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.

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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

The Bankruptcy Means Test: Do I Qualify for Bankruptcy?

image of Worried about bills?The bankruptcy “means test” is the method used to determine whether you are likely to succeed in filing a Chapter 7 bankruptcy case. Chapter 7 bankruptcy is usually preferred because it allows you to receive a “fresh start” without having to pay any money back to your creditors.

The first step in determining whether you are likely to succeed in filing a Chapter 7 bankruptcy case is to see whether your average monthly income (determined by averaging your income over the last six months) is more or less than the median income for a household of your size. If your income is less than the median income, then the means test won’t affect your ability to succeed in filing a Chapter 7 bankruptcy case. The table below shows Wisconsin’s median income figures for households of 1-4 people. Your household size is generally determined by how many family members live with you. Continue reading

Buying a Home After Bankruptcy

image of home foreclosureSome clients are surprised to learn that, after filing bankruptcy, they are actually in better shape to buy a home than they were before. They wonder, “How is this possible with my credit?” By taking care of debt through Chapter 7 or Chapter 13, it shows that a person is serious about getting their debt problems under control. It also frees a person from onerous credit card debt and other bills that make it impossible to save up for a down payment. While there are some restrictions immediately following a bankruptcy, within two years most people are able to at least examine the possibility of buying a house. Continue reading

Business Workouts and Bankruptcy

Business Restructuring Debt Choices

image of store closing signThe Great Recession continues to impose high financial hurdles for today’s businesses, including increases in the cost of goods sold, slower paying customers, and an increase in uncollectible accounts receivable. Over the same period of time, credit markets have tightened, making a traditional refinancing of business debt difficult to accomplish. Business debt workouts and Chapter 11 or 13 bankruptcy cases are the most commonly used solutions for unsustainable financial strain on a business. Continue reading

3 Solid Strategies to Erase Tax Debt for Good

Paths out of a Nightmare

image of income tax debtFalling into tax debt is one of the most stressful situations a person can endure. Constant calls from tax collectors have you in knots, and in fear for your financial future, as well as your family’s well-being.

Fortunately, there are several paths to take that lead out of those dark woods, and the following list contains some of the best. Continue reading

Debt Negotiation

Debt negotiation involves negotiating with your creditors to reduce your debt level. If your debts are out of control, negotiation services can help you get out of debt quicker. If you are considering negotiating your debts, it is important that you get help from a qualified attorney.

Creditors are much more willing to negotiate with a professional; therefore, a lawyer can convince your creditors to decrease the balance on your bill. Some of the types of debt that can be settled include medical bills, unsecured loans and credit card bills. In some cases, it is possible to negotiate your mortgage loan or auto loan. Continue reading

Debt Negotiation: 3 Terms Credit Card Companies Won’t Change

image of cut credit card debtCredit cards can help you through the tough times. They can give you a way to score rewards while shopping. They can provide you with a way to spend money without carrying cash. All that said, however, it’s easy to get in over your head. Millions of Americans have found themselves in too much personal debt. They are scrambling for a way out of the minimum-payment rat race.

Going through debt negotiation with an experienced lawyer can be an excellent way to procure more favorable terms. Talking directly with your credit card company can work as well. If you choose to do so, however, here are 3 terms they are unlikely to negotiate. Continue reading