Common Bankruptcy Mistakes

Deciding whether to file for bankruptcy is difficult. Not only can bankruptcy affect your life in numerous ways, but it’s a complicated and intimidating area of the law. However, once you’ve made the decision to file for bankruptcy, the last thing you should do is make avoidable mistakes. Mistakes during the bankruptcy process can cost you—big time. Therefore, if you’re considering filing for bankruptcy in Milwaukee, it’s imperative that you understand—and avoid—the following common bankruptcy mistakes. 

Avoid These Bankruptcy Mistakes

1. Failing to list all creditors

The bankruptcy process can be overwhelming and confusing—particularly for those debtors who fail to enlist the services of an experienced Milwaukee bankruptcy lawyer. In this confusion, debtors sometimes fail to include all creditors in their bankruptcy filings. If you fail to list a creditor in your bankruptcy case, you may lose the opportunity to discharge the debt connected to that creditor.

2. Hiding assets

Debtors sometimes attempt to hold on to assets by hiding them from the bankruptcy court. Not only can this jeopardize an entire bankruptcy proceeding, but’s it’s also illegal, and it can result in prison time and fines. When you file for bankruptcy, you must disclose all your assets to the bankruptcy court.

3. Repaying family members or creditors before filing for bankruptcy

Debtors sometimes attempt to pay family members and creditors back prior to filing for bankruptcy. However, when a debtor pays back a family member or creditor before filing for bankruptcy, the bankruptcy court may view such payments as preferential, thereby requiring the family member or creditor to pay the money back to the court.

4. Running up credit cards before filing

Some debtors purposely run up their credit cards immediately prior to filing for bankruptcy under the mistaken belief that the additional debt will be discharged. This is wrong. If you make large credit card purchases immediately prior to filing for bankruptcy, the court may force you to pay for them.  

5. Waiting too long to file for bankruptcy

Anyone considering filing for bankruptcy knows that debt can get out of control. However, debtors often wait too long to file for bankruptcy after realizing they can no longer pay their bills. All this does is make the problem worse. If your debt has gotten out of control, you should at least discuss the possibility of filing for bankruptcy with a Milwaukee bankruptcy lawyer

6. Failing to contact a Milwaukee bankruptcy lawyer

The biggest mistake you can make when filing for bankruptcy in Milwaukee is failing to contact a Milwaukee bankruptcy lawyer. Without a bankruptcy lawyer on your side, you are bound to make mistakes. Therefore, in order to avoid the pitfalls inherent in the bankruptcy process, you should contact an experienced Milwaukee bankruptcy lawyer as soon as possible. At Hanson & Payne, our bankruptcy attorneys will help you avoid the pitfalls inherent in the bankruptcy process while doing everything in our power to ensure a successful result in your bankruptcy case. Please contact us today to schedule a consultation.

Pros and Cons of Chapter 7 Bankruptcy

If you’re having financial troubles, you may be considering filing for Chapter 7 bankruptcy. Depending on your circumstances, filing for Chapter 7 bankruptcy can either be a great idea or something to avoid. Therefore, before deciding, you should familiarize yourself with the pros and cons of Chapter 7 bankruptcy. 

Chapter 7 bankruptcy: the pros

A fresh start: Chapter 7 eliminates most unsecured debts. By erasing most unsecured debts, Chapter 7 bankruptcy gives you a fresh financial start. 

You get to keep certain assets: Bankruptcy law allows you to exempt some personal property. This means that, despite filing for bankruptcy, you’ll likely get to certain assets, such as your vehicles and retirement accounts. 

No repayment plan: In Chapter 13 bankruptcy, debtors must pay back their debts. In Chapter 7 bankruptcy, however, your debts are eliminated, allowing you to start anew.

You get to keep your tax refund: Depending on the circumstances, you may be able to keep your tax refund after you file for Chapter 7 bankruptcy. 

It’s fast: The typical Chapter 7 bankruptcy case takes approximately four months. In addition, after you file for bankruptcy, your creditors can no longer contact you.

Chapter 7 bankruptcy: the cons

Your credit takes a hit: It takes ten years for a Chapter 7 bankruptcy to drop off your credit report. This lowers your credit score and can make it difficult for you to obtain certain types of loans. 

Not all debt is forgiven: Certain debts remain even after you file for Chapter 7 bankruptcy. These include debts like alimony, child support, student loans, and taxes. 

You may lose your home: If you’re behind on your mortgage payments when you file for Chapter 7 bankruptcy, there’s a good chance that your mortgage company will pursue a foreclosure of your home.

You may not qualify: Not everyone is eligible to file for Chapter 7 bankruptcy. People who have little to no disposable income are the best candidates for Chapter 7 bankruptcy. In order to determine whether you qualify, the court will perform a means test, which is an examination of your income.

You may lose valuable assets: After filing for Chapter 7 bankruptcy, you’ll probably have to liquidate nonexempt personal property to pay off your secured creditors. For example, if you own your home free and clear, the court may decide to sell it to account for secured debt. 

Contact a Milwaukee Bankruptcy Lawyer 

If you are considering filing for Chapter 7 bankruptcy in Milwaukee, you need an experienced Milwaukee bankruptcy lawyer on your side. At Hanson & Payne, we offer bankruptcy and debt negotiation services for Milwaukee and all of southeast Wisconsin. In addition, our attorneys understand that filing for bankruptcy is a big decision, so we are committed to giving you the information and guidance necessary for you to make an informed decision. Please contact us today to schedule a consultation.

Chapter 7 and Chapter 13 Bankruptcy: What’s the Difference?

Chapter 7 and Chapter 13 are the two types of bankruptcy available to individual filers. If you are considering filing for bankruptcy, your income will primarily determine whether you file for Chapter 7 or Chapter 13 bankruptcy. However, there are differences between Chapter 7 and Chapter 13 bankruptcy other than income requirements. Below are the main differences between Chapter 7 and Chapter 13 bankruptcy. 

Chapter 7

Chapter 7 bankruptcy wipes out most unsecured debts. Common unsecured debts include credit cards and medical bills. To qualify for Chapter 7 bankruptcy, a debtor must meet specific income requirements. A debtor who makes too much money must file for Chapter 13 bankruptcy.

When a debtor files for Chapter 7 bankruptcy, an order called an automatic stay immediately stops most creditors from continuing collection efforts. The bankruptcy trustee then sells all nonexempt property to pay back the debtor’s creditors. If a debtor has no nonexempt assets, his or her creditors receive nothing.

Although Chapter 7 bankruptcy is the right choice for low-income debtors with few assets, it can also work for filers whose discharged debt exceeds the value of the property sold.

Chapter 13

Chapter 13 bankruptcy is designed for debtors who have enough money left over every month to pay back at least some of their debts through a repayment plan. Although most Chapter 13 filers make too much money to qualify for Chapter 7, some debtors choose to file for Chapter 13 bankruptcy due to the benefits it offers over Chapter 7.  

In Chapter 13 bankruptcy, a debtor can keep all of his or her property. In exchange, the debtor must pay back all or a portion of his or her debts through a repayment plan. Typically, Chapter 13 bankruptcy is for debtors who:

  • Fail to qualify for Chapter 7 bankruptcy but need debt relief;
  • Have debts that can’t be discharged, such as child support arrears or alimony that they’d like to pay off within five years; or
  • Have fallen behind on a car or house payment and want to catch up on missed payments and keep their property.

The bottom line

If your debt has gotten out of control, you may want to consider filing for Chapter 7 or Chapter 13 bankruptcy. However, before making a final decision, you should consult with a Milwaukee bankruptcy lawyer

Contact a Milwaukee bankruptcy lawyer 

If you are considering filing for bankruptcy in Milwaukee, you need a knowledgeable and experienced Milwaukee bankruptcy attorney in your corner. At Hanson & Payne, we offer bankruptcy and debt negotiation services for individuals in Milwaukee and all of southeast Wisconsin. When you choose us to represent you in your bankruptcy case, we will do everything in our power to protect your interests and see your case through to a successful conclusion. Please contact us today to schedule a consultation. 

The Bull Sells For $2.4 Million Post Bankruptcy

Earlier this year we blogged about the plight of the Sheboygan Falls-based golf course The Bull at Pinehurst Farms. Now we have an update. In late June, a bankruptcy judge approved the sale of the course, which had been saddled with a $4.2 million debt to Wisconsin Bank & Trust, for $2.4 million. 

According to the Sheboygan Press, the property, which is the only golf course in the state designed by Jack Nicklaus, was bought by John Dunfee and Randy Groth, both of Cedarburg: 

Dunfee and Groth — who have known each other their whole lives — have embarked on multiple business ventures together, including their current agricultural commodities trading group, LaBudde Group, but Dunfee said The Bull was really his brainchild.

 

Being an avid golfer, Dunfee has played the course and loved it for years. When he saw it was set for a second sheriff’s sale, he reached out to the bank’s attorney in early June.

 

Dunfee said after the previous failed bid of $2.2 million, he was told he would need to make an offer that was at least $200,000 higher. For him, the price was too good not to bid.

It is not often that the public gets this sort of inside information about a bankruptcy, so we wanted to highlight a few things. 

Timing Is Everything 

First, is the steep discount the buyers received. We have no doubt the creditor would have liked to see a purchase price closer to the $4.2 million it was owed, but the fact that the previous owners filed for bankruptcy, combined with the financial crisis pushed the purchase price way down. 

This is a great example of why we counsel our clients on the importance of timing as it relates to bankruptcy. While nobody could have predicted the current pandemic and resulting financial crisis, there are indications that golf is not as popular with Millennials and Gen Z. This could have a long-term impact on the golf market. 

Hanson & Payne is a very business-minded firm. We are always thinking about the broader business implications of the legal advice we give because we know that is important to our clients. And it is important to us as well. Our team has deep roots in the Milwaukee area, so we want to do what we can to help our clients thrive.  

The Role of the Courts

This sale also illustrates the role the bankruptcy court plays in managing the sale of distressed assets. The Bull was foreclosed on last October, and the property was set to be sold at a Sheriff’s sale. 20 minutes before the sale was scheduled to begin, it was cancelled because the course’s owners filed for bankruptcy. 

Next, a group of minority owners attempted to buy the course, but that fell through. Another buyer then offered $3.1 million for the course before pulling the offer. Shortly before Dunfee and Groth made their successful bid, an unnamed buyer attempted to purchase the course for $2.2 million. The bank rejected this offer and a second Sheriff’s sale was scheduled. 

That’s when Dunfee and Groth stepped in. The bank accepted their offer of $2.4 million, and the court approved the sale. In theory, the court could have demanded a higher purchase price, but that is unlikely in scenarios like this where it has taken months to find a buyer, and the main creditor accepts the terms proposed by a potential buyer. 

A Rare Peek Inside

It was interesting to see this case play out in the courts and in the local papers. Few bankruptcies draw this sort of attention, which is probably a good thing, but when they do it is important to follow along.

Debt Reduction During the Pandemic

If you are having trouble paying your bills, you are not alone. The financial crisis accompanying the COVID-19 pandemic has had a negative impact on millions of people across the country. Here in Milwaukee, many are struggling to make ends meet in these uncertain times

At Hanson & Payne, we are fielding a lot of calls from Milwaukee area residents who have questions about their debt relief options. And we would like to stress that yes, options is plural. There are several paths forward for debtors who are struggling, and we do our best to help our clients find the best one for them. 

Pandemic Specific Programs 

It’s virtually impossible to detail them here because lawmakers and lenders keep changing the rules, but there are a variety of debt relief options open to people who can trace their financial difficulties back to the pandemic. Our firm is keeping up to date on these programs and policies, as are reputable credit counselors. 

Meeting With A Credit Counselor

Something that won’t directly reduce your debt, but may help you manage it better is meeting with a credit counselor. Credit counselors are trained to help people struggling to pay their debts create a budget and assess their overall financial health. 

Getting advice from a neutral third party that really understands the ins and outs of personal finance may be all you need to get things back under control. Or it may be the first step in a longer process since meeting with a credit counselor is required if you want to file for bankruptcy. 

Because of this, the bankruptcy court keeps a list of approved credit counselors on its website. We recommend sticking to this list if you are looking for a credit counselor because there are a lot of scam artists out there who pose as credit counselors, but do little more than drain you of whatever money you have left. If you need assistance sorting through the court’s list, or would like a recommendation, our firm would be happy to point you in the right direction.

Debt Negotiation

Debt negotiation may be a good option for you if you are delinquent on your payments, or if your creditors are threatening to file a collection lawsuit against you. Creditors are often willing to reduce your monthly payments, extend your repayment period, or even forgive some of your debt if you are upfront with them about the difficulty you are having. They know that giving you some flexibility may keep you from filing bankruptcy. 

Creditors do not like it when their debtors file for bankruptcy because it means they will get repaid pennies on the dollar, if at all. Since our firm handles bankruptcies, getting contacted by us on your behalf sends a signal to your debtors that cutting a deal may be the only way they get paid back. 

Bankruptcy 

The most drastic debt relief option is filing for bankruptcy. Filing for bankruptcy can help you wipe your financial slate clean and get you the fresh start you need to rebuild your life. Our firm can help you decide which type of bankruptcy is right for you, then guide you through the process. 

Debt Relief For Milwaukee Area Residents 

Determining what debt relief option is best for you is not something you have to do on your own. The attorneys at Hanson & Payne have years of experience helping Milwaukee area residents turn their financial lives around. As the pandemic-caused financial crisis worsens, you can count on us to guide you and advise you

Will Briggs & Stratton Find Greener Grass On The Other Side Of Bankruptcy?

If you’ve ever push-mowed a lawn or used a snow blower, there’s a good chance you were running a Briggs & Stratton motor. For over 100 years, the Wauwatosa-based manufacturer dominated the market for small engines. Now, it has filed for Chapter 11 bankruptcy

Why Briggs & Stratton Filed for Bankruptcy

The company, which at one time employed 11,000 people in the Milwaukee area alone, has struggled to turn a profit in recent years. The economic downturn caused by the COVID-19 pandemic seems to have made things worse. After the company skipped a $6.7 million interest payment on its substantial debts in June, the writing was on the wall. However, this is not the end for Briggs & Stratton. 

Chapter 11 bankruptcy is also known as reorganization bankruptcy, and that is exactly what Briggs & Stratton intends to do. Instead of winding down operations and closing up shop, they intend to regroup, retool, and reemerge with new owners. 

KPS Capital Partners LP, a private equity firm that owns a lot of manufacturing companies, agreed to buy all of Briggs’ assets for approximately $550 million. A higher bidder could come in, but when a deal like this is so broadly announced that rarely happens.

KPS is also providing funding so Briggs & Stratton can continue to operate while their case makes its way through the bankruptcy courts. This is not uncommon. As the likely buyer, KPS will want to protect its investment, and that means keeping it up and running and making whatever money it can. 

According to the Milwaukee Journal Sentinel, “The private equity firm also said it has entered into an agreement in principle with the United Steelworkers of America for a new collective bargaining agreement for Briggs hourly employees represented by the union in the Milwaukee area. The agreement would become effective upon completion of the acquisition and reorganization.” This is a big hurdle to clear so smoothly.

One thing that is particularly interesting about the KPS deal is that the buyer has already announced it intends to aggressively grow the company through “strategic acquisitions.” This is quite the change from the message Briggs & Stratton was sending out pre-bankruptcy. Earlier this year, the company announced it would sell off parts of its business. This change in direction highlights the way filing for bankruptcy can open up new options for a business. Avenues that were previously closed can open back up after debts are reduced and the business leaders have space to craft a clear vision for the future. 

Bankruptcy Opens New Doors

As we weather the current economic downturn it is likely that more businesses will find themselves the same situation as Briggs & Stratton. But as their current plan for moving forward shows, this is not a bad thing. 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. We would be honored to assist you during your time of need. 

What Happens to Gift Cards When a Business Goes Bankrupt?

Gift cards are one of the most requested and most gifted items in the United States. Their convenience makes them easy for purchasers. Their versatility means recipients will be happy. And they provide an important funding stream for many businesses. 

Gift cards function as unsecured loans that benefit the businesses that sell them. Under normal circumstances, each of those mini loans may stay on the books for years. In 2010, the Federal Trade Commission promulgated new rules for retail gift cards that restrict service fees and extend expiration dates.

How the COVID-19 Has Impacted Businesses

The COVID-19 pandemic has sped the collapse of many businesses that were teetering on the edge of insolvency. Retailers, restaurateurs, and mom and pop shops are all hurting. As more businesses declare bankruptcy, many consumers and business owners are wondering what will happen to the millions of dollars in outstanding gift cards that have yet to be cashed in. 

Because gift cards are considered unsecured debt, untethered to any sort of collateral, gift card holders are offered no special protections by the bankruptcy courts. In fact, businesses that file for bankruptcy must ask the court for permission to keep accepting gift cards while they wind down operations, or attempt to restructure. 

Courts will generally sign off on a request to allow customers to continue to redeem gift cards, but they do not have to. The court may also set a time limit after which gift cards will no longer be honored. The court does this in order to protect higher priority creditors. 

Consumers who miss the cut off deadline for using a gift card after a business has filed for bankruptcy can file a claim against the company for the value of the card. But it is unlikely this claim will be honored since higher priority creditors will be paid first. 

It is also important to note that if a company files under Chapter 11 and completely restructures, or is bought out of bankruptcy by new owners, outstanding gift cards may not be honored going forward. Although a business’s name may remain the same, it is essentially a new company that emerges from bankruptcy. Saddling it with old obligations from unsecured creditors when higher priority creditors did not get fully paid back is unfair, even if gift card holders disagree.  

Businesses that sell gift cards or gift certificates should clearly communicate to their customers what their gift card policy is if they file for bankruptcy. Being transparent about what is going on, and emphasizing the deadline for using outstanding gift cards can go a long way toward easing hard feelings. This is especially important if the business intends to restructure or sell its branding to a new owner. 

If you are considering filing for bankruptcy, and you have concerns about how to handle your outstanding gift cards, let’s talk. Hanson & Payne is a business-minded firm that business owners and commercial lenders in Milwaukee and across the state rely on to counsel them and guide them through the bankruptcy process. We would be honored to assist you during your time of need. 

Brewer Fans Have Bankruptcy To Thank For 50 Years Of Baseball

Most Julys, we are watching the All-Star Game, and starting to pay a little bit closer attention to the Central Division Standings. This year, we are teetering on the brink of a baseball season, with no promise that anyone, let alone the Brew Crew, will make it through the postseason before the pandemic shuts things down again. This could very well be the first year since the 1960s that there is no baseball in Milwaukee. 

It’s a little bit ironic because this was supposed to be a big year for the Brewers. 2020 is the team’s 50th anniversary, and the guys looked pretty good in the handful of spring training games that actually got played. 

One of the things we were looking forward to this year were those long, slow, middle innings when Bob Uecker brings a guest into the broadcast booth for a chat. The story of how the Brewers came to Milwaukee is a fascinating one, and we had hoped to hear some inside accounts of how it happened. 

Inside Pitch: Insiders Reveal How the Ill-Fated Seattle Pilots Got Played Into Bankruptcy in One Year

Earlier this year, a new book came out that tells part of the story. Inside Pitch: Insiders Reveal How the Ill-Fated Seattle Pilots Got Played Into Bankruptcy in One Year, from author Rick Allen tells the story of the work done by Bob Schoenbachler, the then 23-year-old CFO of the Seattle Pilots turned Brewers, and Jim Kittilsby, who also served in the team’s front office. As you may have deduced from the book’s title, bankruptcy played a major role in helping Milwaukee secure its Major League team. 

When the Braves left Milwaukee after the 1965 season, baseball lovers were devastated. The state even filed a criminal complaint against the MLB to try and keep the team here. The case went all the way up to the United States Supreme Court, but the Braves still went to Atlanta. 

Then, in 1967, Major League Baseball (MLB) announced that it was adding four expansion teams. Kansas City, Montreal, San Diego, and Seattle were all given leave to start teams, but Milwaukee was snubbed (perhaps as a punishment). Lucky for us, the Seattle Pilots had a horrible first year. So many things went wrong the team became the first and only professional sports team to ever declare bankruptcy

As we often remind our clients, filing for bankruptcy is often a way to find a path forward, not the end of the road. The Pilots’ path forward meant moving to Milwaukee and changing their name to the Brewers. Although Seattle fans were upset (the state of Washington filed its own lawsuit against the MLB), they were soon mollified by the creation of the Mariners. Both teams have had great success despite their market size thanks to the strong support of their fan base. 

If your business is in a slump, bankruptcy should always be on the table. At Hanson & Payne, we regularly assist Milwaukee area business owners and lenders who are looking for help finding a path forward. We would be honored to assist you during your time of need.

Don’t Be Too Optimistic About The Future When You File For Bankruptcy

At the end of Back to the Future, when Doc is convincing Marty and his girlfriend to accompany him to the year 2015, he utters the famous phrase, “Roads? Where we’re going, we don’t need roads.” It gets you excited for the sequel, which does in fact feature flying cars. Yet, here we are living in 2020, and there’s not a flying car, hoverboard, or self-tying shoe to be found. For some reason, the future we imagined has yet to arrive. 

At Hanson & Payne, we deal with this same disconnect between what is portrayed in movies or imagined and our current reality on a daily basis. There are many, many misconceptions about how bankruptcy works thanks to the way it is treated in popular culture. And filers often expect that the future will be much rosier than is likely. 

Busting Bankruptcy Myths

Our firm works with individuals and families interested in declaring bankruptcy as well as Milwaukee area businesses that wish to do so. Both types of clients often assume that all the debts they have will be forgiven and that all the assets they have will need to be sacrificed in order to achieve that result. Both of these assumptions are wrong. 

Not all debts are forgiven when a filer declares bankruptcy. Some common forms of nondischargeable debt are:

  • Tax debts
  • Child support, alimony, or other family support obligations
  • Debts that are tied to a legal judgment like a personal injury lawsuit
  • Student Loan debts, except in cases of undue hardship
  • Fines for violating laws
  • Debts that you forget to include in your bankruptcy application

Our firm works with filers to help them figure out what debts they will still owe if they file for bankruptcy. We also work with our clients to try and negotiate lower payments or some debt forgiveness from their remaining creditors. 

The other bankruptcy myth that we are frequently asked to bust concerns a debtor’s assets. Many filers assume that they will have to give up or sell off all of their assets in order to pay off their creditors. While this is true in some cases, there are chapters of the bankruptcy code that allow debtors to go on a repayment plan and/or restructure their debts so they can retain possession of important assets. Our firm helps our clients figure out which chapter of the bankruptcy code will be most beneficial to file under considering their long-term goals. Just like a time-traveler, we work to ensure that the current you is not going to mess things up for future you. 

Being Realistic About The Future 

We are not optimistic that flying cars will be available any time soon, but that does not mean that radical changes to the vehicles we know and love are not coming our way. Cars today are safer and more fuel-efficient than ever before, and self-driving vehicles will probably be here before we know it. Being realistic about what the future holds keeps us from being too disappointed that Back to the Future Part II didn’t get everything right. It’s also an important lesson in the bankruptcy world. 

It’s tempting to file for bankruptcy in hopes that doing so will help you get your life or your business back on track. However, it is important to remember that filing for bankruptcy is not the equivalent of waving a magic wand. If it is likely that things will get worse for you financially over the coming months, it may be better to wait to file until you have really hit rock bottom. 

Declaring bankruptcy can only help you manage the debts you already have. It can’t prevent you from accumulating more debt, and it can’t help you with debts you rack up post-filing. Being realistic about what the future holds for your family or your business is therefore critical. 

At Hanson & Payne we do more than help our clients fill out paperwork and navigate the bankruptcy courts. We provide advice and counsel that allows our clients to make good choices and chart a path forward. We look at debts of the past, our clients’ current situation, and even do our best to predict the future. We aren’t time travelers, but we are committed to helping Milwaukee area families and businesses survive and thrive during difficult times

Can States File For Bankruptcy?

The financial pressure of the coronavirus pandemic has forced many families and businesses to consider filing for bankruptcy. It has also sparked a hot debate about the ability of governmental bodies to file for bankruptcy protection. If cities, towns, counties, and school districts are allowed to file for bankruptcy, why not states? 

What Does The Law Saw? 

Right now, the answer to this question is that the bankruptcy law does not apply to states. SInce the late 1930s, federal bankruptcy law has allowed “municipalities” to file for bankruptcy under Chapter 9 of the bankruptcy code. The term “municipality” is defined in the bankruptcy code as a “political subdivision or public agency or instrumentality of a state.” This means cities, townships, school districts, and other government units like sewer and water districts can file, but a state cannot. A state, by definition, cannot be a subdivision, agency, or instrumentality of itself. 

Laws Can Be Changed 

However, Congress could change the bankruptcy code to allow states to file. Policymakers are always tinkering with the code, as we saw last year with the passage of new rules that apply when small businesses file under the new Subchapter V. It is possible that the financial crisis brought on by the COVID-19 pandemic will inspire Congress to pass a new law that allows states to file for bankruptcy. 

Possible, but unlikely. 

As the Council of State Governments points out, “the mere existence of a federal law allowing states to declare bankruptcy would increase interest rates, rattle investors, raise the costs of state government, create more volatility in financial markets, and erode state sovereignty under the 10th Amendment to the U.S. Constitution.” 

Those are some pretty significant downsides. 

Bad For Them, But Good For Me? 

If allowing states to file for bankruptcy is so bad, why are families and businesses encouraged to seek bankruptcy protection? Part of the answer lies in the scale of the issue. A single family or business is not at all equivalent to a state. Comparing the two is like comparing apples and toothpaste. 

From a more practical point of view, the benefits of bankruptcy far outweigh the downsides for families and businesses in financial distress. Bankruptcy offers a fresh start to individuals and families who file under Chapters 7 or 13, and businesses who file under Chapters 7 or 11. While it may be more difficult to access credit post-bankruptcy, and some business opportunities may be out of reach, getting out of a financial hole and back on solid ground is typically worth it. 

Experienced Attorneys Serving The Milwaukee Area

Milwaukee area families and businesses who are facing financial difficulties, and beginning to question what their options are, should not hesitate to make an appointment with one of the experienced bankruptcy attorneys on the Hanson & Payne team. We can offer advice on what options are available, and help find a path forward.