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

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.

Would Bankruptcy Affect My Partner?

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The short and not very helpful answer is maybe. If you file to discharge joint debts, that will likely appear on your spouse’s credit report. Creditors will be notified of your filing, and will likely come after your spouse for payment of debts. Whether and how much one spouse’s filing for bankruptcy will affect the other’s credit also depends on whether you file under Chapter 7 or Chapter 13, and also on what the laws of your particular state of primary residence are.

Property owned outright by your spouse may be protected, particularly if they were acquired prior to marriage, but jointly owned properties and debts are another matter. A bankruptcy trustee may sell any jointly owned property to pay off debts, but how property is treated depends largely on whether you reside in a Common Law Property State or a Community Property State.

If you live in a Common Law Property State and you file for bankruptcy, your assets and those you own jointly with your spouse are liable to be sold to satisfy debt obligations, whereas those held outright by your spouse are to some degree protected. Still, a bankruptcy trustee may sell an entire property jointly owned if it is not clearly divisible under a Chapter 7 bankruptcy. He would then reimburse your spouse for their portion in funds.

If you live in a Community Property State, virtually everything acquired during the time of the marriage is liable to be seized. It is very important, therefore, to declare bankruptcy early if you have significant debts that you think you will be unable to discharge. Because you are jointly liable for all property held in common, a bankruptcy declaration is liable to have a significant impact on your spouse’s property and credit. This liability covers income as well as assets acquired during the course of marriage. Once you have discharged your debts through Chapter 7 bankruptcy, creditors may be able to come after your spouse’s property, but only for debts for which they are personally liable. Because your spouse is jointly responsible for all mutually owned property, which includes all income and assets acquired during the marriage, the spouse also is discharged from debt obligations at the time of settlement, in what is commonly known as a phantom discharge.

A Chapter 13 Bankruptcy filing can sometimes help to protect a spouse, by way of a codebtor stay that prohibits creditors from going after a codebtor (in this case, your spouse), but debtors may request that a court lift a codebtor protection.

As you can see, there are a variety of different scenarios, which can seem quite complicated and daunting. The expert team at Burr Law know all the ropes, and will take the tack that best suits your particular situation, so that you can get back on track as quickly and as painlessly as possible. You’re not just discharging your debts. You’re discharging a great weight off your mind. Reach out to Burr Law. They can help.

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.

Tax Returns and Bankruptcy: Do I Get to Keep My Refund in Bankruptcy?

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Before exploring the status of any tax refunds, let’s be clear about taxes owed. If you owe taxes, that debt will not be discharged during bankruptcy, whether you file Chapter 7 or Chapter 13 unless 1) that tax debt more than 3 years old; 2)there was nothing fraudulent about the tax returns; 3) and the tax was not assessed within 240 days of filing the bankruptcy petition. Business tax debts cannot be discharged. That said, the status of any tax refunds is not so clear-cut. So the answer to the all important question “Do I get to keep my refund in bankruptcy?” is “It depends.” The issue of tax refunds during bankruptcy is one of a number of complex questions that can arise during bankruptcy. That’s why it is essential to consult with professionals, like the experts at Burr Law, who deal with the intricacies of bankruptcy law every day.

 

Exemptions

Whether you file Chapter 7 or Chapter 13 bankruptcy, you are entitled to exemptions. There are both federal and state exemptions, and Wisconsin is one of only 19 states that allows you to choose which set of exemptions you use. It’s important to note that you must choose one or the other; you cannot mix-and-match the exemption rules. The experts at Burr Law can help you determine which is better for your particular situation. While Wisconsin does not have a specific federal or state tax refund exemption, you can protect it with a wildcard exemption if you are able to use the federal bankruptcy exemptions. Should you choose, your tax refund can become an asset protected through your exemptions, and you would then retain it.

 

Necessary Expenses

Your tax refund may be automatically deposited into your bank account. Can you spend those funds? If you spend your tax refund on necessary expenses like mortgage or rent payments, that is allowable. Other necessary expenses include food, medical expenses, and clothing. While your tax refund counts as an asset, you are allowed to spend money on necessary expenses, and that applies equally to money gained from a tax refund. Basically, as long as you are not spending it on luxury items, it’s all right for you to spend the tax refund you receive. You can also use your tax refund to pay your bankruptcy attorney and associated court costs.

 

Timing – Not Yet Filed

If you have not yet filed bankruptcy, but plan to do so within the year, it is a good idea to adjust your withholding to minimize any refund you may receive. This must be done carefully; if you miscalculate and end up owing taxes, those become non-dischargeable debts. Another way to plan ahead for bankruptcy is to designate more of your income to your employer IRA or 401k. Those retirement contributions will not become assets liable to exploitation during bankruptcy. Pre-planning for bankruptcy will help you avoid the question altogether.

 

Timing – Refund From Income After Filing

Any refund that results from income you earned after filing for bankruptcy is yours free and clear. Also, if any portion of the refund results from income you earned after the filing date, that portion is available to you without restriction. Again, this is a delicate calculation and it is vital that you have an experienced bankruptcy attorney from Burr Law to guide you through the process. You want to adhere to the law in all instances.

 

The issue of tax returns during bankruptcy is complex. With the experts at Burr Law, you can feel confident that all of your individual circumstances will be carefully considered. We will find the best possible solutions for your financial situation.

Can I Keep My Tax Return During Bankruptcy?

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If you are considering filing bankruptcy, or have already done so, you may be anticipating filing your taxes and wondering how taxes owed or refunds received will work into a bankruptcy proceeding. This post will explore how your tax return affects your bankruptcy.

Before exploring the status of any tax refunds, let’s be clear about taxes owed. If you owe taxes, that debt will not be discharged during bankruptcy, whether you file Chapter 7 or Chapter 13. Also, any overdue taxes or penalties will remain.

Tax Refunds Are Assets

You may have received your refund directly into your bank account, the refund may be in process, or the refund may result from the taxes you file for the previous year. Any way you look at it, tax refunds are assets. And when you file for bankruptcy all of your assets become part of the proceedings. That fact does not necessarily mean that you will lose your tax refund. Whether you keep all or a portion of it depends on a variety of factors.

Timing – Not Yet Filed

If you have not yet filed bankruptcy, but plan to do so within the year, it is a good idea to adjust your withholding to minimize any refund you may receive. This must be done carefully; if you miscalculate and end up owing taxes, those become nondischargeable debts. Another way to plan ahead for bankruptcy is to designate more of your income to your employer IRA or 401k. Those retirement contributions will not become assets liable to exploitation during bankruptcy.

Protect Refund With Exemptions

Whether you file Chapter 7 or Chapter 13 bankruptcy, you are entitled to exemptions. There are both federal and state exemptions, and Wisconsin is one of only 19 states that allows you to choose which set of exemptions you use. The experts at Burr Law can help you determine which is better for your particular situation. While Wisconsin does not have a specific federal tax refund exemption, you can protect it with a wildcard exemption. In any event, your tax refund can become an asset protected through your exemptions, and you would then retain it.

Refund Used For Necessary Expenses

If you spend your tax refund on necessary expenses like mortgage or rent payments, that is allowable. Other necessary expenses include food, medical expenses, and clothing. Basically, as long as you are not spending it on luxury items, it’s all right for you to spend the tax refund you receive. You can also use your tax refund to pay your bankruptcy attorney and associated court costs.

Timing – Refund From Income After Filing

Any refund that results from income you earned after filing for bankruptcy is yours free and clear. Also, if any portion of the refund results from income your earned after the filing date, that portion is available to you without restriction. Again, this is a delicate calculation and it is vital that you have an experienced bankruptcy attorney from Burr Law to guide you through the process. You want to adhere to the law in all instances.

The issue of tax returns during bankruptcy is complex. With the experts at Burr Law, you can feel confident that all of your individual circumstances will be carefully considered. We will find the best possible solutions for your financial situation.

Can You File Chapter 13 After Chapter 7?
Multiple Bankruptcies

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There is nothing prohibiting a person from undertaking multiple bankruptcies. If you have already gone through bankruptcy and find yourself in financial difficulties again, you already know some of the advantages that filing bankruptcy brings. While there are no limits on the number of bankruptcies you can file, there are time frames you need to be aware of. It’s also important to know that these time frames apply to bankruptcy cases that have been discharged, not those that have been dismissed.

Successive Same Chapter Filings

A Chapter 7 bankruptcy can be done and dusted in three to six months with all unsecured debt eliminated. If you have previously filed Chapter 7, eight years must elapse from the date of filing in order for you to file another Chapter 7. In Chapter 13 bankruptcy your unsecured debt may be eliminated or substantially reduced. It is possible for you to file another Chapter 13 bankruptcy after two years. Given that the first Chapter 13 plan would still be in place, it would be wise to consult with one of the experienced bankruptcy attorneys at Burr Law before doing so.

Chapter 13 Then Chapter 7

Typically, you can file a Chapter 7 bankruptcy six years after the filing date of your Chapter 13. That time frame can be shorter if you paid your unsecured creditors in full or if you paid at least 70% of the claims and it represented your best efforts. You will need to meet the income status requirement for Chapter 7 as well.

Chapter 7 Then Chapter 13

Four years after the filing date of your Chapter 7 bankruptcy, you can file for Chapter 13. This is sometimes known informally as a Chapter 20, though that can refer to filing a Chapter 13 immediately after a Chapter 7 (or while it is still pending). When you file a Chapter 13 after a Chapter 7 without waiting four years, you cannot receive a discharge in the Chapter 13 but there are some advantages. In Wisconsin, though, courts rarely allow the filing of Chapter 13 earlier than the four year time limit. If the four years has elapsed, then it is perfectly acceptable to file Chapter 13. That will protect your home and car, eliminate or significantly reduce unsecured debt, and give you time to deal with nondischargeable debts.

Multiple Bankruptcies and Automatic Stays

It’s important for you to know that if your initial bankruptcy case is dismissed rather than discharged, there are implications for the next bankruptcy you file (whatever Chapter it is under). If you file within a year of the filing of the first bankruptcy, and that first bankruptcy was dismissed, the automatic stay that prevents creditors from pursuing all collection action will be limited to 30 days only. Usually it is for the duration of the bankruptcy proceedings. The time limit is based on the assumption that the second filing is done in bad faith, so it is possible to request the bankruptcy court to extend it beyond the 30 days. You would need to demonstrate your good faith to the court for that to happen. In the event that you file three bankruptcies within a year, the automatic stay is voided in the third instance.

Bankruptcy is a complicated legal situation. Multiple bankruptcies present even more intricacies. If you are considering a subsequent bankruptcy, it is vital that you have expert advice. With Burr Law, you have access to the finest bankruptcy attorneys, all of whom are experts on Wisconsin bankruptcy law.

How to Prepare for Bankruptcy: What to Avoid Before Filing

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If you’re considering filing for bankruptcy, it’s important to plan ahead, whether it is Chapter 7 or Chapter 13 bankruptcy. There are a number of strategies that you can use to make sure that your bankruptcy work most effectively to eliminate your debt. Once your bankruptcy is complete, you want to have a completely clean slate to begin your financial life anew.

Timing Is Crucial

Chapter 7 bankruptcy is the best choice for actually getting rid of your unsecured debt. It requires a means test, though; you can’t make more than the median household income based upon your family size for your state. For Wisconsin, the median household income in 2019 for a single filer (the most recent data) is $51,792, for a 2 person family is $67,146, a 3 person family is $82,119, and a 4 person family is $98,317. The calculation of your household income is made from all of your income for the six months prior to the month in which you file for bankruptcy. So if there are particular times of the year when you receive money, either in the form of a bonus from your work or a payout from an investment for instance, it would be wise to file for bankruptcy so that any extra income isn’t included. For instance, if you get a work bonus around the 20th of December every year, filing in December means that your household income is figured from June 1 through November 30. You want to avoid any extra money that might push your household income above the median for your state.

Credit Card Spending

When you are contemplating bankruptcy, it may be tempting to make a number of purchases on your credit cards. You may think that it is a good idea to use them while you still have them, and that it’s your final chance to buy something major. There is some truth to this thinking. With either Chapter 7 or Chapter 13 bankruptcy, you will no longer have access to your credit cards. However, it is important for you to know that some credit card debt can be determined non-dischargeable. If you go on a spending spree just before filing bankruptcy, your credit card company can claim those were fraudulent purchases, that you never intended to repay them, and request that they be declared non-dischargeable. You would need to be able to prove that you intended to repay them or that you didn’t plan to declare bankruptcy.

Presumed Fraudulence

There are some instances where the law presumes that your intent was fraudulent. If you use your credit cards in the three months before filing bankruptcy for luxury goods and services totaling more than $725, fraud is presumed (11 U.S.C. § 523(a)(2)(C)(i)(l). Likewise, If you use your credit cards for cash advances totaling more than $1,000 within 70 days before filing bankruptcy, fraud is presumed (11 U.S.C. § 523(a)(2)(C)(i)(l).

Necessary Spending

The designation of luxury goods is significant. The court will not penalize you for using your credit card for reasonable and necessary living expenses. So, while buying a new elliptical machine for your home would not be allowed, paying for your heating for the winter would. If you are considering getting a cash advance on your card in order to pay for necessary living expenses, it would be better to use your card to pay for the gas you need to get to work, and the groceries to feed your family.

If you’re contemplating filing for bankruptcy, the best advice is to speak to one of the bankruptcy experts at Burr Law. We can help inform your decision, and advise you based on your particular situation.

Should I File for Bankruptcy Before or After Christmas? How to Survive the Holidays

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When your finances are in disarray, it’s hard to enjoy let alone survive the holidays. You want to focus on your family and friends, not your financial difficulties. It’s hard to have the emotional capacity to consult an attorney about bankruptcy during this already emotionally challenging time of year. Yet, bankruptcy is a viable option, and it may be wisest for you to file before Christmas. Timing is crucial, and in this post, we look at the various factors you need to consider when making the decision to file for bankruptcy.

Two Types of Personal Bankruptcy

There are primarily two types of personal bankruptcy: Chapter 7 and Chapter 13. Chapter 7 bankruptcy takes only about four months from start to finish, and can eliminate almost all your debt. With Chapter 13 bankruptcy you retain your debt, and a way to pay off your obligations is worked out. It takes between three and five years. So the first thing to figure out when you are considering bankruptcy is whether or not you qualify for Chapter 7.

Income Matters

Filing for Chapter 7 bankruptcy is means tested; you must not earn more than the median household income for your state. In Wisconsin, the median household income was $60,773 in 2018 (according to figures released by the US Census ACS on September 26, 2019). The size of your household matters as well, and the bankruptcy experts at Burr Law can help you know definitively whether or not you qualify for a Chapter 7 bankruptcy.

Timing Matters

Importantly, “income” excludes any money received during the actual calendar month in which you file. The median household income is determined by the numbers during the six calendar months prior to the filing. So, for instance, if you generally receive a holiday bonus in December, or your parents give you a monetary gift to help with presents for the children in December, it would be a good idea to file for bankruptcy before Christmas. Filing for Chapter 7 bankruptcy in December will mean that your household income will be calculated based on the numbers from June 1 through November 30. Survive the holidays by beginning the bankruptcy procedure when the means testing will work in your favor.

Non-dischargeable Debt

If you imagine that you can charge wonderful Christmas presents on your credit cards, and have a spectacular holiday, and then file for bankruptcy, that will not work at all. Bankruptcy law states that any debt incurred during the three months before or after Christmas that exceed $600 and that are not living necessities may be non-dischargeable debt. That particular creditor could file an adversary proceeding to determine that that debt is non-dischargeable. That means that you could be responsible for any purchases made during that time. When you file for Chapter 7 bankruptcy, your credit card use will be carefully examined to determine whether or not charges were “necessary.” Those deemed unnecessary could be non-dischargeable debt, and you may remain responsible for them. So filing for bankruptcy before or after Christmas will not make any difference to the categorization of non-dischargeable debt. Other non-dischargeable debts are certain income tax owed, domestic support obligations, debts to governmental agencies, and student loan debt.

Surviving the holidays is even more difficult when your financial situation is a mess. Even though you may be reluctant to confront the situation before Christmas, it may make a big difference in what kind of bankruptcy you can file and how your income is calculated. Make the time to consult one of our bankruptcy professionals at Burr Law today.

When Does Bankruptcy Clear From Your Credit Report?

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If you’re considering filing for bankruptcy in Wisconsin, you probably have a lot of bankruptcy questions. It’s important for you to have all the information you need in order to make a truly sound decision, and in this post, we will look at one of the most commonly asked bankruptcy questions: When does bankruptcy clear from your credit report?

Credit reports are simply a fact of contemporary existence, and they are consulted every time you apply for a new credit card, or an automobile loan, or any type of financial undertaking. You may not be aware that in Wisconsin credit reports are also considered by landlords, and by some employers. So concern about your credit report is absolutely reasonable when making the decision to file for bankruptcy.

Filing for bankruptcy becomes part of the public record, so if anyone is truly interested in the bankruptcy filing itself, they can access that information.

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 will mean a drop in your credit score immediately after filing, but about 12 to 18 months after you receive your bankruptcy discharge your credit score should go up because your debtor to income ratio becomes much better than when you filed the bankruptcy. 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.

The type of bankruptcy that you file may also affect how its presence on your credit report is viewed by prospective lenders. Chapter 7 Bankruptcy completely wipes out your debt by selling whatever eligible assets you have; Chapter 13 Bankruptcy sets up a three to five year plan to repay a portion of your debt. Obviously, prospective lenders would consider a Chapter 13 Bankruptcy in a more favorable light than a Chapter 7 Bankruptcy. When applying for credit after bankruptcy, you should be straightforward about the bankruptcy and your reasons for choosing that option.

Attorney Michael Burr and the Burr Law Offices can answer all of your bankruptcy questions. You concern about your credit report is certainly warranted, and we can help you understand all the implications of a decision to file bankruptcy. Consult the experts in Wisconsin bankruptcy law at the Burr Law Offices, and bring all your bankruptcy questions with you.