Feds Release New Report On Bankruptcy Trends

The Administrative Office of the U.S. Courts releases data on bankruptcy filings each quarter. The data gives the Hanson & Payne team a snapshot of the current bankruptcy docket. And it is helpful to dive into the data and see how bankruptcy filings in Wisconsin, and the Milwaukee area in particular, compared to those in other states — something we did in a recent blog post

But it is also good to take a look back over several quarters or years of data and see what sort of trends emerge. That is exactly what the Administrative Office of the U.S. Courts did in a recent report. 

Looking at just nonbusiness filings (which we can assume are personal bankruptcies), it found:

  • In the 16-year span from Oct. 1, 2005, to Sept. 30, 2021, about 15.3 million non-business bankruptcy petitions were filed in the federal courts (i.e., filings involving mainly consumer debt). Of those, 10.3 million – 67 percent of total nonbusiness filings – were filed under Chapter 7, and 5 million – 32 percent of total nonbusiness filings – were filed under Chapter 13.

You may recall that a Chapter 7 bankruptcy is a fresh start bankruptcy. Assets are liquidated, most debts are wiped out, and the filer moves forward with a clean slate. In a Chapter 13 bankruptcy, the filer enters into a multi-year, court-supervised repayment plan, which helps the filer catch up on payments while hanging on to important assets. 

What is interesting about this data is that 2005 is when Congress updated the bankruptcy code to encourage (and in some cases force) more bankruptcy filers to file under Chapter 13 instead of Chapter 7. It is clear from the data that the vast majority of filers still file under Chapter 7. 

Is Wisconsin Following This Trend? 

Taking a look at the Wisconsin data, we can see that is certainly true here. During the 12-month periods ending September 30, 2006-2021, there were around 13,100 Chapter 13 cases filed in the Western District of Wisconsin. That is 14.04% of the total nonbusiness bankruptcy cases filed in that district. In the Eastern District, where Milwaukee is, there were around 61,600 Chapter 13 cases filed. Those were 26.13% of the nonbusiness bankruptcy cases filed in the district. 

But compare this to the Southern District of Georgia where 74% of all nonbusiness bankruptcy cases were filed under Chapter 13. Or the Middle District of Alabama, where 70% of all nonbusiness bankruptcy cases were filed under Chapter 13. Clearly there are regional differences in bankruptcy filing trends that it will be important to keep an eye on.  

Milwaukee Bankruptcy Attorneys You Can Trust

The Hanson & Payne team will continue to monitor bankruptcy trends across the country and in the Milwaukee area to ensure we can serve our clients well. 

We are a full-service bankruptcy law firm you can trust to handle your case with care. Please contact our experienced team of attorneys to schedule a meeting if you are in need of advice about bankruptcy, or representation in a pending case.

Receivership 101: What You Need To Know About This Popular Alternative To Bankruptcy

Although receiverships are frequently used by Wisconsin businesses in financial distress, they are not as well known or understood as the bankruptcy process. In this post, the Hanson & Payne team, which has helped numerous business owners in the Milwaukee area navigate the receivership process, will give an overview of receivership and discuss some of its pros and cons. 

What is a receivership? 

While bankruptcy is federal law, and cases are handled in the federal courts, a Chapter 128 receivership is a creature of Wisconsin law. Wisconsin lawmakers created the Chapter 128 receivership process to provide an additional option to local companies in financial distress. All the cases are handled in our state courts. 

A receivership may be initiated by a business owner, much like a bankruptcy, or secured creditors may petition the court to appoint a Chapter 128 receiver involuntarily. No matter how the case begins, the court appoints a receiver to take over the business and run it with the interest of the company’s creditors in mind. 

The receiver has the flexibility to facilitate the quick closing, sale, or restructuring of troubled businesses. However, the court will provide some oversight. 

When a business is closing down, the receiver is in charge of managing the sale of company assets. Oftentimes the assets are heavily discounted in order to get the money needed to pay off financial obligations and wind down operations as quickly as possible. 

When the business is not closing, it is the receiver’s job to dig into the company’s financial records and take a look at its operations in order to determine if the business can be effectively restructured and turned back over to the current owners, or if it is better to sell the whole thing as a going concern.

If the business is being sold as a going concern, the receiver may choose to appoint an agent who will be tasked with managing the day-to-day operations of the business. 

The receiver has much more flexibility than a bankruptcy trustee when it comes to determining which assets can be sold off, what debts should be renegotiated, and how to move forward. 

What is a receiver? 

The court-appointed receiver is an attorney experienced with the Chapter 128 process. 

He or she is an agent of the court, but has a fiduciary duty to the business he or she is tasked with overseeing. The receiver’s powers and responsibilities are laid out in statute, and further described in the court order appointing them to their current role. 

Receivers are generally paid on an hourly basis, with their fees coming from the business.

What are the pros and cons of receivership? 

Compared to Chapter 7 or Chapter 11 bankruptcy, a Chapter 128 receivership may be a faster and cheaper way to resolve a business’s financial woes. The receiver has much more flexibility than the trustee in a bankruptcy case, which can mean there are more options available for moving forward. 

Receiverships may not be the best option for a business that is intent on shutting down. Bankruptcy may also be a better option if the business has an overwhelming amount of debt. 

Helping Businesses In the Milwaukee Area Find A Path Forward

Hanson & Payne team has advised numerous business owners in the Milwaukee area that are unsure if receivership or bankruptcy is the best option based on their goals. We have experience with both processes, so our firm can help business owners understand what their options are, and what choosing one over the other would mean for their business. Contact us today to schedule an initial consultation.

Bankruptcy Is Not The Way To Get Rid Of Student Loan Debt… Yet

There are roughly 43 million Americans who have some sort of federal student loan debt. It is therefore not surprising that President Biden’s plan to forgive up to $20,000 held by low- to middle-income borrowers is making headlines and inspiring a lot of questions from Hanson & Payne clients. 

For many student loan debtors in Wisconsin, Biden’s plan may be the only sort of forgiveness they can ever expect, no matter how dire their financial situation. Except in very rare circumstances, student loan debt is not dischargeable through bankruptcy… yet. 

Biden’s Student Loan Forgiveness Plan

In August, President Biden announced a plan to forgive up to $20,000 of student loan debt held by low- to middle-income borrowers while restarting loan payments that have been paused since March 2020:

“The Department of Education will provide up to $20,000 in debt cancellation to Pell Grant recipients with loans held by the Department of Education, and up to $10,000 in debt cancellation to non-Pell Grant recipients. Borrowers are eligible for this relief if their individual income is less than $125,000 ($250,000 for married couples).”

The Department of Education estimates that, among borrowers who are eligible for relief, 21% are 25 years and under and 44% are aged 26-39. More than a third are borrowers age 40 and up, including 5% of borrowers who are senior citizens.

If all borrowers claim the relief they are entitled to, 20 million borrowers will see their full debt wiped out. This is a big deal since filing for bankruptcy typically does not impact one’s student loan balance. 

Can Student Loans Be Forgiven Through Bankruptcy? 

Declaring bankruptcy typically does not help someone whose debt load is mostly student debt. Only in rare circumstances is student loan debt dischargeable through bankruptcy. 

The courts apply what is known as the Brunner test to determine whether a filer’s student debt may be forgiven. In order to be eligible for student loan forgiveness, a debtor must show:

  1. His or her loans and life circumstances are creating a hardship;
  2. Those circumstances are likely to continue for the entire term of the loan; and
  3. He or she has made good faith attempts to repay the loan. 

While these are fairly straightforward criteria, the courts have been reluctant to decide that student loan debt is forgivable. 

However, there is a movement to change this. The national conversation over student loan debt has inspired policymakers to take a closer look at the current system with an eye toward improving it. Making student loans dischargeable through bankruptcy is one option being considered. 

A Milwaukee Area Bankruptcy Attorney You Can Trust 

If you are worried about keeping up with your student loans when payments resume, Hanson & Payne is here for you. Please contact us today to schedule a meeting with our experienced team of bankruptcy attorneys. The debtor cannot maintain, based on their current income and expenses, a “minimal” standard of living for themselves and their dependents if forced to repay their loans;

Additional circumstances exist indicating that this situation is likely to persist for a significant portion of the repayment period of the student loans, and the debtor has made good faith efforts to repay their student loans. 

In these cases, the courts really focus on the hardship that the loans are creating. Are the student loans making it difficult to pay other bills? Is it impossible to find a decent place to live or move to a new location because of the student loans? What would you be able to do without the loans that you are unable to do now? Specific details are needed to persuade the judge that the hardship the debt is creating is unbearable and that the student loans should be forgiven. This typically covers both the first and second prongs of the Brunner test.

To meet the third prong of the test, one does not need to show that any payments have been made. It is enough to show that the borrower was serious about budgeting, or attempted to enroll in an income-based repayment plan. What the court is looking for is evidence that the borrower would pay the loans back if he or she were able to do so. 

Unlike many other types of debt, student loan debt is not tied to any collateral. Nobody can repossess the lessons you learned while sitting in a lecture hall to pay themselves back if you don’t have the cash to do so. This is one of the main reasons student loan debt is not dischargeable. 

But compare this to other types of debt without collateral that is dischargeable, including credit card debt and gambling debts. These debts without collateral are typically dischargeable. In the eyes of policy-makers, the difference is in the magnitude and scale of the potential debt, and the perceived societal benefits tied to educational debt. 

PLUS loans, like other student loans, are not always dischargeable through bankruptcy. A filer must prove repaying the loans would be an undue hardship. This is a difficult burden to meet, but the difficulty of meeting it should not prevent you from seeking relief and consulting with one of the experienced bankruptcy attorneys at Hanson & Payne.

Iron Horse Hotel Motors On Despite Bankruptcy

Earlier this summer, Milwaukee’s popular Iron Horse Hotel filed for Chapter 11 bankruptcy. The much-lauded, motorcycle-themed lodge plans to stay open while its case proceeds, which is not unusual and is probably a good thing for the Walker’s Point neighborhood. 

Although Hanson & Payne is not involved in the case, it is one we are keeping an eye on since the hotel is a well-known Wisconsin business, and Chapter 11 filings give you a glimpse behind the curtain. 

Why The Iron Horse Hotel Filed for Bankruptcy

The Iron Horse has been welcoming guests at its Florida Street location, just across the bridge from the Harley-Davidson Museum, since 2008. The former Coakley Bros. Inc. warehouse has around 100 guest rooms, two banquet facilities and two restaurants. 

According to court filings, the hotel is valued around $28 million. Its largest debt is to its mortgage lender, which has attempted to foreclose on the property. Other creditors include a neighboring apartment complex which provides parking to the hotel, professional services firms, food and beverage suppliers, local construction companies, and the Small Business Administration’s Covid-19 Economic Injury Disaster Loan (EIDL) program.

Some of these debts, and the hotel’s legal and financial issues in general, appear to date back several years. However, hotel management is emphasizing the impact the COVID-19 pandemic has had on the establishment, and the rebound it has made. Ownership is adamant that the Chapter 11 process will allow the hotel to get back on its feet. 

Chapter 11 Provides A Path Forward 

Under Chapter 11, a business may renegotiate debts, terminate certain contracts, sell off assets, and downsize or shut down portions of its business while continuing to operate. This flexibility is designed to help struggling businesses turn things around and get back on track, and that is what the owners of the Iron Horse intend for it to do.

The hotel’s creditors have an incentive to work out an agreement and find a way to move forward because the alternative is seeing the debtor convert the bankruptcy from Chapter 11 to Chapter 7 and wind down operations. In that scenario, creditors are less likely to get repaid any of the debts they are owed, or may only get pennies on the dollar. 

Such conversions are not unusual. Many businesses that file under Chapter 11 and continue to struggle, even after taking advantage of the benefits that the bankruptcy law provides, end up converting to Chapter 7 and shutting down.

The Hanson & Payne team will be watching to see what happens in this case, particularly if the Milwaukee Economic Development Corp. gets involved. 

Milwaukee Bankruptcy Lawyers You Can Trust

Bankruptcy opens new opportunities and can allow a company on the edge to survive and thrive. The business-minded legal team at Hanson & Payne has helped countless business owners and commercial lenders in the Milwaukee area navigate the bankruptcy system. If you are looking for legal counsel in this challenging time, we would be honored to take your call. Contact us today to schedule an initial consultation.

Wisconsin Bankruptcy Filings Dropped Over the Past Year

While we are well on our way through Q3 of the calendar year, the Administrative Office of the U.S. Courts has just released its data on the number of bankruptcies filed through the end of the latest fiscal year. 

Across the country, “Personal and business bankruptcy filings took a sharp drop in the twelve-month period ending June 30, 2022, falling 17.7 percent compared with the previous year.” There were 380,634 bankruptcy cases filed in the year ending June 2022, compared with 462,309 cases filed in the previous year. 

While it is always interesting to take a look at nation-wide trends, Hanson & Payne is a Milwaukee-based bankruptcy firm that primarily serves the needs of businesses and families in the Southeastern corner of the state. So, we like to take a bit of a deeper dive into the Wisconsin and Milwaukee area data. 

A Closer Look at Wisconsin

Across the state of Wisconsin, 8,049 bankruptcy cases were filed from June 2021-22. This is a 23.2% drop from June 2020-21, when 10,508 bankruptcy cases were filed. 

Of the bankruptcy cases that were filed in Wisconsin over the past year, only 161 of them were business bankruptcies. The vast majority — 7,888 cases — were non-business bankruptcies, including personal bankruptcies and farm bankruptcies.

What’s Going on in the Milwaukee Area

Milwaukee County, as usual, led the state in the number of bankruptcies filed by county. There were 2,841 bankruptcy cases filed here over the past year. That’s 35.3% of the cases filed across the whole state. 

22 of the Milwaukee County cases were business-related, while 2,819 were filed by people attempting to clear personal debt. 

Even controlling for population density, the Milwaukee County data is eye-popping. The region as a whole, looks a bit better. Other counties in the region saw the following number of bankruptcies filed over the past year:

Racine – 309

Ozaukee – 77

Waukesha – 382

Sheboygan – 129

That means as a region, the Milwaukee area had 3,738 or 46.4% of the state’s 8,049 bankruptcies.

Milwaukee Bankruptcy Attorneys You Can Trust

According to the Administrative Office of the Courts, “Bankruptcy filings have fallen almost steadily since peaking in 2010. That trend has accelerated since the pandemic began in early 2020, despite some early COVID-related disruptions to the economy.” Looking back at past posts we have written about bankruptcy data shows this is true in Wisconsin as well. 

The Hanson & Payne team will continue to monitor bankruptcy trends across the country and in the Milwaukee area to ensure we can serve our clients well. 

We are a full-service bankruptcy law firm you can trust to handle your case with care. Please contact our experienced team of attorneys to schedule a meeting if you are in need of advice about bankruptcy, or representation in a pending case.

Crypto Investors Get A Crash Course In Bankruptcy Proceedings

The recent bankruptcies of the cryptocurrency trading and lending firms Voyager Digital Holdings, Inc. and Celsius Network LLC are giving many Milwaukee area residents a crash course in bankruptcy. Both firms froze their users’ accounts, and everyone wants to know if and when they will get their money back. 

Hanson & Payne is monitoring these cases because there are many people and businesses in Milwaukee investing in crypto, who are impacted by these cases, or may be involved in similar cases in the future. Our firm often represents creditors in bankruptcy cases, and we are curious if crypto creditors will be protected during bankruptcy proceedings since one of the selling points of crypto is that it is outside the traditional financial system. 

In a Typical Bankruptcy, Creditors Get Paid Back Based on Priority  

When a company declares bankruptcy, the court must figure out who gets what when any assets are distributed. 

The first debts to be paid back are those secured by a specific asset that was pledged as collateral. For example, say a business took out a loan to buy new equipment, and used its building as collateral. If the company declares bankruptcy, the creditor on the equipment loan will likely be able to claim the building during the bankruptcy case. 

If an asset has multiple liens against it, the court will look at the order in which the creditors contracted with the debtor. The first in time is typically the first in line for payment. 

The next set of creditors to be paid are those with unsecured claims against the entity that filed for bankruptcy. The court determines which of these creditors will get paid back by looking at each debt and determining its importance. The official name for this ordering of debts is priority. 

The higher the priority a debt is, the more likely it gets paid back. Claims that are higher priority are paid in full before claims considered lower priority receive anything. The priority of various claims is dictated by the Bankruptcy Code. 

The court will look through the documents each creditor has to figure out the debt’s priority, and other details like the amount owed. A creditor must have documentation to back up any claim they make against the debtor. 

Hanson & Payne often works with Milwaukee area businesses and lenders who are creditors in bankruptcy cases to document their claims and present them to the court. 

Figuring Out if Crypto Investors Have Priority

It is clear from the letters being written to the judges overseeing the Voyager and Celsius cases that the users of these services assumed the money they deposited was secure and could be withdrawn at any time, no matter what. It is now clear that that was not true. 

In fact, Celsius’ terms of use state that any funds deposited with the firm “may not be recoverable” in the event of bankruptcy. This means it is likely that users will be considered creditors of the lowest priority. They will likely get back pennies on the dollar if they are able to get any money back at all. 

Milwaukee Area Bankruptcy Lawyers You Can Trust

Hanson & Payne’s experienced team of bankruptcy attorneys have spent years representing creditors in bankruptcy cases, but we have never seen anything quite like these crypto bankruptcies. We are keeping an eye on them, and waiting to see if cases like this end up inspiring policymakers to amend our nation’s bankruptcy laws. 

If you are a Milwaukee area resident or business with questions about the rights of creditors during bankruptcy, please don’t hesitate to reach out.

How Does Increasing Inflation Affect Bankruptcy Filings?

Inflation is rising faster than it has at any time during the past 40 years. The Federal Reserve is attempting to tap the brakes by raising interest rates, but prices are continuing to climb. 

There are a few different ways this may impact bankruptcy filings in the Milwaukee area and beyond. 

Does Inflation Hurt Or Help Borrowers And Lenders? 

Inflation generally hurts everyone. That is why it makes everyone so anxious, and why the government is so keen to slow its rise. 

It hurts borrowers who cannot afford to make payments on their debt because their income has not kept pace with inflation. These borrowers must spend more of their income on necessities like food and housing instead of paying off debts. If this persists, it can lead to higher default rates, which hurt lenders. 

Lenders must also contend with the fact that the money they are owed is now worth less than it was when they lent it out. Raising interest rates can help with this, but many loans are fixed-rate, with rates lower than inflation. This is a benefit to borrowers, but only those that can still afford to make their loan payments. 

Changes To The Law

Aside from impacting borrowers and lenders, inflation changes the law itself. 

Federal law mandates that the Judicial Conference update the Bankruptcy Code every three years by increasing the dollar amounts referenced in the law to keep up with inflation. April 1, 2022 was the latest increase, and it was a big one. Dollar amounts increased by close to 11%. The last time rates were increased, they rose by only 6.2%.

Some of the dollar amounts that increased include: 

  • debt limits for individual who wants to file bankruptcy under Chapter 13
  • the means test limits for individuals who want to file under Chapter 7 instead of Chapter 13
  • the debt limits for filing under the relatively new “Subchapter V” of Chapter 11, which is used by small business owners 

These dollar amounts are important because they help debtors figure out which chapter of the bankruptcy code to file under. Which chapter of the code then determines how their assets are treated by the court. 

Another amount that increased is the amount of property that an individual debtor or family may exempt and keep if they file for personal bankruptcy. Exemptions can be used to protect a family’s home, car, personal belongings, or retirement accounts from being liquidated by the bankruptcy courts. Increasing the exemption amount is a good thing for debtors. 

A Milwaukee Area Bankruptcy Attorney You Can Trust 

Rising inflation puts Wisconsin families, businesses, and lenders in a tough spot. It can be difficult to know how to move forward when every path seems dangerous. Hanson & Payne, LLC’s experienced team of bankruptcy attorneys are here to guide anyone who needs help navigating difficult financial situations, and determining what options are available to them. Please contact us to schedule a meeting.

Bankruptcy & Death: Two Complex Areas Of The Law

The intersection between bankruptcy and death is complex since it involves two very different areas of the law. Hanson & Payne’s experienced team of bankruptcy attorneys is here to assist Milwaukee area residents, businesses, and lenders who are navigating this difficult set of circumstances.

There are two main ways a bankruptcy proceeding can be impacted by a death. The first is if someone who has filed for bankruptcy dies while their case is pending. The second is when someone who has filed for bankruptcy inherits money while their case is pending. In this blog post, we will cover a few things it is important to understand about both of these scenarios. 

What Happens When Someone Who Filed For Bankruptcy Passes Away? 

The French philosopher Michel Eyquem de Montaigne wrote that “Death, they say, acquits us of all obligations.” This observation is proven true in the bankruptcy courts. 

When someone who has filed for bankruptcy passes away while their bankruptcy case is pending, the bankruptcy case must be closed before the deceased person’s estate can be probated. Depending on how much debt there is, and which chapter of the bankruptcy code the case was filed under, this can take awhile. 

For cases filed under Chapter 7, the bankruptcy court will work with the deceased person’s personal representative to process the case pretty much as they would if the debtor had not died. Available assets are liquidated, and the proceeds are used to pay off creditors. Assets that were exempt from bankruptcy are then distributed according to the deceased person’s estate plan, or the laws of intestacy if he or she had no will in place. 

Chapter 13 bankruptcies are years-long, court-supervised repayment plans. If a Chapter 13 filer passes away while his or her case is ongoing, the deceased person’s personal representative can ask the bankruptcy court to: 

  • See the Chapter 13 case through then allow the personal representative to administer the estate as normal;
  • Convert the Chapter 13 case into a Chapter 7 case and proceed as discussed above; or 
  • Dismiss the Chapter 13 case and allow the personal representative to administer the estate as normal.

The bankruptcy judge will decide what the best path forward is for everyone involved. 

The big thing to take away from all of this is that heirs cannot touch their loved one’s assets until the bankruptcy case is closed. This is obviously very frustrating, and can seem unfair, but the courts try to process these cases quickly so family members can grieve their loved one. 

What If Someone Inherits Assets While Going Through Bankruptcy? 

The other situation where a death can dramatically impact a bankruptcy proceeding occurs when a debtor inherits assets after filing for bankruptcy. If the death occurs within 180 days of the bankruptcy filing, the inheritance may be pulled into the bankruptcy case.

In a Chapter 7 case, the inherited assets may be liquidated and the proceeds used to pay off creditors. In a Chapter 13 bankruptcy, the inherited assets may be used to calculate how much money the debtor must pay the court each month of his or her supervised repayment plan. 

Milwaukee Area Bankruptcy Attorneys You Can Trust 

It is rare, but not unusual, for a death to impact a bankruptcy filing. The overlap of these challenging and emotionally fraught areas of law can be overwhelming. Hanson & Payne, LLC’s experienced team of bankruptcy attorneys would be honored to assist you if you find yourself in this situation. Please contact us to schedule a meeting.

Is Kohl’s Going To File For Bankruptcy?

If you asked a Magic 8 Ball whether Kohl’s is going to go bankrupt, it would probably say “Reply hazy, try again.” Nobody can divine if the Wisconsin-based retailer is headed toward bankruptcy, or will find some other way to survive in a challenging market. As Milwaukee area bankruptcy attorneys who do a lot of work for businesses and commercial lenders, the Hanson & Payne team is keeping a close eye on what happens at Kohl’s. 

Cannot Predict Now

The company that grew into what is now the largest department store chain in America, was founded in Milwaukee in 1927. Polish immigrant Maxwell Kohl opened a small grocery store, and when it proved successful, expanded until Kohl’s Food Stores was the largest supermarket chain in the Milwaukee area. The first department store run by the chain was opened in Brookfield in 1962, and the company went public in 1992. 

The chain, which is now headquartered in Menomonee Falls, is the largest department store chain in the nation. It has locations in every state except Hawaii and continues to grow. However, it is growing at a much slower rate than in the past and has been losing market share to competitors. Activist investors are pressuring company leadership to make some changes to increase the company’s value. 

Concentrate And Ask Again

Last year, the company added new members to its board of directors. 

In March, Kohl’s announced plans to add Sephora mini-shops to roughly 75% of its 1,100 US stores, open 100 new locations at half the size of its traditional outlets in the next four years and increase its popular Kohl’s Cash rewards program to 7.5% on purchases, up from 5%.

“Kohl’s is undergoing a significant transformation of our business model and brand to be the retailer of choice for the Active and Casual lifestyle. We have fundamentally restructured our business to drive sustainable and profitable growth while providing a strong return to shareholders,” said Michelle Gass, Kohl’s chief executive officer.

Now, it is being reported that over 25 other companies are vying to buy Kohl’s outright, including arch-rival JCPenney. JCPenney’s offer values Kohl’s at $8.6 billion.

Better Not Tell You Now

It is interesting that Kohl’s is planning on making some big changes, and does not appear to want to file for bankruptcy in order to do so. Filing for bankruptcy is a common tactic retailers resort to when it is time for them to re-tool. 

Filing for bankruptcy under Chapter 11 means a business can:

  • Reject and renegotiate the unfavorable lease and other contract terms
  • Renegotiate terms of secured financing, including interest rates
  • Negotiate new credit terms with critical trade creditors and suppliers while repaying old payables over an extended period of time
  • And even put a pause on litigation

It is a way to get flexibility and make major changes without going out of business. 

Ask Again Later

At Hanson & Payne, LLC, we help Milwaukee area businesses and commercial lenders navigate the bankruptcy process. We work hard to ensure that our clients’ interests are protected because we believe bankruptcy is a tool and not a torment. Please contact us today if we can be of assistance.

Is It Bankruptcy? Or Is It Cake?

There’s a new game show on Netflix called “Is It Cake?” On it, expert bakers make cakes that look exactly like everyday objects. The people on the show have a few seconds to decide if the object they are looking at is cake or the real deal.

The cakes are so realistic looking, and the participants are under so much pressure to quickly assess the objects they are looking at, that real objects are often mistaken for cake (and vice versa). The only way to know what is actually a cake is to cut into it. 

This is reminiscent of the way adversary proceedings work. From the outside, a bankruptcy case may look run-of-the-mill, but an experienced practitioner must quickly assess whether it is appropriate to cut into the case and file an adversary proceeding. 

What Is An Adversary Proceeding? 

An adversary proceeding is a lawsuit filed within a bankruptcy case, typically by a creditor or ex-spouse, in order to preserve their claim against the debtor’s assets. If an adversary proceeding is successful, the person or entity who files suit will still be able to seek payment from the debtor, even after their bankruptcy case is closed and other debts have been forgiven. 

These cases are of critical importance for both parties. For a debtor, an adversary proceeding may make the difference between coming out of bankruptcy with a clean slate or coming out still owing a significant amount of money to creditors. For someone in a financial relationship with a bankruptcy filer, an adversary proceeding may be what salvages their financial claims and keeps them from having to file their own bankruptcy case. At Hanon & Payne, we have worked for both debtors and creditors in these cases and seen their importance close up. 

Adversary Proceedings Come In Many Shapes And Sizes

Some common examples of adversary proceedings include:

  • Claims arising from the debtor’s fraud or intentional misrepresentations 
  • A divorced spouse owed maintenance, or who is worried that their ex-spouse will not pay the debts assigned to them in the Marital Separation Agreement
  • Contractor theft claims, specifically in construction or development cases  
  • Claims arising from bad (bounced) checks
  • Claims between former business associates or affiliates
  • Claims against former employees for breach of a non-compete agreement or for theft/embezzlement
  • Actions taken by the bankruptcy trustee in order to recover gifts or transfers of property to friends or family members of the debtor in the 1-year period prior to the bankruptcy filing.

What determines whether an adversary proceeding will be successful varies from case to case. In fact, the list of claims that are not dischargeable in Chapter 7 cases is even different from the list of claims that are not dischargeable in Chapter 13 cases. 

This is why it is important to get advice from an experienced bankruptcy attorney like those at Hanson & Payne if you are considering filing for bankruptcy, or have a financial relationship with someone who has filed for bankruptcy. This is a complex area of bankruptcy law, so “winging it” will not work. Messing up could cause you financial hardship, or even get you sanctioned by the bankruptcy court. 

A Milwaukee Bankruptcy Attorney You Can Trust 

Whether you are a debtor or creditor in the Milwaukee area, the Hanson & Payne team is here to answer any questions you may have about the bankruptcy process. Rather than making snap judgments, or going off first looks alone, we will slice into any case before us so we can give the best advice possible. Please contact us today to schedule a meeting.