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

What Happens If You Become Bankrupt?

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“Bankrupt” can have lots of scary connotations. You might imagine that you will be forced out of your home, have your car repossessed, and lose all your valuables. You might believe that you will never again be able to acquire a credit card or any type of loan after bankruptcy. Those fears arise from a lack of information. In this post, we will look at what bankruptcy is and its effects.

Two Types of Bankruptcy

The two primary forms of bankruptcy that individuals (and couples) file are Chapter 7 and Chapter 13. They each have advantages and disadvantages, and it’s important to consult with an expert to determine which one is the best for you. Chapter 7 bankruptcy takes about 3 to 6 months from time of filing; Chapter 13 has a plan that lasts between 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 2019 (the last official figure) was $67,355.

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.

Bankruptcy And Your Credit Report

Generally speaking, bankruptcy stays on your credit report in Wisconsin for about 10 years. Remember, though, that even if you don’t file bankruptcy, your creditors can obtain a judgment against you for your debt, and that judgment would appear on your credit report. A judgment can remain on your credit report for seven years or until the statute of limitations expires, whichever is longer. In Wisconsin, the statute of limitations on a judgment can be up to 20 years! So a bankruptcy may well fall off of your credit report before a particular judgment.

Bankruptcy And Your Credit Score

Bankruptcy will mean a drop in your credit score immediately after filing. However, you may already have a poor credit score due to your debt-to-asset ratio (your debt is high compared to your available credit) and delinquent accounts; in that case, the decrease in your credit score may be less than you suppose. If your credit score was good before filing bankruptcy, the drop may be more pronounced.

Bankruptcy And Obtaining Credit Cards

When you file for bankruptcy, whether it is Chapter 7 or Chapter 13, you usually lose access to your credit cards. That doesn’t mean that you will never again have a credit card. There are credit cards specifically designed for those with poor credit and the experts at Burr Law can advise you on how best to reclaim your creditworthiness through measured use of particular credit cards.

The professionals at Burr Law can answer all of your bankruptcy questions. With all of the information, you can make an informed decision about bankruptcy.

Debt Consolidation vs Debt Settlement

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When you’re in debt, it can seem like there’s no way out. Credit card payments, rent or mortgage payments, car payments, student loan payments . . . you may feel like you’re being bled dry. If it’s just impossible to keep juggling all your financial obligations, it’s time to think seriously about your debt management problems. In this blogpost, we will explore the options of debt consolidation, debt settlement, and bankruptcy.

Debt Consolidation: What Is It?

In its most basic form, debt consolidation works by combining multiple debt payments into one monthly payment through obtaining either a secured or unsecured loan. That monthly payment is sometimes lower than the individual payments combined, and the interest you pay is sometimes lower as well. You will maintain your access to credit, though incurring more debt increases the likelihood of the debt consolidation failing. One of the easiest ways to consolidate your debt is to obtain a new credit card that offers 0% interest for a period of time (usually 6 to 12 months). Once you get the card, you can transfer the balance from other credit cards where you are paying high interest to the new card and use the 6 to 12 months to pay down the principal. Of course, that only consolidates your credit card debt. Alternatively, you can take out a debt consolidation loan; most are secured loans though, and you risk losing your collateral, usually your car or other significant tangible property.

Cross-Collateralization

Sometimes you may risk losing collateral that you aren’t aware you have placed in jeopardy. That can happen when your debt consolidation loan has a cross-collateralization clause that 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, 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 in 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. Chapter 13 bankruptcy lasts between three to five years, similar to debt consolidation. With Chapter 13 bankruptcy, the moment you file, there is an automatic stay on all collection actions, and you will almost certainly retain possession of your home and vehicle.

If you’re experiencing significant debt management problems, it would be a good idea to talk to one of the experts at Burr Law.

Tax Debt – Filing for Bankruptcy in 2021

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With more and more people free-lancing and the gig economy in full swing, it’s becoming more common for people to owe the IRS for back taxes. And unpaid taxes can add up to a huge financial burden, especially on top of all your other expenses. If you’re feeling overwhelmed by your financial situation, you may be considering bankruptcy. Bankruptcy is a good way to clear unsecured debt, but what about tax debt? This post explores the question of what happens with tax debt when you file for bankruptcy.

Automatic Stay

The moment that you file for bankruptcy, whether it is Chapter 7 (most commonly) or Chapter 13, all your creditors must stop harassing you for payment. That includes the IRS. So no more threatening letters, phone calls, etc. The automatic stay also applies to property. The IRS can’t touch your more valuable assets. So no matter what stage the IRS collection effort is in, the automatic stay stops it completely. But remember, this is just a pause. And as you’ll see, knowing when to file for bankruptcy is especially important if you’re trying to eliminate unpaid taxes as well as other debts.

Conditions for Tax Debt to be Discharged

As you probably already know, IRS rules and regulations can be like an impenetrable maze. There is a regulation for pretty much everything. So, it should be no surprise that there are specific rules for bankruptcy discharge. And you should expect that the IRS will object to eliminating your tax debt if it can find any reason to do so. The main bankruptcy discharge rules have to do with time.

Income Taxes

Chapter 7 bankruptcy only discharges income tax debt. Your 1040 taxes are definitely income taxes, but other taxes aren’t. For instance, property taxes and trust fund taxes are definitely not income taxes. So the kind of taxes you owe the IRS makes all the difference. If you do owe unpaid income taxes, then you’ve cleared the first hurdle.

Taxes Filed for Last 2 Years

You have to have filed your taxes for at least the last 2 years (if you were required to file). At the time you file for bankruptcy, the IRS needs to have your tax filings for the previous 2 tax years, and that applies even if you filed those taxes on time. If you didn’t file and the IRS prepared substitute returns to determine what you owed, those do not count as taxpayer-filed returns.

Tax Debt Must Be at Least 3 Years Old

Your income tax debt must be at least three years old. And it’s crucial to remember that Tax Day is not always April 15. Some years, it could be the 16th, 17th, or even 18th. Last year (2020) it was July 15 because of the pandemic. IRS lawyers have been known to object to discharge over one or two days. So, make sure you file the petition on the correct day, or else you will have to start over.

240 Day Rule

Your tax assessment can’t be more than 8 months old, or must not have been assessed yet. If the IRS has not assessed the debt within the last 240 days, the income tax debt is not dischargeable. It’s almost impossible to tell if the IRS has assessed the debt or not, because this process is an internal accounting tool. But generally, if you’ve not received a bill which breaks down the amount due by tax years, it’s probably not assessed the debt yet.

Burr Law Helps with Complexities

At Burr Law, our professionals have years of experience dealing with bankruptcy law. We understand the complicated IRS rules around bankruptcy, and will work with them to make sure your tax debt is included in your bankruptcy. Don’t leave something this important to chance.

Does Bankruptcy Clear All Debt?

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The reason you choose to file bankruptcy is to get rid of your debt, so it’s important to know whether or not it actually does. Does bankruptcy clear all debt? The short answer is probably not. That “probably” is there because it does eliminate a lot of debt, and it’s possible that it will take care of all your debt, though that’s unlikely. Let’s take a closer look.

Different Bankruptcy Options

The two most common forms of bankruptcy are Chapter 7 and Chapter 13. You can file Chapter 7 if your median household income is equal to or below a certain level. For the state of Wisconsin, that amount is $67,355 (as of 2019). This type of bankruptcy takes between 3 to 6 months. Or you can file Chapter 13 bankruptcy, which has no income status requirement, but does have a cap on the amount of debt. 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.

Unsecured Debt

Whatever method of bankruptcy you choose to use, your unsecured debt will almost certainly be eliminated. Unsecured debt is debt you have incurred without having to put up collateral. So, for instance, all credit card debt is unsecured debt. So is medical debt. And any other obligation you have that you got simply through agreeing to pay it back. That gym membership that you can no longer afford, but that’s due to run another 2 years? That’s unsecured debt.

Secured Debt

Your mortgage, your car payment, your home equity loan, these are all examples of secured debt. That doesn’t mean that you will lose your home and your car, however. Each type of bankruptcy has provisions to protect your most important assets. The professionals at Burr Law will be able to help you retain these kinds of essential items.

Money Owed to the Government

It’s extremely difficult to eliminate tax debt. There are a number of conditions that must be met in order for some tax debt to be included in those cleared through the bankruptcy process. The experts at Burr Law can work with your specific situation to see if it is possible to clear some of your tax debt. Any debt relating to tax fraud would not be exempt. It is virtually impossible to eliminate student loan debt. If your student loans are from the federal government or guaranteed by the federal government, you should be prepared for the likelihood that they will still be there once your bankruptcy is complete. Even money owed to local governments are difficult to clear through bankruptcy. If you’ve accumulated a hefty amount in traffic tickets, you’ll still need to pay that back.

Specific Personal Obligations

There are some particular personal obligations that bankruptcy will not eliminate. For instance, bankruptcy will not clear your child support payments or your alimony obligations. Similarly, if you have been involved in a personal injury or death as a result of DUI case as the defendant and are obligated to pay a settlement, that will still remain.

Bankruptcy is a great way to deal with most of your debt. However, it is unlikely to eliminate all of it. It’s crucial to work with experienced professionals in the field, like those at Burr Law, so that you can clear as much of your debt as possible.

Credit Card Debt: Can Credit Card Companies Repossess My Items If I Don’t Pay?

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Credit Card Debt is Unsecured Debt

Unsecured debt refers to any kind of 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–all are examples of revolving credit. Credit card debt is unsecured because you haven’t had to offer any kind of collateral in order to get it. Unlike your auto loan, where the vehicle itself functions as the collateral, credit card companies offer you short-term loans that you agree to repay with the stated interest. You can pay for your groceries with your credit card just like you can buy a computer with your credit card. In either case, the credit card company cannot come and take the food out of your refrigerator, or the computer off your desk. Since there is no collateral with credit cards, there can be no repossession.

Credit Card Debt Can Spiral

It’s easy to purchase things with credit cards, and almost without you noticing, you find your credit cards maxed. With all of the economic disruptions caused by the pandemic, you may have had to rely more heavily on credit cards, as well. The minimum payment due only pays the interest, and when even that becomes difficult, you need to consider your options. This 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 Deals With Credit Card Debt

If your credit card obligations are driving you to the breaking point, then bankruptcy may be your wisest option. In Chapter 7 bankruptcy, credit card 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 completely eliminate your credit card debt while keeping 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. Credit card debt is often, but not always, eliminated. Even when it is not entirely written off, you will end up having to repay only a small portion of your credit card debt. 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.

Credit card debt can be overwhelming, but you don’t have to worry about your personal possessions being repossessed. If you’re interested in getting out from underneath crushing credit card debt, you might be wise to consider bankruptcy. Reach out to the professionals at Burr Law to discuss your financial situation. It may be that bankruptcy can entirely clear your credit card debt, or that it can be made into something manageable. You won’t know how close you are to relief unless you call now.

With COVID-19 Raging, How to Manage Medical Debt

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The COVID-19 pandemic has hit the whole world hard. For those who have contracted the disease, the primary concern is treatment and recovery. Once you have surmounted that challenge, another awaits: medical debt. In Wisconsin, almost 20,000 people have been hospitalized with COVID-19 (19,785 as of December 17, 2020 according to the Wisconsin Department of Health Services) and over 4000 have died. That means that more Wisconsinites are facing massive medical debt than ever before. What can you do when you find yourself in a financial crisis because of your medical crisis? In this post, we look at some of your options.

What Not To Do

Before examining what you should do, here’s something you should NOT do: transfer your medical debt to credit card debt. When you pay your medical bills with your credit cards, you are shifting your debt obligations from an interest-free creditor to a high-interest creditor. Most consumer credit cards charge 18 – 24% interest while medical debt is almost always interest-free. So resist the urge to pay your medical bills with your credit cards unless you are absolutely certain that you are able to pay off the credit card before accruing the interest payments.

Medical Bill Itself

Many people never really look at the itemized medical bill that they receive. That’s understandable. It’s often long, complicated, and uses technical vocabulary, both medical terms and insurance jargon. However, carefully examining the medical bill is absolutely essential. Here is information from the American Academy of Family Physicians that can help with that https://familydoctor.org/understanding-your-medical-bills/. If you have questions or concerns about particular items, use the established process to dispute the charge. If you cannot resolve a disputed charge, you can turn to the Wisconsin Department of Agriculture, Trade and consumer Protection for assistance.

Payment Plan

When are you certain the bill is correct, you can set up a payment plan with the hospital or medical provider. As long as the payment is reasonable, medical providers are usually happy to accommodate you. And you won’t be accumulating interest while you pay off your medical debt. The important thing here is to contact the medical provider right away and negotiate an agreement that you can actually maintain.

Medicaid and/or BadgerCare Plus

If you were uninsured when you went into the hospital, you can still manage to get Wisconsin Medicaid or BadgerCare Plus to cover your hospitalization costs. These programs are retroactive up to three months. That means that if you were eligible for Wisconsin Medicaid or BadgerCare Plus when you went into the hospital, you can apply for and receive that insurance and it will cover the time that you were there. However, if you became eligible for these programs subsequent to your hospitalization, your Medicaid or BadgerCare Plus coverage will not be retroactive.

Bankruptcy

Bankruptcy is a viable option when you are facing thousands of dollars of medical debt. The average cost for a Wisconsinite hospitalized with COVID is $14,573, and sustaining that level of debt, along with your usual obligations may not be feasible. Bankruptcy can completely clear medical debt. There are different options in bankruptcy, and if you are thinking about it at all, you should contact the experts at Burr Law. Chapter 7 bankruptcy completely eliminates unsecured debt; that includes medical debt and credit card debt. A professional bankruptcy attorney can make sure that you get the exemptions you’re allowed, so you keep your house and car. The whole thing takes between 3 and 6 months. Chapter 13 bankruptcy can also eliminate medical debt, though it’s a different process that lasts from 3 to 5 years.

Medical Debt Shouldn’t Be Another Crisis

When you’ve survived a medical emergency like COVID, you shouldn’t need to succumb to a financial emergency. Working with the experts at Burr Law can give you the information and options you need to make sure that you are making the right choices. When it comes to dealing with medical debt, contact Burr Law.

Pros and Cons of Chapter 13 Bankruptcy

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When your financial situation is difficult and you can see no way out of the spiraling debt, you may be considering bankruptcy. There are two common forms of personal bankruptcy: Chapter 7 and Chapter 13. Filing for Chapter 7 is means tested. In Wisconsin, you must not make more than $67,355 as a household (2019 statistics). Chapter 13 doesn’t have those restrictions, but it does have limitations on the amount of debt you have. 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. This post outlines the pros and cons of Chapter 13 bankruptcy.

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.

Bankruptcy May Become An Option

The state and federal programs designed to diminish the negative economic impacts of COVID-19 have generally worked very well. In Wisconsin, there were 8,272 consumer bankruptcy filings (Chapter 7 and Chapter 13) from January through August 2020; that’s 28% fewer than through August of 2019, according to American Bankruptcy Institute data. However, almost all of those programs end December 31, and Wisconsin’s seasonal prohibition on utility cutoffs ends April 15. So if you’re barely making it now, you should consider whether you may need to declare bankruptcy in the spring.

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.