law to clarify your situation.

If you are worried about your utilities being shut off, or feeling overwhelmed with financial difficulties, contact the professionals at Burr Law. You don’t need to struggle through it alone. We’re here to help.

Bankruptcy and Divorce

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Divorce and bankruptcy are both extraordinarily difficult and stressful situations to experience; doing so at the same time is even more complicated. Aside from the emotional strain, there are some very pragmatic factors that must be considered. In this post, we will explore the implications of divorce on bankruptcy.

Amicable or Acrimonious?

Before factoring in any of the financial or logistical matters, you must evaluate honestly the state of your relationship with your (soon to be ex) spouse. If you’re on amicable terms with your spouse, then filing for bankruptcy before a divorce could be a viable option. However, attempting to file bankruptcy with a spouse who is hostile to your financial interests could actually cause more harm than good. You will need to depend on your spouse to show up to court and provide all necessary financial documents, and you need to be confident that they will work with you and your attorney.

Chapter 7 Bankruptcy

Whether or not divorce is involved, deciding on what kind of bankruptcy to file is key. Chapter 7 bankruptcy is often chosen because it can be completed within four to six months and completely eliminates unsecured debt. However, in order to file for Chapter 7 bankruptcy, your income must be equal or below the median household income for your state. For Wisconsin, that’s $67,094 (as of 2020). If you and your spouse remain friendly, and you can file for Chapter 7 bankruptcy, then filing it before your divorce may be the best option. You can file jointly, discharge your debts, then divorce afterwards.

Chapter 13 Bankruptcy

If your income level is too high to qualify for Chapter 7 bankruptcy, you may file Chapter 13 bankruptcy. Chapter 13 functions more like a court-administered reorganization and it lasts from three to five years. If you divorce during that time, you will still be obligated to make the repayments ordered. If you and your spouse are friendly, perhaps you can agree on the portion of the repayment you will each do. If not, you may need to go through the process of having the bankruptcy case bifurcated. That may make the most sense; it’s possible that you may then be able to convert to a Chapter 7 bankruptcy.

Bankruptcy Costs

If you and your spouse file a joint bankruptcy you’ll save money on filing fees and the cost of hiring a lawyer. However, since your household income will be determined by what both you and your spouse earn, filing bankruptcy before your divorce could mean that your income is too high for Chapter 7 bankruptcy. In that case, divorcing first and then filing for bankruptcy would be the best idea.

Assets

Filing for bankruptcy jointly with your spouse brings advantages. One of the experts at Burr Law can help you understand how your assets will be protected. This applies, especially, to things you own jointly like your house or your vehicles. And depending on the jurisdiction you live in, filing a joint bankruptcy with your spouse could give you extra protection in the form of double exemptions. For example, if your home value is exempt up to $100,000 for a single bankruptcy filer, depending on the law in your jurisdiction, filing jointly could give you a bonus exemption making the house exempt for up to $200,000.

Bankruptcy and divorce are both unpleasant things that happen sometimes. Taking a pragmatic and rational approach to your situation is the best way to mitigate it. Contact the professionals at Burr Law to explore your options.

How Long Does Bankruptcy Take in Wisconsin?

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When your financial situation is dire, you’re looking for solutions, and you need them quickly. You might think that the bankruptcy process is just too long and cumbersome to provide the kind of relief you need right away. While there are a number of steps that you need to go through, that doesn’t necessarily mean that it will take an extremely long time. In this post, we will examine just how long bankruptcy takes in Wisconsin.

Two Kinds of Bankruptcy

The first thing you should know is that there are generally two different kinds of bankruptcy that individuals can pursue, Chapter 7 and Chapter 13. The actual bankruptcy process through bankruptcy court for both takes approximately four to six months. For Chapter 7 bankruptcy, that’s it finished; your unsecured debt is eliminated. For Chapter 13 bankruptcy, you enter into an agreement that runs over three to five years where a portion of your debts are repaid.

Credit Counseling

Whether you are filing Chapter 7 or Chapter 13 bankruptcy, the bankruptcy court process is the same. It begins with pre-filing credit counseling. This seminar usually lasts between 60 and 90 minutes and is required before you actually file in the bankruptcy court. There is also a post-filing course that you are required to complete successfully. The word “course” here is a bit misleading. In Wisconsin, there are approximately 85 courses approved by the US Trustee, and they range in price and duration. Some of them are as short as 2 hours.

341 Meeting

A 341 meeting must take place within 3 to 7 weeks after filing. At a 341 Meeting you meet with the Trustee appointed to oversee the case. The Trustee checks your identification and asks you a series of questions about the bankruptcy paperwork. The Trustee’s job is to check your identity, review your paperwork for accuracy, and make sure that your creditors get paid as much as possible. Creditors who attend can ask about financial matters, although it’s rare for creditors to appear. The whole thing usually lasts about 10 minutes; if there are creditors present or the inquiry seems to be taking longer, another date will be set to conclude the meeting.

Differences in 341 Meeting

The Trustee in Chapter 7 and Chapter 13 has different duties. The Chapter 7 Trustee will sell any assets that you can’t protect with a bankruptcy exemption and distribute the proceeds to creditors. The experts at Burr Law can help you preserve your assets. For instance, you’ll almost certainly retain your car and house. The Chapter 13 Trustee will evaluate the workability of your proposed Chapter 13 repayment plan. If the judge approves the plan at the Confirmation Hearing (which follows), the Chapter 13 Trustee will continue to distribute monthly payments to creditors. (Debtors begin making the proposed plan payments about 30 days after filing and receive the funds back if the court doesn’t confirm the plan, with some exceptions.)

Confirmation Hearing for Chapter 13 Bankruptcy

If you are pursuing Chapter 13 bankruptcy, there will be a Confirmation Hearing within 45 days of the 341 Meeting. In Wisconsin, it is not usually necessary for you to appear at this hearing; only your attorney needs to do so. If there are other issues, the Confirmation Hearing can be continued (delayed) either at the request of a creditor or your request. A Continuance can be granted multiple times.

Discharge

For Chapter 7 bankruptcy, the Discharge happens between 60 and 90 days after the 341 Meeting. For Chapter 13 bankruptcy, the Discharge does not occur until the repayment plan (usually three to five years) is completed.

Bankruptcy is complex, but doesn’t have to be lengthy. The experts at Burr Law can guide you through the process so that you meet all deadlines and emerge into a financial future that is much less stressful.

What Happens When You File Bankruptcy?

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With the COVID-19 relief ending, you may be discovering that your debt obligations are still there whether or not you are in a better position to deal with them. In fact, they may be looming larger than ever before. If that is the situation you find yourself in, you may be seriously considering filing for bankruptcy. In this blog, we’ll explore what actually happens when you do that. You want to have all the information and understand all the implications before proceeding.

Bankruptcy Stops All Collection Activities

When your debt is crippling, it comes with collection agents working relentlessly to extract money you don’t have. Letters that threaten dire consequences, phone calls that badger you at all times of day or night, these tactics can make you feel hunted, haunted, or both. The moment you file bankruptcy, all collection activities must stop.

Bankruptcy Eliminates or Decreases Debt

With bankruptcy, all your unsecured debt is either eliminated or reduced. Most people file Chapter 7 Bankruptcy, and with that type, you don’t need to worry about any sort of repayment. The entire process takes between 3 to 6 months, and then your debt has disappeared. Some people choose Chapter 13 Bankruptcy, and with that type, you do repay a portion of your debts, determined with the court. This process lasts from 3 to 5 years. In both cases, your debts are cleared, once and for all.

Bankruptcy Avoids Draining Resources

The bill collectors don’t care where you get the money to pay them, and you may be tempted to take it from your retirement funds, social security or other protected assets. When you declare bankruptcy, not all your assets are liable for your debt repayment. Social security and retirement funds are protected. Your house and car are too. Filing bankruptcy allows you to retain those protected assets while getting rid of the debt.

Bankruptcy And Your Credit Cards

While bankruptcy eliminates your debt, it also eliminates your current credit cards. Not having credit cards makes some things more difficult. For instance, car rental agencies usually require credit cards; hotels often do too. It also means that unexpected large expenses cannot be paid with a credit card. There are credit cards specifically for those with negative credit histories; the terms are not favorable and credit limits are carefully controlled.

Bankruptcy And Your Credit Score

Bankruptcy remains on your credit record for 7 to 10 years, and naturally it lowers your credit score. It can make getting an auto loan or other kind of loan more difficult. It is important to remember, though, that if your repayment history has been poor and your debt to asset ratio is high, your credit score may already be quite low. In that case, bankruptcy may have a smaller impact than you suppose.

Bankruptcy Can Help Your Mental Health

Often unspoken, the negative impact on your mental health when you have significant financial issues is undeniable. Filing for bankruptcy shifts all of that stress and tension. Instead of facing your money problems alone, you will be working with professionals dedicated to helping people in your situation. Over 6000 Wisconsinites have declared bankruptcy already this year (January through August 2021). The experts at Burr Law can guide you through the process step by step, and you can breathe a sigh of relief.

Bankruptcy can give you a clean slate, though it is not without difficulties and dangers. If you are considering bankruptcy, it is vital that you consult with experts. The professionals at Burr Law can evaluate your particular circumstances and advise you on the best way forward..

Rebuilding Credit After Bankruptcy

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When you declare bankruptcy, you are able to eliminate or diminish your debt, but it does leave its mark. Any credit cards you have when you file for bankruptcy will be unavailable to you, and the bankruptcy stays on your credit report for 7 to 10 years. That doesn’t mean that you are doomed to live without any credit resources or loans for that entire time. Bankruptcy is often the wisest choice, and there are steps you can take in the short and longer term to rebuild your credit. In this blog, we’ll explore some practical ways to do that.

Adhere to Bankruptcy Agreements

Whether you declare Chapter 7 or Chapter 13 bankruptcy, you have entered into a legally binding agreement. In Chapter 13, that means that a court-appointed trustee takes control of all of your disposable income and pays your creditors with it. This situation usually lasts from three to five years. It is imperative that you inform the court of any changes to your disposable income during this period. If you have filed Chapter 7 bankruptcy, that eliminates all your unsecured debt. However, you may have entered into a Reaffirmation Agreement with your auto lender in order to keep your car. If so, you must prioritize making those monthly payments.

New Credit Cards

Although your current credit cards will be unavailable to you once you declare bankruptcy, there are credit cards specifically designed for those working to re-establish creditworthiness. These credit cards often have low credit limits and higher interest rates to begin with; those elements switch as time passes and you use the card wisely. Once you demonstrate your ability to make monthly credit card payments, other institutions will begin to offer you credit cards as well.

Understanding Your Credit Report

Bankruptcy will almost certainly lower your credit score, but it you have had delinquent accounts and history of late payments, you may be surprised to find that your credit score does not plummet. Rebuilding your credit score depends on understanding how your credit score is calculated. Not every action has the same impact. For instance, one of the most important factors is the amount owed. Declaring bankruptcy actually makes your amount owed negligible. The most important factor, though, is payment history. While you cannot change your past, you can certainly control what your payment history becomes.

Credit Report – Time Frame

Your credit report is not a static document. Your credit score changes all the time, and actions that have lowered your credit score do disappear from your credit report. The time frame varies from two to ten years. A Chapter 7 bankruptcy usually remains on your report for 10 years, while a Chapter 13 one stays on for 7. Crucially, the severity of the impact diminishes with time, too. So a bankruptcy five years ago will matter less than when freshly filed, especially if it appears with five years’ worth of on-time payments.

Credit Report – Repair

Declaring bankruptcy does not have to be devastating to your ability to get credit, and it can be mitigated. The experts at Burr Law can guide you in re-establishing your credit in ways that meet your particular situation. Remembering that payment history is crucial, and that many accounts do not typically report on-time payments, you can work to have your timely payments noted. While auto loans, mortgages, credit cards and some others are typically reported, other things like utilities, phone payments, and even streaming services can be reported. If you have a monthly expense that isn’t being reported and you want those timely payments to count, Burr Law can help.

Rebuilding credit after bankruptcy is certainly possible. The experts at Burr Law can advise you on that as part of your bankruptcy service.

A Risk/Benefit Analysis of Chapter 13

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Chapter 13 bankruptcy acts much more like a reorganization than a Chapter 7 bankruptcy. It’s often called the “Wage-Earner’s Bankruptcy,” because it is designed for someone who has a regular income, but has become mired in unmanageable debt. Unlike Chapter 7 bankruptcy (also called “Liquidation Bankruptcy”), it doesn’t have an income limit and you won’t need to worry about losing your valuable assets. It does have limitations on the amount of debt you have, though. 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. If your debt falls within these parameters, Chapter 13 bankruptcy may be for you. Let’s look at the pros and cons.

PRO – Protects Your Assets

Filing Chapter 13 causes all collection actions to stop, including home foreclosure. Chapter 13 bankruptcy preserves your secured assets, so you don’t have to worry about losing your home or car. Unlike Chapter 7 bankruptcy, which is also known as Liquidation Bankruptcy, Chapter 13 bankruptcy is also called Wage-Earner’s Bankruptcy. The objective is reorganization of debt rather than liquidation of assets.

PRO – Unsecured Debt

Unsecured debt includes credit card debt, medical bills, and other debts that don’t depend on collateral. Chapter 13 bankruptcy results in unsecured debt being discharged entirely or diminished significantly. If the debt is not completely eliminated, you will be paying off a small portion of what you owe over the course of three to five years.

PRO – Attorney Fees Become Part of Plan

Often, people delay filing for bankruptcy because they fear incurring additional debt through attorney fees. Yet expert guidance is necessary to navigate bankruptcy law. When you file for Chapter 13, your attorney fees can be included in the reorganization plan and paid over the three to five year time frame.

PRO – Other Debt Included in Reorganization

A professional bankruptcy attorney may be able to help you incorporate debts not usually available for reorganization. For instance, while domestic support obligations (DSO) like child support remain due and payable, past-due amounts can be worked into the reorganization plan and paid over three to five years. Likewise, if you owe back taxes, there are some situations where some amounts of tax debt can be incorporated into the reorganization plan too.

PRO – Second Mortgage as Unsecured Debt

If your home’s second mortgage is worth less than what you owe on your first mortgage, then you can motion the court to have your second mortgage become an unsecured debt. Upon completion of your debt repayment plan, your second mortgage may be reduced greatly or discharged. Again, this is a situation where the guidance of the experts at Burr Law can make the difference.

CON – Length of Reorganization Plan

As indicated above, the typical Chapter 13 reorganization plan lasts from three to five years. That’s a long time. Many debtors find it impossible to maintain, though they are contractually and legally obligated to do so. Again, seeking professional advice from attorneys dedicated to bankruptcy law makes a tremendous difference here. Crafting a reorganization plan that anticipates periodic extra expenses and realistically assesses your earning potential over the next five years makes the length of the reorganization workable.

CON – Credit Implications

Like all bankruptcies, Chapter 13 bankruptcy is part of the public record and remains on your record for 10 years. It will decrease your credit score by 100 to 200 points. While Chapter 13 bankruptcy doesn’t immediately deprive you of all of your credit cards, it will affect your ability to acquire new ones, and sometimes how you are able to use the ones you already have.

With COVID-19 mitigation ending at the end of September 2021, you may find yourself in an untenable financial situation. If you’re considering Chapter 13 bankruptcy, you should contact the professionals at Burr Law. We can help you evaluate your particular situation.

Bankruptcy After Lockdown?

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The last year has been challenging for all of us in many ways. Americans have lost jobs at a rate not seen since the Great Depression. Industries–especially those in retail, tourism, and hospitality–have experienced crushing lockdowns. The government has passed a number of COVID-19 bills to mitigate the worst of these effects, beginning in March of 2020 with the CARES Act and most recently with the American Rescue Plan on March 11, 2021. The direct payments to the majority of Americans and the assistance provided to businesses have been beneficial. But they cannot eliminate all the damage done. And they cannot continue indefinitely.

Now is the Time to Act

Bankruptcy filings are low just now, but experts anticipate that they will rise significantly. 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, making snap decisions detrimental to those involved. Now is the time to take a long, hard look at your financial situation and decide what the best way forward will be.

Personal Bankruptcy

More than 22 million people lost their jobs during this pandemic, and Moody’s predicts that those jobs will not be recovered until 2024. If you’re one of those who have suffered this loss, you may well benefit from declaring bankruptcy. While the additional unemployment benefits have been extended, they will not last forever, and unemployment benefits rarely compare positively with actual employment. The moratorium on evictions goes until June 30, 2021, but what happens on July 1? Perhaps you are one of the 7.7 million people who lost their employer-sponsored medical insurance; you don’t need to have had COVID to have incurred significant medical debt. Whatever your situation, you should consider your bankruptcy options now rather than later.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is the one most commonly used by individuals (or couples). It is often called ‘Liquidation’ bankruptcy, but the experts at Burr Law can make sure that you get the exemptions you’re entitled to, and you will almost certainly keep your house and vehicle. Chapter 7 completely eliminates your unsecured debt, and it takes between four and six months to complete. It is means tested; your income must be equal to or below the median household income of your state. For Wisconsin, that is $67355 as of 2019 (the last year for which we have figures).

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is often called ‘Wage-Earners’ bankruptcy since it functions more like a partial debt-repayment plan. The bankruptcy court assigns a trustee who examines your entire financial situation, negotiates the elimination or reduction of your debt with your creditors and establishes a realistic monthly payment plan. The whole process lasts between three and five years. While this option is not means tested, there are indebtedness restrictions. To be eligible to file for Chapter 13 bankruptcy, you must have less than $419,275 in unsecured debt, like credit cards or medical bills, and you also can have no more than $1,257,850 in secured debts, which includes mortgages and car loans.

Business Bankruptcy

Chapter 11 Bankruptcy

Most businesses choose to file Chapter 11 bankruptcy; it 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. 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.

Chapter 12 Bankruptcy

Chapter 12 bankruptcy is specifically designed for family farmers and family fishermen. It recognizes the greater debt burden that family farmers and fishermen carry but treats them more like individuals than business bankruptcies. The process is more streamlined and less expensive than Chapter 11, for instance. If you’re a farmer, in order to qualify for Chapter 12, your total debts must not exceed $4,153,150, and 50% of them must come from the farming operation. If you’re a fisherman, your total debts must not exceed $1,924,550, and 80% of them must be associated with your fishing enterprise. In both cases, more than 50% of your gross income should come from your farming or fishing. This bankruptcy pays off all or a portion of your debts over 3 years, though that can be extended to 5 years if necessary. You continue operating your farm or fishing business during the bankruptcy process.

Call the professionals at Burr Law to help guide you through the decision-making, and if necessary, the bankruptcy process itself. You’ll be glad you did.

Overwhelmed with Debt?

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The COVID-19 pandemic has had dire economic consequences for many people, and there have been protections put in place to help people survive this difficult time. Those aren’t going to last forever, though, and you may be looking at your financial situation and wondering just how you’re going to manage. If you feel overwhelmed with debt, it’s important to think things through now and have a plan in place while you still have a number of options. There are basically three different approaches you can take: debt consolidation, debt management, and bankruptcy. This post explores each of them.

Debt Consolidation

Debt consolidation is just what it sounds like: you gather all your debts into one place so that you’re making one payment a month. There are several ways to consolidate your debt. If most of your debt is unsecured credit card debt, you can take out another credit card that offers 0% interest for a period of time (often 12 to 18 months) and then transfer your other credit card debt onto that new card. You then have that given time to pay down the principal. This method only works if all or most of your debt is credit card debt. If you have other sources of debt, you may need to take out a consolidation loan. These loans are financed by banks, and the main concern here is that you trade your unsecured debt for secured debt, as most will require collateral. Even if your consolidation loan doesn’t require specific collateral, it may well have a cross-collateralization clause. That means that if you get a consolidation loan from the same bank that financed your auto loan, and you fall behind on your consolidation loan payments, the bank can repossess your car. So debt consolidation can certainly work, though it has some important limitations, and poses some significant risks.

Debt Management

There are a number of debt management companies that will act on your behalf to manage your financial situation. The debt management company negotiates with the credit card companies on your behalf, and establishes a repayment plan for you. 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, and at least half of clients do not successfully complete the plan.

Bankruptcy

Individuals usually file either Chapter 7 or Chapter 13 bankruptcy. Chapter 7 bankruptcy is known as “liquidation” bankruptcy, and in order to qualify for it, you must not make more than your state’s median household income. In Wisconsin, that amount is $67,355 (as of 2019, the latest available figures). Although the word liquidation sounds threatening, the truth is that there are exemptions and you will almost certainly keep your home (if you have a mortgage) and your car. If you have a second home or other luxury item, those may be sold to pay your debt. Chapter 7 bankruptcy is quick, usually taking three to four months, and it eliminates all your unsecured debt. Chapter 13 bankruptcy is also known as “wage-earner’s” bankruptcy. It functions a lot like the debt management plan; a trustee appointed by the court drafts a plan, you and your creditors agree to it, and then the trustee administers the plan. It lasts between 3 and 5 years. There is no means test like Chapter 7 bankruptcy, but there is a cap on how much you owe. To be eligible to file for Chapter 13 bankruptcy, you must have less than $419,275 in unsecured debt, like credit cards or medical bills, and you also can have no more than $1,257,850 in secured debts, which includes mortgages and car loans.

If you’re overwhelmed by debt and considering your financial future, you have options. Contact the experts at Burr Law to talk through your specific situation, and have them help you chart the best course forward.

Most Common Types of Bankruptcy

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This past year’s double catastrophe (the pandemic and its subsequent economic impacts) have brought many people to the brink of financial disaster. Whether it is unanticipated medical expenses, loss of income, or a combination of other factors, you may be emerging from the COVID-19 disaster to discover just how dire your money situation is. If that’s the case and you are considering bankruptcy as an option, it’s important that you know what kinds of bankruptcy are open to you. This post will explore three of the most common types of bankruptcy open to individuals: Chapter 7, Chapter 13, and Chapter 12.

Chapter 7 Bankruptcy

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 totally eliminating unsecured 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, $67,355 as of 2019 (the latest figures available).

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 less than $419,275 in unsecured debt, like credit cards or medical bills, and you also can have no more than $1,257,850 in secured debts, which includes mortgages and car loans.

Chapter 12

Chapter 12 bankruptcy is specifically designed for family farmers and family fishermen. It recognizes the greater debt burden that family farmers and fishermen carry but treats them more like individuals than business bankruptcies. The process is more streamlined and less expensive than Chapter 11, for instance. If you’re a farmer, in order to qualify for Chapter 12, your total debts must not exceed $4,153,150, and 50% of them must come from the farming operation. If you’re a fisherman, your total debts must not exceed $1,924,550, and 80% of them must be associated with your fishing enterprise. In both cases, more than 50% of your gross income should come from your farming or fishing. This bankruptcy pays off all or a portion of your debts over 3 years, though that can be extended to 5 years if necessary. You continue operating your farm or fishing business during the bankruptcy process.

These are the most common kinds of bankruptcy for individuals in Wisconsin. For businesses, other bankruptcy options apply. If you’re wondering how you’re going to resume your life after the pandemic, bankruptcy may give you a positive way forward. Consult the experts at Burr Law today to find out more.