How Does Bankruptcy Affect A Lawsuit?

There is no quick and easy answer to this question. Generally, if the lawsuit involves money or property, it will be temporarily suspended or dismissed. If it is primarily concerned with something else (child custody, for instance), it will not have any effect. When you file for bankruptcy, the bankruptcy court will enter an automatic stay. This injunction means that as soon as any other court learns of the bankruptcy proceeding, it must act accordingly. Usually, lawsuits that involve money or property are immediately suspended, with the possibility of dismissal if the bankruptcy goes through to completion. This is an extremely complicated area of law, however, and it is imperative that you have the advice of bankruptcy experts, like those at Burr Law.

Pending Money/Property Lawsuits

This lawsuit would overlap with the jurisdiction of the bankruptcy court, so typically, the automatic stay will stop the debt collection lawsuit. Your attorney would file a “Suggestion of Bankruptcy.” This lets the judge know that a bankruptcy case is pending, and the entire lawsuit is suspended, at least until the bankruptcy court enters a discharge. When that happens, the court in the collection suit usually dismisses the case since it will be dealt with in the bankruptcy court. However, this course of action is not guaranteed. Though bankruptcy courts issue an injunction that suspends a pending case that has to do with money or property, it may be determined that having another court continue the case would be more efficient. In that situation the bankruptcy court would allow the case to go forward.

New Lawsuits

Likewise, if a creditor wants to begin a lawsuit against you after you have filed bankruptcy, it is possible, though difficult, to do. The creditor can request that the automatic stay be lifted in that particular instance, and it would be up to the bankruptcy judge to decide.

Divorce and Child Custody

Generally, divorce or child custody cases that are in current litigation will not be affected by a bankruptcy action. A number of family court judges will put the case on hold as a courtesy until they get an order from the bankruptcy judge. Bankruptcy courts don’t want to have anything to do with these kinds of family law matters.

Alimony and Child Support

With alimony and child support, the relevance of bankruptcy is apparent. The family court’s imposition of child support or alimony orders could affect a bankruptcy case because of the effect on the debtor’s resources. This is true when the person declaring bankruptcy is the one also paying alimony and/or child support as well as when the person declaring bankruptcy is the one receiving alimony. A bankruptcy court may reserve jurisdiction over a property settlement but even then, bankruptcy courts rarely take issue with a property settlement unless it is extreme.

If you are behind on your alimony payments and legal action has actually begun to collect them, the bankruptcy injunction will suspend that activity. However these are not debts that are dischargeable under either Chapter 13 or Chapter 7 bankruptcy. This can also be the case for many property settlement agreements. Consultation with the professionals at Burr Law can help clarify your position.

A child support creditor (a state agency or the other parent) is subject to the automatic stay just like any other creditor. However, any debts you owe for child support will not be discharged in the bankruptcy case. The creditor can renew collection activities after the bankruptcy court enters the discharge.

Other Lawsuits

There are other kinds of lawsuits where the intricacies of the particular situation mean that bankruptcy might have an affect on them. These lawsuits include: criminal cases, code enforcement and nuisance actions, evictions, and administrative actions. Ask the expert bankruptcy attorneys at Burr Law for help if you are considering bankruptcy.

How to Prepare for Bankruptcy: What to Avoid Before Filing

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.

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.