What is bankruptcy anyway?
Bankruptcy is a legal process that allows people who are overburdened with debt to pay off as much of it as possible while still having the resources they need to get back on their feet. Bankruptcy protects the person who owes money from being completely trapped by debt and lets them start over, but it also allows the people and businesses who are owed money recover as much of it as they reasonably can.
Isn’t filing for bankruptcy a bad thing?
No! Congress built bankruptcy into our laws to provide people with the opportunity to restructure their debts and get the fresh start they deserve. After all, is there anything more American than a second chance?
Am I eligible for bankruptcy?
Almost certainly. There are different kinds of bankruptcy for different situations. You may be eligible for more than one kind, so consulting with our attorneys will be a good first step:
- Chapter 7
This is the most common kind of bankruptcy used by people in Wisconsin. It’s usually called a “liquidation” bankruptcy.
- Chapter 12
This is used by farmers.
- Chapter 11
This is usually used by businesses to reorganize their finances, though individuals can file Chapter 11 in limited circumstances.
- Chapter 13
This is another kind of bankruptcy for individuals. You pay back more of your debt with this type of bankruptcy, but you also keep more of your assets.
Can I include all of my debts in a bankruptcy?
Most debts can be included in a bankruptcy proceeding and discharged, but certain debts may be very difficult to discharge, while some may not be dischargeable at all. Generally, consumer debt such as credit card debt is relatively easy to discharge. Government-backed loans such as student loans are very difficult to discharge; a debtor must show that paying back the student loan would be an extreme burden. Some family debts such as alimony and child support may not be discharged at all.
Will everyone know that I’ve filed for bankruptcy?
People will know about your bankruptcy only if they want to go through the hassle of searching through public records databases. Most people will not take the time to do so or have any reason to look at those records.
Are there any other options I should know about before considering bankruptcy?
Other debt relief options include debt settlement, strategic default and debt management programs. Our experienced attorneys can help you explore these options at your free consultation.
What do all of these legal terms mean?
Here are some common terms that you will hear during bankruptcy proceedings:
The person filing for bankruptcy.
Anyone to whom the debtor owes money, including people, businesses and other entities.
A person—typically a lawyer—assigned by the court to oversee and carry out the bankruptcy proceedings, including the sale of any assets and distribution of money to creditors.
- Bankruptcy Judge
This person presides over the bankruptcy proceedings. If any disputes come up, the bankruptcy judge will issue rulings.
- Credit Counselor
This person will sign off on the mandatory financial management courses that are part of the bankruptcy process.
- Bankruptcy Estate
This is everything owned by the debtor, including property that the debtor has co-ownership of with other people, minus exemptions allowed by Wisconsin state law.
What is an automatic stay?
An automatic stay occurs when a debtor files bankruptcy. The automatic stay is a bankruptcy court order that stops creditors’ actions. When an automatic stay is in effect, most creditors may not contact a debtor or otherwise attempt to collect on a debt. If a creditor violates the automatic stay, that creditor may suffer serious repercussions. In some instances during the bankruptcy process, the court may lift the automatic stay, meaning that the creditor may resume attempts to collect debts from the debtor.
Can I stop wage garnishment?
Yes. The automatic stay issued after you file for bankruptcy puts an immediate stop to wage garnishment, repossession and creditor harassment.
Can I save my home from foreclosure?
If it is in your best financial interest to keep your home, you may be able to use Chapter 13 bankruptcy to restructure your debts in a way that will allow you to make your monthly payments and avoid foreclosure. Renegotiating the terms of your mortgage may also be a possibility; the fact that it is in the bank’s best interest to receive some form of payment rather than holding onto a vacant property provides you with good leverage in this situation.
Will bankruptcy affect my job?
Your employer may find out, particularly if you file Chapter 13, but cannot use your bankruptcy against you. Employers can consider bad credit revealed in background checks during the hiring process. However, bankruptcy could actually be helpful for your future prospects by providing a fresh start and improving your credit if you are currently missing payments or struggling with crushing debt.
Should I try to file Chapter 7 or Chapter 13 bankruptcy?
Most people filing bankruptcy will choose Chapter 7 because most debt is able to be discharged. This means that the person does not have to pay back that debt. However, debtors (the people filing for bankruptcy) must qualify for Chapter 7 bankruptcy using something known as a “means test.” This test determines a debtor’s disposable income by balancing overall income against certain expenses. If a debtor has too much income, he or she may not qualify for Chapter 7.
Although Chapter 7 allows debtors to discharge most debt, Chapter 13 can also be very beneficial. A Chapter 13 bankruptcy allows debtors to repay their debts over time, without fear of accruing additional interest or suffering harassment from creditors. Chapter 13 can also be helpful for debtors who are behind on bills like their house payments when they wish to keep their house; these debtors are able to repay their delinquent house payments over time rather than all at once.
How long will it take to complete the bankruptcy process?
This depends on the kind of bankruptcy that you decide to file. For the most common kinds of consumer bankruptcy, Chapter 7 and Chapter 13, the timelines are quite different. A Chapter 7 bankruptcy is typically finished in three to four months, at which point all of your dischargeable debt will be erased. This rapid timeline is one of the reasons people often choose it, since they can get a fresh start more quickly.
Chapter 13 bankruptcy filings take longer to complete, since they include a debt repayment plan that extends over a period of three to five years.
Working With A Bankruptcy Lawyer
How much is the consultation?
The consultation for bankruptcy cases is completely free.
How much will bankruptcy cost?
We charge a flat fee with flexible payment plans, which makes bankruptcy affordable and allows you to pay in a way that fits your situation.
Will I work with my lawyer directly or staff members?
While we have a highly qualified and helpful staff to maximize our success, our lawyers will work directly with you and be your main contact.
Will I get a lecture about my finances?
No. We are not here to judge you, but rather to help you get a fresh start and headed toward a financially successful future.
Do I really need a lawyer?
While you can technically represent yourself in bankruptcy proceedings, it is in your best interest to use a qualified attorney. Bankruptcy is an exceptionally detailed process, so the cost of an experienced attorney is more than balanced by the savings and strategies that come with a thorough understanding of the law.
What Happens To Your Property In Bankruptcy?
Will I lose assets like my car and home?
Generally no, as with most bankruptcies we file, we are able to protect homes and vehicles.
If I file bankruptcy, do I have to give up all of my property?
In a Chapter 13 bankruptcy, a debtor (the person filing for bankruptcy) will abide by a court-ordered repayment plan. The bankruptcy court will weigh several factors such as a debtor’s income and amount of debt to determine the specifics of the repayment plan. The plan will call for either all of the debt or just a portion to be repaid, with the rest of the debt being discharged at the end of the repayment period. Generally in a Chapter 13 bankruptcy, a debtor is able to keep all of his or her property, because the debtor will be repaying portions of the debt over time.
Because a Chapter 7 bankruptcy discharges, or erases, most of a person’s debt, he or she may have to surrender certain property. This property is then sold and used to compensate a person’s creditors for a portion of the debt they are owed. Although this sounds frightening, Chapter 7 bankruptcy allows for many “exemptions.” In the majority of Chapter 7 bankruptcies our clients are able to protect and keep all their assets using the exemptions, so most of our clients do not lose anything other than the debt.
These exemptions are amounts of money and/or property that a debtor may keep. Exemptions include certain types of government compensation such as Social Security and unemployment income, retirement benefits, tools used in a debtor’s profession, certain amounts of equity in a debtor’s home, and most personal property. There is even a so-called “wild card” exemption, which allows a debtor to exempt things that do not quite fit into any other category or to exempt more value of an allowed item.
Life After Bankruptcy
How long will bankruptcy affect my credit score?
The timeline varies, but it is not uncommon for people to start receiving credit offers within 12 to 18 months after completing the bankruptcy process. While it can take several years to fully rebuild your credit, bankruptcy will not permanently ruin your credit score.
Does bankruptcy make it harder to get loans?
Yes, but primarily in the short term. If you are struggling with debt to the point where bankruptcy becomes an attractive option, your poor credit is already making it difficult, if not impossible, to obtain credit anyway. Bankruptcy may hurt in the short term, but it will provide you with the opportunity to rebuild your credit rating and improve your financial standing.
Will I ever be able to buy a house again?
Chapter 7 will typically result in a four-year “seasoning” period before you are eligible for a home loan, while Chapter 13 may result in only a two-year period, and even shorter for FHA or VA loans.