We’ve written a series of blog posts answering questions regarding bankruptcy and the use of credit and its financial impact. Call (262) 827-0375

Consumer Credit Bankruptcy

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.

Does Divorce Hurt Your Credit?

Divorce, like marriage, doesn’t directly affect your credit. You and your ex-spouse will still have separate credit reports. That said, divorce is usually a time of considerable stress, and legal and other expenses, loss of income due to interruption of routine, and inability to keep on top of expenses or disagreements about untangling finances can have significant consequences for your credit score.

Such concerns are often compounded when the divorce is not amicable, and property and debt division are contested. It is generally advisable to suspend joint accounts if divorce seems imminent and to try to establish individual accounts, and to keep good records of what debts have been incurred by which party, since any debts involving joint credit or joint property will be liabilities on both parties.

Remember, too, that apart from legal fees and whatever losses might result from a reduction in joint income, the sum of individual expenditures will often rise when former partners begin to support separate residences, perhaps acquire another vehicle and replace other shared items and expenses that no longer can be shared. It is best to budget strictly in anticipation, because any interruption in payments for joint debts may adversely affect individual credit ratings. Interruption in court-ordered spousal support payments and child support often accompany such upheavals, whether due to inability or unwillingness of a former partner to pay.

If you are able, try to untangle whatever debts you may have from those belonging to your spouse. Request in writing that any joint accounts be suspended and not reopened. Remove his or her authorized user status from any credit accounts. Once again, it is best to do this in writing. Also, if possible, get your spouse to have transferred to them any debts belonging solely to them, so that responsibilities will be as clear-cut as possible. Look to transfer balances and renegotiate debt to your favor wherever possible.

And even though the transition time is liable to be tempestuous, don’t blow off your debts. Stay in touch with your creditors, and let them know that you mean to meet your obligations, even though it may be hard to muster the focus during a difficult time.

For personalized guidance on how best to protect your assets and your credit during a divorce, contact the experts at Burr Law. They will offer intelligent, compassionate support to help you when you need it most.

Who Pays for Bankruptcies? How Bankruptcies Work

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

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

Court Costs

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

Credit Counseling Course Costs

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

Attorney Costs

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

Cost/Benefit Analysis

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

How Does Debt Relief Affect Your Credit?

The unrelenting pressure of overwhelming debt can cause all kinds of problems outside of the financial realm. It can affect your love relationship, your familial interactions, and your physical and mental health. You know you need debt relief, but worry that pursuing it may further deteriorate your credit score. In this blog post, we will examine the different kinds of debt relief and their implications for your credit.

 

Debt Management – What Is It

With debt management, the entirety of your financial situation is reviewed by a credit counselor, who then creates a debt management plan for you to follow. Generally these are for terms of three to five years, and often you must agree not to seek any additional credit during the time that the debt management plan is in place. Some organizations may take control of your monthly payments, making them on your behalf. You will pay a monthly fee for the service.

 

Debt Management – Credit Implications

The fact that you’re engaged in a debt management plan will be noted on your credit report. If you adhere to the regime for the entire time, your credit score should not be affected. However, at least half of clients do not successfully complete the plan. Obviously, failing to complete a debt management plan would have negative implications for your credit score.

 

Debt Settlement – What Is It

Debt settlement differs from debt management in that the organization you work with negotiates with your creditors on your behalf to decrease the amount you owe. Sometimes, they offer a lower lump sum payment to the creditor; sometimes, they seek debt forgiveness or lower interest. You will be expected to pay an enrollment fee as well as a monthly fee for each credit card on the plan. Also any forgiven debt is reported to the IRS who treats that as income.

 

Debt Settlement – Credit Implications

Debt settlement companies are not concerned with your credit report. Their job is to get the current debt lowered or forgiven. Most debt settlement companies ask you to suspend payments to your creditors while they negotiate on your behalf. This strategy has a tremendously negative impact on your credit report since the most significant factor is payment history.

 

Debt Consolidation – What Is It

In its most basic form, debt consolidation combines 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. 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.

 

Debt Consolidation – Credit Implications

Because you are taking out an additional loan, your credit report will reflect a “hard inquiry” and that will lower your credit score. Often, your credit score decreases by a relatively small amount, and that decrease is temporary.

 

The ultimate debt relief, of course, is filing for bankruptcy. The general fear that filing for bankruptcy means the end of ever acquiring new credit or home ownership is unfounded. The experts at Burr Law can talk you through the different options and the various implications for your credit.

When Does Bankruptcy Clear From Your Credit Report?

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.

Bankruptcy Pros and Cons

When you’re in financial distress, it can sometimes seem like there is no way out. There are all different kinds of reasons people find themselves flailing in a sea of debt. Whatever the reason, when creditors are circling sharks, bankruptcy may be the lifeboat you need. Over 12,000 Wisconsinites have filed bankruptcy so far this year (January 1 through September 30, 2019). In the Eastern District of Wisconsin (including Milwaukee and its surrounding areas), 9,466 bankruptcy cases have been recorded
(www.wiwb.ucourts.gov, www.wieb.uscourts.gov). So bankruptcy is neither shameful nor unusual.

Filing for bankruptcy is a serious decision, though. You want to have all the information and understand all the implications before proceeding. Let’s take a look at some of the bankruptcy pros and cons.

PRO: Bankruptcy Stops All Collection Activities By Any And All Creditors. 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, including any garnishment, foreclosure or repossession.

PRO: 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 from 3-6 months, after which your debt is cleared” (David Chandler, https://www.consumeraffairs.com/finance/bankruptcy_02.html). 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.

PRO: 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. Filing bankruptcy allows you to retain those protected assets while getting rid of the debt.

CON: Bankruptcy Means No Credit Cards Until You Receive Your Bankruptcy Discharge. While bankruptcy rids you of your debt, it also rids you of your 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; car repairs may need to wait. Once you receive your bankruptcy discharge you can apply for credit, including credit cards and you should receive that credit or credit card.

CON: Bankruptcy Complicates Credit/Loan Prospects. Bankruptcy remains on your credit record for 10 years, and it can make getting an auto loan or other kind of loan more difficult, but not impossible. And while you may receive credit card offers shortly after declaring bankruptcy, they often come with high interest rates. Naturally, your credit rating will drop, but will improve and be back to normal about 1 year after bankruptcy discharge. Professional advice can assist in charting a positive strategy and ways to improve your credit score.

CON: Bankruptcy Becomes Public Record. When you file for bankruptcy, it becomes a matter of public record, and anyone can request those records. Except it will not appear on the State of Wisconsin, CCAP website, which list case filed in Wisconsin.

A Wisconsin legal team that specializes in Chapter 7 and Chapter 13 bankruptcy proceedings can help you make the right decision for you and your family. If you need help with dealing with debt in Wisconsin, Burr Law Office can provide you with practical solutions that suit your needs. We can help you make the best possible decisions for yourself, your family and your future. Call us today at (262) 827-0375 to schedule a free bankruptcy evaluation. At Burr Law Office, we are here to help.

Answering Common Questions About Milwaukee Credit

Credit and debt are among some of the most complicated financial topics to grasp, which is often why so many individuals find themselves facing massive debt and other major financial troubles. A good way to help protect your financial future is to educate yourself on common credit topics. Read over these answers to common questions about credit to boost your knowledge.

How Many Credit Cards Should You Have?

While there is no perfect number, most individuals benefit from having two credit cards —one that offers a low-rate when you must carry a balance, and one that offers a grace period. However, it is recommended that you carry at least four different lines of credit to help boost your overall rating, such as a major credit card, retail card, car loan, and home loan.

Does Checking Your Credit Rating Hurt Your Score?

Checking your credit rating does not affect your score if you utilize a “soft inquiry” rather than request it directly from your lender. By requesting your score from a service that provides reports directly to consumers for a fee, these inquiries will show up on your credit report, but will not deduct any points from your overall score.

How Can You Repair Your Credit Rating?

There are a number of ways to improve your credit rating. This includes reviewing your credit report for discrepancies or errors, obtaining a secured credit card, and paying all of your bills on time each month. It is also important that you pay the maximum balance on all of your credit cards on a monthly basis rather than just the minimum balance to avoid compounding interest.

With years of experience, the bankruptcy attorneys with the Burr Law Office are here to help you with your financial struggles. To learn more about our debt relief services or Milwaukee Chapter 13 bankruptcy, contact our bankruptcy law office at (877) 891-1638 today!

Bankruptcy, Credit, and Lessons for You and Your Children

If you’ve read this blog before or looked around our website, you won’t be surprised to hear me repeat what we’ve said about bankruptcy many times before. Bankruptcy is a legal tool to allows people to protect their future and keep financial issues from taking over their lives. While many people automatically associate negative thoughts with the word “bankruptcy,” it’s also worth looking at in a positive light as well. It does, after all, provide this important protection for so many people. Far worse would be a country with no bankruptcy law and no effective way to get out of lifetime indebtedness.

But in this post, let me suggest another “silver lining” regarding the bankruptcy process—the lessons you can learn and that you can teach your children about finances, borrowing, and debt. That’s right: Although going through financial hardship isn’t fun, it can lead to some important life lessons.

Have you ever heard it said about someone that, “he (or she) knows the value of a dollar?” It’s a common saying and usually refers to someone who has had to work hard for his or her money or someone who has a “rags to riches” story. The point of the saying is, whatever the case, they don’t take money for granted—they pay attention to their money.

There are many stories about people who have become wealthy only after they have first had a financial hardship. Financial hardships can transform the way people think about money and how carefully they pay attention to it. To be sure, financial difficulties can come from any number of situations and are not always relational to how vigilant one is with their finances; however, someone who has had to watch every penny might just value those extra pennies just a little more.

So whether you’re thinking about filing for bankruptcy, already have, or are just finding out more about the process, let me suggest that there can be a lot of value in going through a difficult financial time. Let’s take a quick look at some of the financial experiences that many have gone through and how they have used those experiences as an opportunity to learn and to pass on wisdom to their children.

Borrowing

For many of us, we were perhaps never given a formal introduction to the concept of borrowing money. Maybe the whole idea first came in the form of a low-limit credit card or a department store card. Or maybe we started borrowing money when we took out student loans and we simply resigned ourselves to the fact that borrowing money is a part of life. Then, as we got more and more comfortable with borrowing, we took out more cards, loans, and borrowed other places.

After going through a cycle of borrowing and trying to repay, many people become more aware of how the process works. If you have children, this is a very valuable lesson you can teach them. You can explain to them how the process works and what the implications are so that the first time they are presented with the idea, they have the facts. Your experience can be a great teacher for them.

Repaying

Up until recently, lenders like credit card companies didn’t have to clearly lay out the implications of making minimum payments on debts. For those who didn’t know better, they may have assumed that they could simply pay the minimum monthly payment and the debt would be retired in a relatively short matter of time. This is almost never the case with things like credit cards. Oftentimes, even small debts will take years and years to pay off if only the minimum payment is made each time. This is another pearl of wisdom you can pass along to your children. You can teach them that when they do borrow, they will need to pay attention to these number and figures and be prepared to know what to expect before they sign up for anything.

It’s Not “Real Money”

When you’re given a line of credit, it might not feel like real money. It’s really just a number. And then if you make your payments online, an amount is just debited out of your checking account. It might not be tangible to you. Think about creative ways to quantifying money when you talk to your children, or even quantifying the amount of money they will spend in interest. Try explaining that “this is enough money for a new video game…a new bike…or even a new car” (depending on how much money you are talking about). Putting it in real terms might help them think about what the numbers mean and make it more tangible.

Saving

Many young people open their first credit card so that they have a backup plan for “unexpected expenses.” Since life is unpredictable, these lines of credit almost always get utilized. By saving up an “emergency fund” instead of utilizing credit cards, you can still be prepared for those unexpected expenses. Encourage your children to start a “rainy day” fund for themselves very early—maybe when they are working just a part time job and still in school. By the time they start their adult lives, they will have a nice little bit saved up that they can rely on as a backup plan rather than opening a credit card for the same purpose.

Finally, it’s important to re-iterate that the reasons for financial hardships are as diverse as the people experiencing them. The above information is not at all to suggest that poor decisions were made by anyone, but just a way of explaining how sometime good lessons can come out of hard times. If you are facing financial problems and need to talk to one of our Milwaukee bankruptcy attorneys to find out what your options are, please don’t hesitate to give us a call today. We’re always here to help!

Keep Yourself Out of Credit Card Debt: Tips & Tricks

Credit cards can be a blessing when it comes to large purchases. They prevent you from having to carry excessive amounts of cash and, depending on the card, can provide you with competitive financing options. There are a few things to keep in mind when deciding whether or not to use a credit card. Take a look at these easy steps to help keep you from getting yourself into trouble with debt.

Establish and stick to a budget

Keeping yourself on track is the most important and key component to staying out of debt. You may be tempted to charge that brand new gadget because it’s the latest and greatest thing, but you need to be able to justify it financially before doing so. If it’s not in your budget, don’t buy it.

Understand how reward cards work

Some people get caught up in reward offers on credit cards. Sometimes people that hold these cards end up spending way more than the reward is worth and get caught up in major fees and interest rates.

Choose cards with lower interest rates

Having a better credit score allows you to be approved for credit cards with lower interest rates. Try not to be fooled by fancy offers or catches associated with applying for a new credit card without looking at the full details first. Usually, cards with the best introductory offers bump up to sky-high interest rates after the first 6 months or so.

Don’t keep balances longer than 6 months

Compound interest adds up quickly. The longer you keep a balance, the larger the amount you pay. Don’t let you balance snowball for longer than six months, or it can become extremely expensive to pay off.

The Milwaukee bankruptcy specialists at Burr Law Offices are here to help keep you out of debt. If you find yourself in financial trouble, call Milwaukee bankruptcy Attorney Michael Burr to schedule a consultation.

Rebuilding Credit After You Declare Bankruptcy

Milwaukee bankruptcy rebuild creditThe process of filing is extremely stressful. After you declare bankruptcy in Milwaukee, there are several very important things you should do to continue on the path to financial freedom. It is crucial that you pay close attention to a number of details so as to protect yourself from problems down the road. Here are a few tips to help you rebuild credit.

Keep tabs on your credit report/score

After you’ve filed for bankruptcy, one of the first things you should do is obtain a credit report and check it to be sure everything is accurate. From then on, make an effort to continuously monitor your credit score. This way you’ll be aware of any changes that may occur and can address the issue immediately. If you need assistance reviewing or understanding your credit report, feel free to contact Waukesha bankruptcy attorney Michael Burr.

Hang on to your discharge and other documents

Although you won’t be pulling them out every so often like you would a photo album, it’s a good idea to keep all of the paperwork from you filing in a safe place. If something were to happen down the road regarding the discharge, having the paperwork will be a huge help.

Don’t throw in the towel on credit cards

Many people that have filed for bankruptcy say they will never again have a credit card. While living without credit cards has its benefits, it may not be practical in this day and age. It’s a good idea to keep at least one credit card for a multitude of reasons – online purchases, hotel reservations, unexpected expenses, etc. You never know when you might need a credit card, so it’s best to have one and be smart with it. Wait about 6 months after your bankruptcy to apply, and do so at your local bank or credit union.

Set a goal for savings

Setting up a new savings account and setting a goal as to how much you will keep in the account is a great way to give yourself a bit of security. You can start out small – maybe one or two weeks pay worth – and build it up over time. Just and with anything, you never know what will happen so it’s a great idea to give yourself a backup account in case of emergencies.

At Burr Law Office, we are committed to helping you declare bankruptcy and want to help you to get back on your feet. Our Waukesha bankruptcy attorney team is a great resource – give us a call with any questions!