Mark Twain’s Safety Net: Bankruptcy

“There are two times in a man’s life when he should not speculate: when he can’t afford it and when he can.” -Mark Twain

Although he married into a wealthy family, was a best-selling author, invented a popular scrapbook, and went on many profitable public tours — including here in Wisconsin — Mark Twain was forced to declare bankruptcy at the height of his popularity. Money ran through that man’s hands like water, and as the quote above indicates, he was always throwing money at what he hoped was the next big thing. 

Over the years he invested in and lost money on, an engraving process, a magnetic telegraph, a steam pulley, the Fredonia Watch Company, railroad stocks, and a protein powder called Plasmon, which he claimed delivered 16 times the nutritional value of steak at a cost of a penny a day. But those were small potatoes compared to his two biggest business blunders. 

He sank the modern equivalent of millions of dollars into a machine called the Paige Typesetter, which promised to revolutionize the printing world. Twain saw a demonstration of the printer on one of the rare days a prototype of it was working and invested heavily. He continued to pour money in over the next decade as the machine’s inventor promised he needed just a little more time to work out some bugs. “At first, Twain had called Paige—who would run through four sets of backers—the ‘Shakespeare of mechanical invention.’ By the end, he fantasized about catching a certain part of Paige’s anatomy in a steel trap and watching him slowly bleed to death.”

Twain’s second big mistake was starting his own publishing company. He was bitter about the admittedly poor deal he got from his first publisher and thought he could do better himself. So, when it came time to publish The Adventures of Huckleberry Finn, he established his own company and put his nephew in charge of it. At first, things were great. Twain’s new book sold well. As did the autobiography of President Grant, which Civil War veterans peddled door to door. Unfortunately, every other book Twain’s nephew chose to publish was a disappointment. There was no commercial market for a book of sermons by Pope Leo XIII or an in-depth analysis of the speech of monkeys. Twain called the company a “lingering suicide.”

By the 1890s, the cash-strapped Twain owed more than $80,000, which would be more than $2 million today, to authors, bookbinders, and a bank. On the advice of a friend, Twain transferred all of his remaining assets to his wife, then filed for bankruptcy. 

This was questionable advice then and would be considered fraud now, but it helped get Twain back on firm financial footing. Post-bankruptcy he went on a world lecture tour that brought in money and acclaim and reignited public interest in his writing. He made so much money he paid off all his old debts, even though he had no obligation to do so. And he once again started investing in dubious ventures. 

Bankruptcy was a safety net for Mark Twain, just as it is for so many people today. It is a way to start fresh or refocus on what you do best. If you have questions about bankruptcy, Hanson & Payne’s experienced team of attorneys is here for you. Please contact us today to schedule an initial consultation. 

How Many Times Can I File For Bankruptcy?

They say the third time’s a charm, but if you are unfortunate enough to consider filing for bankruptcy multiple times, you know this is not always true. Filing for bankruptcy does not get easier each time. In fact, there are limits on your ability to file if you have done so in the past. 

You Can File For Bankruptcy As Many Times As You Need To… In Theory

There are no limits on the number of times you can file for bankruptcy. You may file as many times as you need to. 

However, the law does require you to wait a certain amount of time between filings. These waiting periods end up limiting the number of times many people can file for bankruptcy. The amount of time it takes to be eligible for another discharge of debt depends on the type of bankruptcy you filed previously, and the type of bankruptcy you wish to file this time.

The Two Main Types Of Personal Bankruptcies 

How long you will need to wait to file bankruptcy again depends on the type of bankruptcy you filed previously. Most people file under Chapter 7 or Chapter 13. 

Chapter 7 bankruptcies are traditional “fresh start” bankruptcies. In a Chapter 7 bankruptcy, your assets are turned over to your creditors or sold off, then your remaining unsecured debts such as credit cards and medical bills are discharged. 

Chapter 13 bankruptcies are court-supervised repayment plans. You get to hold on to assets you are able to afford by paying off your debts a little at a time. If you make all of your payments during the 3-5 year repayment period, your remaining debts can be discharged.

If You Previously Filed Under Chapter 7

If you previously filed for bankruptcy under Chapter 7, you must wait 8 years from the date of your previous filing to file another Chapter 7 bankruptcy.

If you want to file under Chapter 13 this time around, you are only required to wait 4 years 

If You Previously Filed Under Chapter 13 

If you previously discharged some debts through the Chapter 13 bankruptcy process, you must typically wait 6 years from the date of your filing to file again under Chapter 7. However, if you raid at least 70% of the claims in your Chapter 13 case, and you proposed the plan in good faith and used your best effort to repay creditors, you can file virtually immediately.

If you want to file under Chapter 13 again, you must wait 2 years to qualify for another discharge.

Help With More Than The Math 

Rather than trying to remember the details of your case, and do the math yourself to figure out if you can file for bankruptcy again, we recommend reaching out to the experienced Milwaukee bankruptcy attorneys on the Hanson & Payne team. A blog post like this can give you basic information, but it can’t tell you what options are actually available to you. Our team will listen to your side of the story, and help you figure out the best way to move forward. Contact us today to schedule a free consultation. 

3 Benefits Of Subchapter V Bankruptcies

In February 2020, a new bankruptcy law went into effect. The Small Business Restructuring Act of 2019 (SBRA), which is also being referred to as Subchapter V, created a bankruptcy process designed specifically for small businesses. 

Under the law, debtors can pay off creditors over a three to five-year period through a payment plan based on projected disposable income. At Hanson & Payne, we work with both debtors and creditors. Our role in a Subchapter V case is to lobby the trustee on behalf of our client so the trustee will recommend a plan that benefits our client. To do so, we work with our client to put together what we would consider an ideal plan, then gather all of the evidence that supports that plan. 

The Repayment Plan 

The third thing that sets Subchapter V apart is its repayment plan. This is not something you typically see in other business bankruptcies, but it is common in a Chapter 13 personal bankruptcy. 

The big issue in Subchapter V cases is what counts as disposable income since that is the money that is earmarked for repaying creditors. The pandemic has made this a challenging task since cash flow has been so irregular during the past year. The Hanson & Payne team helps debtors and their creditors determine a fair way to calculate disposable income. 

Milwaukee Bankruptcy Lawyers Small Business Owners Can Rely On

At Hanson & Payne, we are eager to help small business clients who feel the Subchapter V process may be just what they need to survive and thrive post-pandemic. Whether you know Subchapter V is what you want to do, or you are open to other options, our business-savvy team is ready to advise you and guide you along whatever path you choose. 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.

Businesses a bankruptcy option that is like a hybrid of a traditional Chapter 11 business bankruptcy and a Chapter 13 personal bankruptcy. This has been a real boon to small businesses here in Wisconsin and across the country during the economic downturn caused by the pandemic. 

There are three big things that set Subchapter V apart:

  • It provides shorter deadlines for completing the bankruptcy process
  • It provides for a private trustee who will work with the small business debtor and its creditors to facilitate the development of a consensual plan of reorganization, and 
  • Creditors are repaid through a court-supervised repayment plan. 

Shorter Deadlines 

Under Subchapter V, businesses have only a 90-day window to submit a reorganization plan to the court. Compare this to the 120-day deadline in Chapter 11 cases, which is often extended for periods up to 18 months. The difference is remarkable, and businesses are getting through the Subchapter V process remarkably fast. 

The law also requires the court to convene a status conference within 60 days of the filing date. 14 days before this conference, the debtor must file a report with the court detailing its progress towards reorganization. These deadlines really speed up the resolution by keeping the court and all of the parties interested in the case hopping. 

The speed cases get resolved is important because bankruptcy filers must pay ongoing administrative fees and expenses. As cases drag on, these amounts can really add up and become a burden on an already cash-strapped business. 

The Role Of The Trustee 

As soon as a Subchapter V case is filed, the United States trustee (UST) will appoint a Subchapter V trustee to the case. The trustee is tasked with facilitating the development of a consensual plan of reorganization. This is a very hands-on job. 

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. 

How Long Does It Take To File For Bankruptcy?

It’s been almost two years since the Wisconsin-based retail chain Shopko filed for bankruptcy, but some lingering issues related to its Chapter 11 filing are just now being resolved. Thankfully, most bankruptcy cases do not last this long. 

What’s Going On With Shopko? 

Shopko filed for Chapter 11 bankruptcy in January 2019. Their plan was to use the tools offered by Chapter 11 to downsize, reorganize, and regroup while remaining in business. However, it was unable to do so and ultimately had to shut down completely. The chain closed its doors in June 2019. 

Now, almost two years after its initial filing, and well over a year since it ceased operations, Shopko’s bankruptcy is still making headlines. The company has just reached a settlement with thousands of former employees who filed a class-action lawsuit seeking severance payments they allege they were promised but never received

“Shopko denies that it owes any severance pay. Nevertheless, Shopko has reached an agreement with the Class Representatives to settle the asserted claims for the entire class of similarly situated former employees,” reads the class action settlement announcement.

$3,018,434.78 will be distributed to the employees who are part of the class action and their attorneys. If any of the checks are not cashed within 180 days after issuance or returned as void, the funds will go to Brown County United Way and Feeding America Eastern Wisconsin.

Is This Typical? 

What is going on with the Shopko bankruptcy is not typical, but it is not unheard of. 

Businesses that file for bankruptcy under Chapter 11 are often successful at reorganizing and staying in business. If a business wants to shut down, or finds that it must shut down, it typically files under Chapter 7 or converts its Chapter 11 case to a Chapter 7 case. 

Most Chapter 11 cases wrap up within 6 months to 2 years. Shopko is still within that 2-year window, but it is pushing it. The COVID-19 pandemic has played a role in dragging out the case, but Shopko has also faced some unique challenges. Its reorganization plan was rejected by the bankruptcy court, it shifted from reorganizing to shutting down, and it has been dealing with the class action lawsuit discussed above. 

Most Bankruptcy Cases Do Not Last This Long

Even in the midst of the pandemic, most bankruptcy cases are resolved quicker than the Shopko case. Even seemingly complex commercial bankruptcies filed under Chapter 11 can be processed quickly if the reorganization plan is solid and creditors are on board with it or have filed a straightforward adversary proceeding that can be quickly resolved. Chapter 7 cases rarely take over a year to process. 

Hanson & Payne has years of experience helping businesses in the Milwaukee area navigate the bankruptcy process. We have represented companies filing for bankruptcy, creditors, and commercial lenders, and have a reputation for resolving cases quickly so everyone involved can move forward. If you are looking for a reliable and experienced legal team you can trust to swiftly guide you through what can be a complex and frustrating process, let’s talk

Cram What? The Bankruptcy Tool With The Weird Name

Have you ever tried to give a cat a pill? It’s not a pleasant task. You have to pry open its jaws, cram the pill down the poor thing’s throat, then cross your fingers and hope it doesn’t decide to cough it up and force you to start the process all over. 

Now, imagine the cat is a creditor watching one of its debtors go through the Chapter 13 bankruptcy process. They want to get paid back for the money they have loaned out. They don’t want the debt they are owed to be forgiven or renegotiated. So sometimes the court has to cram a solution favoring the debtor down the creditor’s throat. 

Section 1129(b) of the Bankruptcy Code outlines what has become known as the cramdown process for the way it is crammed down the throats of creditors. It allows a Chapter 13 bankruptcy court to reduce the amount of an outstanding loan to match the value of the property securing it. 

What debt can be crammed down? 

Only certain types of debt can be crammed down. The biggest restriction is that the debt must be secured debt. A secured debt is a debt that is tied to a piece of real estate or personal property — like a car or a piece of furniture — that can be repossessed by the creditor if the debtor fails to repay his or her debts. 

The law further restricts cramdowns by preventing the courts from cramming down the mortgage on the debtor’s primary residence. Mortgages on investment properties may be crammed down, but only if the debtor can repay the debt fully during the 3 to 5 year Chapter 13 process. 

Loans on personal property — things that can be owned other than real estate —- can all be crammed down if they were purchased more than a year before the debtor filed for bankruptcy. It is common to cramdown loans on household goods like appliances and furniture. 

The most common type of cramdown is a bit harder to get, and that is a cramdown on a car loan. Other than a home, a car is the most expensive item most people will ever purchase. In order to prevent debtors from buying a car, and then cramming the loan down as the vehicle’s value drops, the cramdown law says car loans cannot be crammed down unless the car was purchased over 910 days prior to the bankruptcy filing. This works out to around 2 ½ years. 

An example of this bankruptcy tool

This is probably easier to understand with a little example. Say there is a debtor who has filed for Chapter 13 bankruptcy, and this is what they owe and how much that same property is actually worth:

  • Primary Residence worth $300,000 with a $450,000 mortgage
  • Rental Property worth $200,000 with a $250,000 mortgage
  • Furniture purchased 2 years ago, now worth $500, with a $1200 loan
  • 5-month-old dishwasher worth $200 with a $500 loan
  • Car 1, purchased 5 years ago, worth $7,000 with a $10,000 loan
  • Car 2, worth $25,000, purchased last year with a $30,000 loan

If the court does a cramdown, the following debts will remain: 

  • The mortgage on the primary residence cannot be crammed down.
  • The mortgage on the rental property may be crammed down to $200,000 if the debtor can pay off that amount during the Chapter 13 process. 
  • The furniture was purchased more than a year ago, so the loan can be crammed down to $500.
  • The dishwasher was purchased less than a year ago, so the loan cannot be crammed down. 
  • Car 1 was purchased more than 910 days ago, so the loan can be crammed down to $7,000.
  • Car 2 was purchased too close to the date of the bankruptcy filing to cramdown the loan. 

Another Tool In The Bankruptcy Toolbox

Cramdowns are another tool in the court’s bankruptcy toolbox. Working with an experienced Milwaukee bankruptcy attorney will ensure that the cramdown process is properly navigated by both creditors and debtors. 

What Is Replevin? Rare Car Stolen From A Milwaukee Man Provides An Unusual But Perfect Example

“Replevin” is the epitome of legalese. It’s Latin mixed with French. It’s not used in everyday conversation. But it is often thrown around in bankruptcy cases as if everyone knows exactly what it means.

The truth is most people don’t know what it is.

So what is replevin? According to the Merriam-Webster Dictionary, replevin is “an action originating in common law and now largely codified by which a plaintiff having a right in personal property which is claimed to be wrongfully taken or detained by the defendant seeks to recover possession of the property and sometimes to obtain damages for the wrongful detention.”

Breaking this definition down is helpful. It’s a legal action. It is brought by a plaintiff who believes the defendant has wrongfully taken (stolen) or detained (failed to return) a piece of personal property (which means any sort of thing, but not land). The plaintiff wants the property back, and may also want paid for the hassle.

Right now, there is an unusual case pending in the Wisconsin Supreme Court that provides a good example of how a replevin action actually works.

In 2001, thieves broke into the old Monarch Plastic Products factory on Milwaukee’s lower east side and stole a disassembled French sports car that its elderly owner had been trying to restore since 1967. The car, a 1938 Talbot Lago T150 C teardrop coupe, was worth around $7 million.

Not only was the car stolen, so were all the documents and spare parts related to it. Other valuable items in the factory-turned-garage were not touched. There was no sign of a forced entry, but in a sinister turn of events the phone lines to the owner’s house were cut the same day the car was stolen.

In 2005, the car’s owner passed away. He left his entire estate, including the rights to the stolen car, to his cousin, Richard “Skip” Mueller. A few years later, Mueller sold a majority share of the right to own the car to Joseph L. Ford III, who has experience tracking down rare stolen cars.

Then things went quiet, and it seemed like the car was gone forever. But in 2016, the authorities alerted Mueller and Ford that someone was trying to title a now completely restored Talbot with the same chassis number in Illinois!

Mueller and Ford demanded the return of the stolen car, but the man who had purchased it, Rick Workman, refused. Workman claims he had no idea the car was stolen. He purchased it in good faith from a Europen dealer.

So in February 2017, Mueller and Ford filed a replevin action against the company Workman used to purchase the car, TL90108, LLC.

It’s a case that fits the definition of replevin to a T. Mueller and Ford, the plaintiffs, are the rightful owners of a piece of personal property, the Talbot. They are suing the defendant, TL90108, LLC, for the return of the vehicle.

Unfortunately, this case is not as simple as the definition of replevin makes it sound. Wisconsin has a six year statute of limitations in replevin cases. A replevin action must be filed within six years from when the property was first “converted” aka stolen or wrongfully detained.

Mueller and Ford think the countdown clock should have started when they demanded Workman return the car and he refused. Workman says the clock had already run out by that time because it started the day the car was stolen.

It is unclear who is right, so the Wisconsin Supreme Court has agreed to hear this case and decide when the statute of limitations clock starts ticking in a replevin case. Our firm represents clients in replevin cases, so we are keeping a close eye on this case.

Should I file for bankruptcy before or after my divorce?

Going through a divorce is a stressful journey on its own. If your divorce is accompanied by financial problems, this stress is compounded. As you go through one of life’s largest hurdles, you may also consider filing for bankruptcy protection.  Not only can this step help protect you from an unscrupulous ex who may run up debt prior to your divorce, but it can also help you make a complete fresh start with less financial worry.

Chapter 7 or Chapter 13 Bankruptcy?

The decision about when to file for bankruptcy depends on a number of factors. The answer will largely depend on whether you want to file under Chapter 7 or Chapter 13. If you qualify for Chapter 7 bankruptcy protection and really want a fresh start, filing before your divorce is a smart option. The process only takes a few months and you can save on filing fees if you file jointly.

If, on the other hand, your joint household income is too high to qualify you for Chapter 7 bankruptcy, then you should decide whether your single income would be low enough to qualify after your divorce, or alternatively, seek Chapter 13 bankruptcy protection.

Income Constraints

In Wisconsin, if the two of you make less than $57,903 and have no children, then you should qualify for Chapter 7 bankruptcy protection before your divorce. If, however, your income exceeds that amount but your single income will be less than $43,958, it would be a good idea to wait until after your divorce to file for Chapter 7 bankruptcy protection.

If your joint and single income amounts are simply too high to qualify for Chapter 7 bankruptcy protection, then you may consider Chapter 13 protect after your divorce. Why after? Because it takes three to five years for a Chapter 13 bankruptcy proceeding to come to a close. Unless you want to continue in your marriage for those extra years, then it would be prudent to wait until after your divorce is finalized to take this next step.

Relationship Status

If you and your spouse qualify for Chapter 7 bankruptcy and are on relatively good terms during the divorce process, filing for bankruptcy before the divorce is finalized can be a good thing. If things are rocky though, your spouse may hinder your efforts to settle your debt situation. You need to be able to depend on your spouse to provide financial documents and appear in court.

Asset Questions

Another big item to watch out for is the distribution of your assets. It is important to talk to your attorney about the implications of a divorce settlement on bankruptcy protection, particularly for assets held jointly.

Thinking About Divorce and Bankruptcy

If you are struggling to meet your financial obligations during your divorce, there are ways to make things easier on yourself. The experienced bankruptcy attorneys at Hanson & Payne provide you with options for seeking bankruptcy protection during a divorce. Contact us today or call (414) 271-4550 for a consultation.

Can You Wipe Out Taxes in Bankruptcy?

image of No more debtA common question that people have about bankruptcy is whether they will be able to “wipe out” (referred to in bankruptcy terminology as “discharge”) certain taxes owed to the Federal and State governments if they file bankruptcy.

If you file a Chapter 7 bankruptcy case, then your income taxes can only be wiped out if all of the following are true:

  1. the due date for the tax return for the tax year in question must be more than three years ago,
  2. the tax return for the tax year in question must have been filed on time (if the tax return was not filed on time, then it must have been filed more than two years ago), and
  3. the tax must have been assessed against you by either the Federal or State government at least 240 days (eight months) ago.

Continue reading

Can I Keep My Home and Car if I File for Bankruptcy?

image of wallet being squeezedA common misunderstanding that people have about bankruptcy is that you cannot keep your home and car(s) if you file bankruptcy. In reality, most people who file for bankruptcy protection get to keep their home, cars, and all of their other property.

When you file for bankruptcy, you must list all of the property which you own at that time. Depending on the value of your car and the nature of your various items of property, you can protect and prevent most property from being taken by the bankruptcy court. Continue reading