Will I Lose My Home if I File for Chapter 7 Bankruptcy?

If you’re considering filing for Chapter 7 bankruptcy, you probably have a lot of questions—including whether bankruptcy will put your home at risk. If you file for Chapter 7 bankruptcy, you won’t necessarily lose your home—particularly if you don’t have much home equity and your mortgage is current. However, if you have a significant amount of equity in your home, you may be better off filing for Chapter 13 bankruptcy. In this article, we examine the effect that filing for Chapter 7 bankruptcy can have on your home. 

Important Factors

Whether you’ll lose your home in Chapter 7 bankruptcy depends on 

  • whether your mortgage is current,
  • whether you’ll be able to continue making mortgage payments after filing for bankruptcy,
  • the amount of equity you can protect using a homestead exemption, and
  • the amount of equity you have in your home.

Is Your Mortgage Current?

You may lose your home in Chapter 7 bankruptcy if you’re behind on your mortgage payments when you file. Although the court issues an automatic stay when you file, this usually only serves to delay the foreclosure process for a few months. The reason that filing for Chapter 7 bankruptcy won’t cure a default is that a mortgage is a secured debt. Therefore, Chapter 7 bankruptcy won’t wipe out the mortgage lien that permits the lender to foreclose if you fail to make your payments. In addition, Chapter 7 bankruptcy doesn’t provide a way for you to catch up on past-due payments.

How Much Equity Do You Have in Your Home?

If your mortgage payments are current, you’ll need to determine how much equity you have in your home. The process for doing this is easy. First, value your home. Next, subtract any outstanding mortgage balance from your home’s value. The equity in your home is the amount you’d keep if were you to sell your home.  

If you don’t have any equity, then your home should be safe—bankruptcy trustees don’t sell houses that don’t have equity. If you do have equity, however, you’ll need to be able to protect it with a bankruptcy exemption to avoid losing your home in Chapter 7 bankruptcy.

Chapter 13 Bankruptcy

If you are behind on your mortgage payments and want to keep your home, filing for Chapter 13 bankruptcy may be an option for you to consider. Unlike Chapter 7 bankruptcy, Chapter 13 bankruptcy allows you to catch up on your mortgage payments over the course of a three-to-five-year repayment plan. In addition, if you have more equity in your home than you can protect with a homestead, you can pay your creditors the value of the non-exempt equity in the plan to protect your home. 

Contact a Milwaukee Bankruptcy Lawyer 

If you are considering filing for bankruptcy and want to protect your home, you should contact an experienced Milwaukee bankruptcy lawyer as soon as possible for guidance. At Hanson & Payne, our experienced bankruptcy attorneys will guide you through the bankruptcy process and advise you on the best course of action based on your unique situation. Please contact our office today to schedule a free consultation.

Bankruptcy and Your Children

As a parent, you want what’s best for your children. Therefore, if you’re considering filing for bankruptcy, it’s only natural for you to wonder how this might affect them. In this article, we examine the consequences of filing for bankruptcy as a parent. 

Child Support

It can be difficult to keep up with child support payments when you are experiencing financial difficulties. Unfortunately, however, child support is not a debt that can be discharged in bankruptcy. In fact, when your assets are liquidated in a chapter 7 bankruptcy case, a portion of the proceeds go towards child support payments. In chapter 13 bankruptcy, child support payments are incorporated into your repayment plan.

Of course, bankruptcy also provides relief from other debts, and this can free up money to put toward your child support payments. So, ultimately, bankruptcy can actually be beneficial to any children for whom you provide child support. 

Education Contributions 

Bankruptcy can, unfortunately, affect the amount of money you have available to make monthly contributions to your children’s education fund. In most bankruptcy cases, the bankruptcy court will only allow you to allocate funds on necessary expenses. These include things like rent payments, medical expenses, and food. Although your children’s education is important, the court doesn’t consider it a necessary expense. So, if you file for bankruptcy, you may have to temporarily put education payments on the backburner. However, there are some circumstances under which these payments may be permitted, but you’ll need to consult with an experienced Milwaukee bankruptcy attorney to see if this might apply to your situation.

Children’s Savings Accounts

When you file for chapter 7 or chapter 13 bankruptcy, you must disclose all your assets, debts, and liabilities to the bankruptcy court. However, the court usually doesn’t make distinctions between your property and the property of your minor children. Therefore, in order to save your children’s assets (such as savings accounts) from seizure in a bankruptcy filing, you must structure them in a way that will enable you to prove that they are the sole property of your children. One way to accomplish this is to open your children’s bank accounts under either the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA). However, if you are seriously contemplating bankruptcy or have already filed for bankruptcy, you shouldn’t take any actions related to your children’s savings accounts without first consulting with an experienced Milwaukee bankruptcy attorney. 

Contact a Milwaukee Bankruptcy Lawyer 

If you need a fresh financial start in Milwaukee, you should contact an experienced Milwaukee bankruptcy lawyer as soon as possible. At Hanson & Payne, our experienced bankruptcy attorneys offer bankruptcy and debt negotiation services to individuals throughout southeast Wisconsin. Therefore, if you’re ready to explore your options with an experienced bankruptcy professional, please contact our office today to schedule a free consultation.

Will Bankruptcy Affect My Retirement Accounts?

People often worry that they’ll lose everything in bankruptcy. Nothing could be further from the truth. In fact, bankruptcy allows filers to keep many of their assets, including their retirement accounts. However, a few limitations do exist. In this article, we discuss the effect that bankruptcy can have on retirement accounts and pensions.

You Get to Keep Most Retirement Accounts in Bankruptcy

Bankruptcy exemptions allow filers to keep certain property. Common exemptions include one’s home, car, and household belongings. In addition, nearly all ERISA-qualified retirement accounts and pension plan funds are exempt from bankruptcy. 

Chapter 7 Bankruptcy

If you file for Chapter 7 bankruptcy, you may lose some of your property. However, your retirement funds should be safe due to federal and state laws.

Chapter 13 Bankruptcy

If you file for Chapter 13 bankruptcy, you’ll keep your retirement accounts, and the amount of the balance won’t affect how much you are required to repay creditors in your Chapter 13 repayment plan. 

Fully Protected Retirement Accounts

Although there are a few exceptions, the exemption amounts for the following types of retirement accounts are unlimited, meaning that the entire retirement account is protected:

  • 403(b)s
  • 401(k)s
  • IRAs 
  • Keoghs
  • Money purchase plans
  • Profit-sharing plans
  • Defined-benefit plans

Traditional and Roth IRAs

For traditional IRAs and Roth IRAs, an exemption limitation exists per person. This amount is updated every year, but it is currently over one million dollars. So, if your traditional or Roth IRA exceeds this limit, the bankruptcy court can use the excess funds to pay back your creditors.

Withdrawn Retirement Benefits 

Although creditors can’t touch the funds in your retirement accounts, retirement benefits that you receive as income aren’t exempt.

Chapter 7 Bankruptcy

If you receive monthly payments from a retirement account or pension, the court will consider it income. Therefore, this amount will be included in your Chapter 7 means test qualification. In Chapter 7 bankruptcy, the bankruptcy court can’t take any retirement benefits that you need for your support, but it may be able to take amounts beyond this.

Chapter 13 Bankruptcy

With Chapter 13 bankruptcy, any retirement income you receive will be used to determine what portion of your unsecured debts you have to repay in your Chapter 13 repayment plan.

The Bottom Line

Although most of your retirement funds should be protected when you file for bankruptcy, you shouldn’t attempt to navigate the bankruptcy process alone. In order to ensure that you keep what you’re entitled to in bankruptcy, it is strongly advised that you obtain the services of an experienced bankruptcy attorney. 

Contact a Milwaukee Bankruptcy Lawyer 

If you would like to explore your bankruptcy options in Milwaukee, you should contact an experienced Milwaukee bankruptcy lawyer as soon as possible. At Hanson & Payne, our experienced bankruptcy attorneys offer bankruptcy and debt negotiation services for individuals in Milwaukee and southeast Wisconsin. So, if you’re ready to explore your options with an experienced bankruptcy professional, please contact us as soon as possible to schedule a consultation. 

Supreme Court To Decide What Happens To Impounded Cars When Owners File For Bankruptcy

The United States Supreme Court is the highest court in the country, so when it takes up a bankruptcy case, everyone pays attention. This year, in City of Chicago v. Fulton, the Supreme Court is tasked with determining what parties in possession of a debtor’s property are to do with that property if the debtor files for bankruptcy. As the case name suggests, it involves the Windy City to our South, meaning the lower court whose opinion is being reviewed, the Court of Appeals for the Seventh Circuit, also handles cases from Wisconsin. This makes this case particularly interesting to us since the Supreme Court will critique the decision-making done by judges the Hanson & Payne team may appear before. 

Who Gets The Keys?

The case is actually a consolidation of four different cases. In all the cases, the city of Chicago impounded a vehicle because the owner failed to pay a fine or fee, typically related to a traffic violation. In such situations, the city is allowed by law to sell off the car if it is not reclaimed by the owner within a certain period of time. In each of these four cases, the various owners filed for bankruptcy after their car was impounded, but before the point where the city could have sold the car. Each owner demanded the city return their vehicle. 

The question before the Court is what the city is supposed to do with the cars after the owner has filed for bankruptcy. And more broadly, what any party that possesses property owned by someone who has filed for bankruptcy is supposed to do with that property. 

SCOTUSblog has the most succinct summary of the laws at issue that we have seen: 

Chicago’s obligations to the debtors turn on how two provisions of the Bankruptcy Code interact. The first is the automatic stay in § 362, which pauses all collection activity against debtors to prevent creditors from racing to consume debtors’ assets before any relief can occur. With a few exceptions, § 362 stays collection activity automatically when the debtor files for bankruptcy protection. Creditors who continue collection activity after the stay is in place risk sanctions.

Here, the debtors argue that § 362(a)(3) required Chicago to return the cars to them as soon as the stay went into effect. This provision bars two kinds of conduct: “any act” either to “obtain possession of property of the estate or of property from the estate” or to “exercise control over property of the estate.” The debtors argue that passively retaining property impounded before bankruptcy is an “act” to “exercise control over property of the estate.” The U.S. Courts of Appeals for the 2nd, 8th, 9th, 11th and now the 7th Circuits have adopted this reading of § 362(a)(3).

The city argues that the analysis of its obligation to return the cars to the debtors cannot stop at § 362(a)(3). Instead, they argue that § 542(a) governs. Section 542(a) provides that “an entity … in possession, custody, or control, during the case, of property that the trustee may use, sell, or lease … shall deliver to the trustee … such property or the value of such property unless such property is of inconsequential value or benefit to the estate.”

The city argues that the “shall deliver” language is not self-executing. Rather, as the U.S. Courts of Appeals for the 10th and District of Columbia Circuits have held, it is an obligation to turn over the property if and when the trustee files an adversary proceeding seeking the property.

Figuring out which section of the Bankruptcy Code is controlling, in this case, means the Court will determine which is more important — protecting bankruptcy filers from debt collection actions, or the rights of creditors. 

What Happens Next?

The Court heard oral arguments in the case in October. Unless something out of the ordinary happens (and it might, oral arguments, in this case, were delayed because of the COVID-19 pandemic) we expect the Court to issue an opinion by the end of June 2021. 

The Hanson & Payne team is keeping a close eye on this case. The Supreme Court’s opinion may impact anyone who is holding property owned by a bankruptcy filer. It may also signal lower courts to put a thumb on the scale in favor of either debtors or creditors when multiple sections of the bankruptcy code are at play. Whatever happens, we will be ready to apply the Court’s ruling in our clients’ cases.

Preference Defense: Bringing Playground Justice Into The Courtroom

There are a set of unwritten yet universal rules that every kid who grows up in the Milwaukee area seems to know. Eeny, meeny, miny, moe is the best way to select a winner. Pinky promises are akin to unbreakable contracts. And saying “no take backs” when you make a trade locks that deal into place, no matter how much the other kid later regrets their decision. These and other rules ensure justice prevails on the playground. 

As we grow up, we see echoes of these edicts in the laws that govern our lives. There is a particularly striking similarity between the playground rule of “no take backs” and preference defense actions in bankruptcy court

What Is the Preference Defense?

Having a preference defense you can assert when one of your customers files for bankruptcy is the “no take backs” of the bankruptcy world. If you do not have a defense, the bankruptcy court can claw back any funds paid to you by someone who has filed for bankruptcy if the payment was made within 90 days of the bankruptcy. Policymakers gave courts this power because they don’t want people who are planning on filing bankruptcy to pay off their favorite creditors and leave others in a lurch. This is where the term preference action comes from.

Although the power to claw back payments through preference actions was given to the courts to protect creditors from debtors who might attempt to transfer assets improperly, no wrongdoing is necessary on the part of the creditor for a preference action to be filed against them. Most preference actions are filed against a business that was just going about its business, as usual, not suspecting that its customer was in financial distress.

Fortunately, going about your business as usual may be a valid defense. The ordinary course of business defense applies when a payment subject to clawback was received in the ordinary course of business between the creditor and the debtor. To take advantage of this defense, the creditor must be able to show that its relationship with the debtor did not change in the time period leading up to the debtor’s bankruptcy filing. 

Another popular defense is the contemporaneous exchange for new value defense. It applies when the payment sent to a creditor was intended by both the debtor and creditor to be a payment for some new good or service exchanged right when new assets were transferred to the creditor. This is why a lot of contracts, and especially those with a financially troubled business partner, specify that they are cash-on-delivery (COD).

Unless you want to risk having the money you are rightfully owed clawed back by the courts when one of your customers files for bankruptcy, it is a good idea to talk with an experienced bankruptcy attorney about what options are available to you in case you are served with a preference action. It is understandably frustrating to pay someone to protect the money that is rightfully yours, but it is better to pay a little extra than to pay it all back to a court, and that is what may happen unless you call “no take backs.” 

New Financing Can Cut A Bankruptcy Short

In October, a group of 29 Applebee’s Grill and Bar locations across Wisconsin filed for bankruptcy. Less than a month later, their operator asked the bankruptcy court to dismiss the case. This quick reversal of fortune has everything to do with financing, something the Hanson & Payne team has a lot of experience with

A Deal Even Better Than The 2 For $20

Seenu Kasturi is the president of Wisconsin Apple, the holding company that owns the Applebee’s in question. He is also the CEO of ARC Group, which owns and operates the Dicks Wings & Grill casual-dining chain, and is the parent entity of a holding company named ARC Fat Patty’s LLC, which owns and operates the Fat Patty’s chain of burger joints. 

Shortly after Wisconsin Apple filed for bankruptcy, ARC Fat Patty’s acquired Wisconsin Apple’s debt from financier Bremer Bank National Association. Now that this new financial arrangement is in place, and Wisconsin Apple is purportedly in a better position to take on the financial challenges posed by the pandemic, Kasturi is asking that the bankruptcy case be dismissed. 

“Throughout an extremely challenging environment, our focus was always on our guests and team members, specifically protecting hundreds of jobs,” Kasturi said in a statement to the Milwaukee Business Journal. “We took the extraordinary step to file, since we were left with no other options. With significant effort from Dine Brands [the parent company of the Applebees brand] in facilitating a dialogue with our lender, we were able to reach an amicable resolution and work towards dismissing the bankruptcy.”

Financing Is Key In Many Milwaukee Area Bankruptcies 

The Wisconsin Apple bankruptcy made headlines because Applebee’s is such a well-known brand, and the pandemic played a part in this story, but the behind the scenes financial issues outlined above are fairly run-of-the-mill. 

Our firm’s experience representing troubled companies means we have advised companies seeking new financing, restructuring their current financing, or buying and selling part or all of a distressed business. Whether the goal is staying afloat or winding down operations, we can provide assistance. 

Hanson & Payne also represents banks and other commercial lenders and borrowers from across the state of Wisconsin in a wide range of transactions, including commercial loan transactions, bankruptcy matters, and insurance issues. We have extensive experience securing and realizing upon wide-ranging forms of collateral, which allows our clients in the Milwaukee area and beyond to broaden their commercial loan portfolios and better secure them at the same time. 

Milwaukee Bankruptcy Lawyers Business Owners & Banks Can Rely On

Hanson & Payne, LLC is a trusted advisor to businesses and lenders in the Milwaukee area. We have a reputation for being business-minded and financial-savvy in an industry that is often criticized for not understanding that legal action is a means to an end, not an end in and of itself. 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.

Is Bankruptcy a Good Idea?

Deciding whether to file for bankruptcy can be difficult. It doesn’t help that there’s so much misinformation out there about bankruptcy. For example, a common belief is that bankruptcy permanently ruins your credit. Another is that people who file for bankruptcy are irresponsible. This couldn’t be further from the truth. In this article, we take an objective look at whether it’s a good idea to file for bankruptcy when you’re experiencing financial difficulties. 

What Causes Bankruptcy? 

As noted above, a common myth is that people who file for bankruptcy are irresponsible with money. Some are, of course, but many aren’t. People are often forced into bankruptcy due to circumstances that are beyond their control. Common reasons for bankruptcy include:

COVID-19: Many people have been forced to file for bankruptcy due to the current COVID-19 pandemic. Governments have shut down businesses in an effort to stop the spread of the virus, leaving many people with no way to make a living. 

Unforeseen illnesses: In addition, many people are forced to file for bankruptcy due to unforeseen illnesses. Often, when a person gets sick or injured, he or she is burdened with a growing stack of medical bills. Many people simply can’t afford to keep up with the bills associated with unforeseen illnesses.

Spending by a family member: Some people are forced to file for bankruptcy due to the actions of others, such as spending by a family member. 

Why Does Bankruptcy Have a Bad Reputation?

The false correlation between financial irresponsibility and bankruptcy contributes greatly to its bad reputation. In addition, many people believe that bankruptcy irreversibly damages one’s credit score. This simply isn’t true. Yes, bankruptcy does temporarily damage the credit score of the filer. However, this certainly doesn’t last forever. In fact, many people are surprised how quickly their credit bounces back after filing for bankruptcy. 

Deciding if Bankruptcy is Right for You

Whether bankruptcy is a good idea for you ultimately depends on your individual circumstances. Bankruptcy isn’t inherently bad or good. However, it can be extremely useful for people who have run into financial difficulties. The purpose of bankruptcy is to discharge debts and allow debtors to get back on track financially. Therefore, if you need a fresh financial start, it’s quite possible that bankruptcy may be a good option for you. However, to be sure, you should contact a Milwaukee bankruptcy lawyer for assistance. 

Contact a Milwaukee Bankruptcy Lawyer 

If you would like to explore your bankruptcy options in Milwaukee, you should contact an experienced Milwaukee bankruptcy lawyer as soon as possible. At Hanson & Payne, our experienced bankruptcy attorneys offer bankruptcy and debt negotiation services for individuals in Milwaukee and all over southeast Wisconsin. Therefore, if you think bankruptcy may be the right choice for you, please contact us as soon as possible to schedule a consultation. 

Avoid These Common Bankruptcy Mistakes

If you’re considering filing for bankruptcy, you probably have a lot on your mind. After all, bankruptcy can be confusing and stressful. However, the one thing you can’t do is allow yourself to get overwhelmed—this can only lead to mistakes. Luckily, by enlisting the help of a Milwaukee bankruptcy lawyer and reviewing the information below, you can drastically reduce your odds of making mistakes during the bankruptcy process. Below are some of the most common bankruptcy mistakes. 

Tips to Avoid Bankruptcy Mistakes

Using credit cards right before filing: Using credit cards right before filing for bankruptcy is a bad idea. Although some credit card use is permissible before filing for bankruptcy, you’re better off avoiding credit cards altogether. The reason being that if you overuse them, the bankruptcy court will make you pay them off, and this defeats the purpose of the “fresh start” that bankruptcy provides. 

Repaying friends and family before filing: If you owe money to friends and family, you may be tempted to pay them back right before you file for bankruptcy. Don’t do it. You can’t treat your friends and family any differently than you would a creditor when it comes to repaying debts. If you do, the bankruptcy trustee in your case may come after those you paid back to collect the money. 

Using 401K funds to repay creditors before filing: Retirement accounts are usually protected when you file for bankruptcy. In most cases, you can discharge your debt and keep whatever you have in your retirement account. You have nothing to gain by paying off debt with retirement account money before filing for bankruptcy. 

Taking out a second mortgage to pay off credit card debt before filing: Don’t take out a loan against your real estate before filing for bankruptcy. It’s often possible to file for bankruptcy and keep your home. However, if you take out a second mortgage to pay off credit card debt or to reduce the equity in your home, you may be putting your home at risk.

Failing to appear in court for debt-related matters: If you have court obligations related to your debt, you can’t simply stop showing up in court after you file for bankruptcy. Rather, you must wait until the court officially dismisses your collections case. 

Failing to be truthful with your attorney: If you plan on filing for bankruptcy, you need an attorney. However, you must be truthful with your attorney. An attorney’s representation is only as good as the information you provide, so provide your attorney with the most accurate information possible to ensure that your bankruptcy case is a success.  

Contact a Milwaukee Bankruptcy Lawyer 

If you would like to explore your bankruptcy options, you need an experienced Milwaukee bankruptcy lawyer on your side. At Hanson & Payne, we offer bankruptcy and debt negotiation services for individuals in Milwaukee and all over southeast Wisconsin. Please contact us today to schedule a consultation. 

How to Keep Your Spending in Check During the Holiday Season

The holiday season can get even the most careful shoppers into financial trouble. During the holidays, it’s easy to let debt get out of control. And when debt gets out of control, debt collectors come calling. If you’d like to keep the debt collectors at bay this holiday season, follow these tips to keep your holiday spending in check. 

Tips to Keep Your Spending in Check

Make a budget (and stick with it): Creating a budget is the first step towards a debt-free holiday season. Of course, a budget alone is useless unless you stick with it! The best way to create a budget is to review your income, expenses, and savings to determine much money you can allocate towards holiday gifts. Next, create a list of the gifts you’d like to purchase. If your gifts cost more than your budget allows, keep tweaking your gift list until you get it right. 

Avoid credit cards: Credit card debt can snowball (no pun intended) during the holidays if you let it. Therefore, you must be cautious when using credit during the holiday season. In fact, if you stick to your budget, you should be able to avoid using credit altogether to purchase your holiday gifts. Making it through the holidays without using any credit should be your top priority. 

Don’t buy yourself gifts: People sometimes buy a few things for themselves while shopping for others during the holidays. However, this is a surefire way to overspend. By foregoing gifts for yourself until after the holidays are over, you greatly improve your odds of sticking to your holiday budget. 

Keep your gift receipts: Obviously, it’s a good idea to hold onto gift receipts for returns. However, there are other reasons to do so as well. For example, some stores have big sales after the holidays are over. If you purchase an item that goes on sale after the holidays, the store may refund the difference if you provide the receipt. 

Don’t give too generously: It feels great to give generously during the holidays. However, you don’t want to give too generously. None of your friends or family members want you to suffer financially in order to give them gifts. Therefore, make sure that you only purchase gifts that will allow you to stay within your holiday budget. 

Contact a Milwaukee Bankruptcy Lawyer 

If you are having financial issues and want to explore your bankruptcy options, you need an experienced Milwaukee bankruptcy lawyer on your side. At Hanson & Payne, we offer bankruptcy and debt negotiation services for clients all over southeast Wisconsin. Our experienced attorneys understand that filing for bankruptcy is a big decision, so we are committed to providing you with the information and guidance necessary for you to make an informed bankruptcy decision. Please contact us today to schedule a consultation. 

More Than One Iron In The Fire

If you have run out of shows to binge-watch during the pandemic, we’ve got a recommendation for you. Milwaukee Blacksmith aired on the History Channel back in 2016 and is available to stream on Amazon. The show follows the Knapp family as they work on building their blacksmith business into something that can be passed on to the next generation. 

Throughout the series, the Knapps are always working on multiple projects. This creates challenges that drive the show’s narrative forward. Although some of the drama was probably amped up in order to make compelling reality television, it resonated with us. Most of our clients have more than one iron in the fire. 

Multipl Issues in Bankruptcy Are Common

Very rarely are the Milwaukee area businesses we assist face a single issue that is driving them toward bankruptcy. Oftentimes, several small issues have snowballed to the point that addressing them individually becomes impossible. By the time many business owners seek our advice on whether bankruptcy may provide a path forward, they are already facing several lawsuits. 

One of the benefits of filing for bankruptcy is that it is like hitting a giant pause button on all other pending litigation. Some of those cases will then get pulled into the bankruptcy case, while others are simply paused until the bankruptcy case is resolved. The official term for this legal timeout and shuffling of suits is an automatic stay. 

How Pushing Pause Keeps Things Moving Forward 

There are two reasons why stays are important from a public policy perspective. 

The first is the idea that nobody who has a claim against the debtor should be treated any better than others who are similarly situated. Pulling pending lawsuits into the bankruptcy case ensures that all creditors — instead of just the first to file — will get some sort of compensation. This also incentivizes settlement because those with a claim against the debtor get more information about the debtor’s full financial situation, and may discover that getting something through the bankruptcy process is better than getting nothing afterwards. 

The second reason the automatic stay is important is that it gives the debtor some breathing room. When a business is trying to use the bankruptcy process to restructure, pausing other legal actions is all but necessary. Creditors and those with claims against the debtor that will survive the bankruptcy have a better chance of getting something if the debtor can continue operations, so pausing things for a bit is really a win-win.

Milwaukee Bankruptcy Lawyers That Can Help You Hammer Things Out

Hanson & Payne, LLC is a trusted advisor to businesses, creditors, and commercial lenders in the Milwaukee area. Our experience working for these various parties gives us a keen insight into the negotiating that can be done while an automatic stay is in place. If you are looking for counsel that can help you strike while the iron is hot, we would be honored to take your call. Contact us today to schedule an initial consultation.