Preparing for Bankruptcy: What Documents To Bring To Your First Appointment

Filing for personal bankruptcy is a simple and straightforward process if you do some work to prepare before showing up at the courthouse. Below is a list of documents we ask all of our clients to work on pulling together before we file their case.

  1. A certificate of credit counseling from a credit counseling agency approved by the Eastern District of Wisconsin. You must complete a credit counseling course not more than 180 days before filing for bankruptcy.
  2. A copy of every pay stub (proof of each pay period) you have received over the past
    seven months. Your employer should be able to provide you a copy of your pay stubs if you do not already have them.

If you have other income, write or type up a list describing it. Include any cash payments you have received.

  1. The complete and current address of all of your creditors (the people/companies to whom you owe money), including account number, the approximate amount you owe each of them, and the approximate date(s) you incurred each debt.

If a creditor has recently sent you a notice directing where notices should be sent in the event you file a bankruptcy, then you also need to provide us with that notice.

  1. Copies of state and federal tax returns for the 2 most recent tax years. If you have not filed tax returns for both of the 2 most recent tax years, then provide us with a copy of the tax return for the most recent year in which you did file.
  2. The state and federal tax returns for the most recent tax year for any business in which you hold an ownership interest (you do not need to provide us with tax returns for publicly traded companies in which you hold stock and in which you are not also an officer).
  3. A copy of the most recent real estate tax bill listing the tax assessed value for each parcel
    of real estate in which you have an interest. For properties in the City of Milwaukee you can get that information by clicking here. For information on properties in other Wisconsin counties, click here.
  4. A copy of each recorded mortgage or recorded land contract on property in which you have an interest. You will likely have to visit the county courthouse for the county in which each property is located to get this information. Click here to see the addresses and official phone numbers of all the courthouses in the state.
  5. The recorded deed to each parcel of real estate in which you have an interest. This information is also available at the county courthouse in the county where the property is located.
  6. A copy of the title to each automobile on which your name(s) appears.
  7. A copy of the Vehicle Purchase and Finance Agreement (the car note) or lease for each vehicle that you are financing through a lender or leasing.
  8. A written/typed list of the name, address, and phone number of everyone to whom you owe a domestic support obligation (includes alimony, maintenance, or child support). Also include the amount you owe, the amount of any arrearage, and the amount of the monthly payment. If an Order has been entered with the court outlining your obligations, please provide a copy of the Order.
  9. A copy of any divorce decree entered within the last four years, or a divorce decree entered at any time if the property division has not been completed between you and your ex-spouse.
  10. A copy of any marital settlement agreement (“MSA”) if divorced in the last twelve (12) months
  11. Any marital property agreement (“MPA”) between yourself and your spouse.
  12. A written or typed description of any personal injury or worker’s compensation claim you may have and a copy of all accident reports related to the claim, a written or typed estimate of the value of the claim, and the name of the attorney(s) who represents you regarding such claim.
  13. Copies of bank statements from all bank accounts you, and/or your spouse if applicable, have used for the last six months.
  14. A copy of each promissory note secured by real estate you own, including your home. The promissory note is the document that states the amount borrowed, interest rate, installment payment amount, and due date of the loan. Your lender(s) should be able to provide you a copy of this information if you do not have it on hand.
  15. A copy of your social security card. If it is a joint filing, we will need a copy of your spouse’s social security card as well.
  16. Any other documents you think are relevant.

Click here to download a .pdf checklist of these documents that you can print and use to organize your files.

Sometimes it can be tricky to track this information down, so if you have any trouble, please reach out to our office and let us know.

Creditors Must All Be Sung The Same Tune

Earlier this year, we did a blog on the Gibson Guitar bankruptcy. It’s a case we’ve been following closely because it is a high-profile version of a type of case we frequently work on ourselves – a Chapter 11, business reorganization bankruptcy. A recent article in the Wall Street Journal provides yet another peek into the case with a focus on an issue that comes up in almost every business bankruptcy – the pre-filing treatment of creditors.

The guitar company’s creditors are reportedly investigating whether certain lenders were favored in the months leading up to the bankruptcy filing. For example, a loan from Elavon Financial Services DAC, U.K. Branch was swiftly paid down from $60 million to $24 million in the months leading up to the bankruptcy filing.

Businesses that are struggling to stay out of bankruptcy, and those that suspect they will soon be forced to file, often think it is a good idea to pay off small debts so it looks like they have fewer creditors, or to focus on paying down larger debts to keep those lenders happy. But treating some creditors better than others in the months before filing for bankruptcy is a no-no.

If a filer prefers one creditor to others, that creditor might have to give back the money they were paid by the debtor and see it instead distributed to all the creditors.   

The Bankruptcy Code defines a preferential payment as:

  1. Any transfer by the debtor;
  2. Made to or for the benefit of a creditor;
  3. To pay back a debt which was owed by the debtor before the transfer was made;
  4. Made while the debtor is insolvent;
  5. Within 90 days prior to the date the bankruptcy case was filed, or within 1 year for “insiders”;
  6. That enables the creditor to receive more than it would have received in a Chapter 7 liquidation.

This is a very broad definition, so it is common for all of a bankruptcy filer’s creditors to receive a letter alerting them that funds they have been paid are being clawed back. Creditors should not hesitate to fight these demands.

Creditors can often keep the money they were paid or at least reach a settlement allowing them to keep a portion of the payment if they can show that they have a valid defense to a claim of preferential treatment.

The most common defense is that the payment was made for a contemporaneous exchange of goods. Prime examples of contemporaneous exchanges involve cash-on-delivery (COD) payments for equipment or inventory the debtor is using to run their business.

It may also be possible to show that the payment was made in the ordinary course of business, and was therefore not preferential but typical. This is a heavily litigated defense, but one that should not be dismissed just because there are few bright lines rules governing what is done in the ordinary course of business.

Our firm regularly helps creditors defend against all sorts of preference claims.

Trump’s Tariffs May Cause Bankruptcies In Wisconsin

It seems as it each week another tariff on foreign goods, or a retaliatory tariff on American goods, is announced. While some industries may benefit, as President Trump claims, Wisconsin dairy farmers are suffering.

According to a report in the Journal-Sentinel, “About 90 percent of Wisconsin milk is turned into cheese, and all but about 10 percent of that cheese is sold outside the state’s borders. Mexico buys nearly a quarter of all dairy products exported by the U.S., and the American dairy industry is reeling from $387 million in Mexican tariffs — of between 15 and 25 percent — on cheese.”

And it is not just Mexico that is imposing tariffs. Canada, the EU, and China are also getting in on the act. Experts estimate that Wisconsin’s dairy farmers can conservatively expect to lose $75 million a month because of these tariffs.

Unfortunately, suffering is nothing new in the dairy industry. A drop in milk prices over the past few years has brought many small family farms to their knees. As the Journal-Sentinel article notes, “Wisconsin lost 500 dairy farms in 2017, and about 150 have quit milking cows so far this year, putting the total number of milk-cow herds at around 7,600 — down 20 percent from five years ago.”

A look at the latest bankruptcy data shows that 17 Wisconsin farmers filed for Chapter 12 bankruptcy during the first quarter of 2018. Chapter 12 is a special chapter of the bankruptcy code that was enacted specifically so that “family farmers” and “family fishermen” can file for bankruptcy without losing all their assets and giving up their way of life.

Chapter 12 bankruptcies are like Chapter 11 or Chapter 13 bankruptcies in that the goal is to reorganize operations, and repay debts on a payment plan. However, Chapter 12 is simpler and less expensive to file under than Chapter 11, which was designed with large corporations in mind. But Chapter 12 is also a lot better at dealing with the large debts and less predictable income that characterize family farming and fishing operations than Chapter 13 is.

As we all focus on getting through these turbulent economic times, know that our firm is here and ready to help. We are ready to help those who are in financial distress determine what paths forward are available. And if the best option is bankruptcy, we can determine what chapter would be best to file under, and how to structure things so the filer comes through the process set up for success moving forward.

As we always emphasize, filing for bankruptcy is not a sign of failure, it is simply a legal mechanism that allows people and businesses to press the reset button and move on with their lives. More often than not, the cause of a bankruptcy is not something that the filer could control, like the imposition of tariffs.

Linda McMahon Knows How To Take A Hit And Come Back Stronger

“..It’s really not how you fall… it’s how you get back up…” These are wise words from Linda McMahon, the head of the federal Small Business Administration and the co-founder and former chief executive officer of WWE. Because of her background, you might think this is advice she is giving to an aspiring wrestler, but it is actually a summation of the lessons she learned when she and her husband Vince were forced to file for personal bankruptcy.

Why Were the McMahon’s Forced to File for Personal Bankruptcy?

According to Linda, the McMahons accumulated over $1 million in debt when she was in her late 20s. She and Vince, “partnered with some folks who weren’t quite the business partners we expected them to be” and invested in a construction company and a cement block factory. Things quickly went south, and the McMahons lost their house and had to watch as their car was repossessed.

“We didn’t really know the safeguards to really look for. We were relying on someone else whose opinion we respected at the time for those kinds of investments, and they just didn’t work,” says McMahon.

After going through bankruptcy, the couple was determined not to make the same mistakes again. They focused on what they knew rather than trusting others for business advice, and ended up growing the WWE from a 13-person regional operation to a publicly traded global enterprise with more than 800 employees in offices worldwide.

Filing for bankruptcy is what allowed the McMahons to get back on their feet and build their business into what it is today. And the law offers this same opportunity to everyone. Our firm has helped countless Wisconsin families and businesses navigate the bankruptcy system and get on with their lives.

And we do so in a very focused and unique way. Instead of rushing through as many cases as possible so we can make a quick buck and move on, we get to know our clients and work with them to craft a plan that will allow them to move forward on their own terms. We believe this is important because like Linda McMahon says, it’s how you get back up that matters. We don’t just help our clients get through the bankruptcy process, we help them get back up.

Pressing Pause

Ever since Remington filed for bankruptcy and the media reported that that might prevent the Sandy Hook parents from recovering anything if they prevail in their lawsuit against the gun manufacturer, we have been getting a lot of questions from potential clients about the interplay between bankruptcy and other lawsuits. In this post, we’ll dive into this issue and try to answer a few common questions about this topic.

A whatchamacallit.

First, let’s talk terminology. An “automatic stay” is the legal name for what happens to other lawsuits when a bankruptcy suit is filed. You can even think of it like the common command given to dogs — stay. But even good dogs will not “stay” forever. Eventually they get moving again, and so do stayed lawsuits.

Will a pending lawsuit go away if I file for bankruptcy?

The short answer is no. Filing for bankruptcy will not make other lawsuits magically disappear. All bankruptcy does is stay other lawsuits until the bankruptcy case is resolved or the court grants the litigants permission to proceed with other claims.

The longer answer is that some litigants will drop their cases or offer more favorable settlement terms if the party they are suing files for bankruptcy. Because of this, some individuals and companies will file for bankruptcy as a strategic move.

Some examples may help.

One of the most common examples of a legal action that is stayed by a bankruptcy filing is a foreclosure. Filing for bankruptcy hits the pause button on the foreclosure since the mortgage is pulled into the bankruptcy. The mortgage doesn’t disappear, but the lender might be open to renegotiating the terms.

Keep in mind that the stay stops all sorts of cases. A couple that is divorcing will have their case stayed if one of the partners files for bankruptcy.

What about criminal cases?

Unlike civil cases, criminal cases are generally not stayed when the person who is the target of a prosecution files for bankruptcy.

However, there are exceptions to this. If a criminal case involves money or property, it too might be paused until a bankruptcy case is resolved. But this is not a hard and fast rule. If the case is about money or property, but the government is seeking to punish the lawbreaker rather than seeking repayment, the case may proceed.

Consider the case of a person who starts blowing through the toll plaza without paying. The government tracks the person down and files a criminal complaint against them. Well, it turns out the person wasn’t paying the tolls because they couldn’t afford to, so he or she files for bankruptcy. Whether the criminal case is stayed depends on what the government wants out of the case. If the government wants all the back tolls paid, the case will be stayed and might even be folded into the bankruptcy case. If, however, the government wants to punish the toll-shirker by throwing them  in jail, the criminal case may proceed alongside the bankruptcy case.

Bankruptcy is a tool, not a weapon.

Debtors who are considering filing bankruptcy just to pause other cases should proceed with caution. Bankruptcy is meant to be used as a tool, not a weapon. If you are struggling with debt, a debt negotiation attorney can help you organize your financials. If Bankruptcy is your only option, consult with a bankruptcy attorney to discuss whether chapter 7 or chapter 13 bankruptcy is the best option for you.

Bankruptcy Is Good For Gibson Guitars

Elvis, B.B. King, Eric Clapton, Jimmy Page, Carlos Santana, Pete Townshend, Jimi Hendrix Slash, and Dave Grohl are just a handful of the musicians who have made Gibson guitars the most popular guitars in the world. The iconic instruments are so essential to modern musicians that there was a debate on the day Gibson filed for bankruptcy over whether that was the new “day the music died.” Those people have obviously not been reading this blog, because as we have said time and time again, for many companies, bankruptcy is the beginning of a new chapter rather than the end of the story.

The Details on Gibson’s Ill-Fated Diversification

Gibson Brands Inc. was founded in 1902 by Orville Gibson as Gibson Mandolin-Guitar Mfg. Co. Ltd. in Kalamazoo, Michigan. The company started out making only mandolins, but soon branched out, and became popular with those who embraced electric instruments. It’s most famous guitar, the solid-bodied, electric Les Paul, named after the Wisconsin native who designed it, remains most of the most popular guitars of all time, and early versions of it are highly collectable.

In the 1980s, the company moved to Nashville, where it expanded its line and attempted to diversify its brand by becoming a musical lifestyle company with products including headphones, speakers, and accessories. It was this ill-fated attempt at diversification that lead to the company’s 2018 bankruptcy.

The company says that it sells over 170,000 guitars annually in more than 80 countries, but its consumer electronics business is lagging. In its bankruptcy petition, which notes that the company currently has up to $500 million in debt, the company states that it will use the Chapter 11 process to refocus its operations on its musical instruments and professional audio business, “unburdened by the challenges experienced by [the company’s] separate, primarily non-U.S., consumer electronics business.”

Same Old Story, Same Old Song And Dance

Gibson’s decision to file for Chapter 11 bankruptcy in order to reorganize and refocus is not unusual. Sophisticated businesses understand that bankruptcy exists for a reason. It is not just a way to wind down operations, it is a mechanism that can be used to re-tool a business and make it profitable again.

More businesses, and individuals, should consider taking advantage of the bankruptcy process. It is not the right option in every situation, but far more people and organizations could benefit from it than currently do.

Businesses and individuals who are facing financial difficulties, and who are questioning what their options are, should not hesitate to make an appointment with an experienced bankruptcy attorney. An attorney will be able to offer advice on what options are available, and outline how they can be used to move forward. And moving forward should be the focus. Despite the fact that many people and businesses equate bankruptcy with failure, it is more about moving forward than anything else.

Bankruptcy Leads to Felony Charges At UW-Oshkosh

When the UW-Oshkosh Foundation filed for bankruptcy last year, few could predict what a wide-ranging impact that case would have. Now, bankruptcy attorneys, college administrators, and policy makers are closely watching the case and debating what steps can be taken to keep other foundations, universities, and lenders from suffering a similar fate.

Last fall, the UW-Oshkosh Foundation, which is a separate, supposedly self-funded entity designed to support UW-Oshkosh, filed for Chapter 11 bankruptcy. Normally, these sorts of foundations fundraise on their namesake organization’s behalf in order to provide scholarships and other financial support, but the UW-Oshkosh Foundation went a bit out of the box and inked five development deals that it hoped would provide revenue to the school over time.

It backed two bio-digesters that turn farm animal waste in energy, an alumni welcome center, a sports complex, and a hotel in downtown Oshkosh. The hotel has proven financially solvent, but the other investments have put the Foundation $14.5 million in debt.

Former Chancellor Richard Wells and former Vice Chancellor Tom Sonnleitner are facing criminal charges over all of this because it appears they lied to the Foundation’s lenders, saying that UW-Oshkosh — so students and taxpayers — would back the loans if the Foundation couldn’t make its payments. Both men are charged with five counts of misconduct in office by acting beyond their authority as parties to a crime. The maximum penalty for each charge is 3.5 years in prison.

The UW System is suing Wells and Sonnleitner in civil court over all this as well. They do not want the System to be on the hook for the UW-Oshkosh Foundation’s debts. And they really don’t want any taxpayer dollars or student funds used to pay off creditors. There are, however, questions about how much the UW System knew about what was going on at Oshkosh. Did the Board of Regents really not know that the school itself had agreed to pay for an alumni welcome center if the Foundation couldn’t make its debt payments?

Lawmakers in Madison are poised to take action to ensure that the 90-some “affiliated organizations” in the state that are similar to the UW-Oshkosh Foundation — in that they are supposed to be non-taxpayer-supported organizations that promote or support some function of the University of Wisconsin System or a specific college or university — are acting appropriately, and that the Board of Regents is exercising proper oversight over them.

From a bankruptcy law perspective, this case highlights how quickly things can get complicated when someone or some organization that is closely related to other entities files for bankruptcy. Although all related parties should know what financial commitments they have, too often leaders sign agreements with a wink and a nudge that suggest other assets could be in play if needed.

Our firm wades into the thick of disagreements over who owes who what all the time, and we have years of experience settling and litigating such matters.

Is Filing Bankruptcy Bad For Your Health?

A new study published in the Journal of the American Medical Association is creating quite a stir. It suggests that going bankrupt can be as bad for your health as heart disease.

While previous studies had suggested that financial trouble can lead to depression and high blood pressure, this is the first medical study to suggest that financial hardship is associated with early death.

“An analysis involving more than 8,000 Americans found that those who suffered a ‘negative wealth shock’ — defined as losing at least 75 percent of their wealth in two years — faced a 50 percent increased risk of dying over the next two decades.”

The researchers point out this puts formerly wealthy people at the same risk of early death as those who have been poor their entire lives. Now the researchers want to study whether there is any way to inoculate someone against the negative health effects of a wealth shock. However, they will first need to do some research to figure out what comes first, a wealth shock or a decline in health. It could be that wealth shocks are being triggered by rising healthcare costs, rather than the other way around.

While the magnitude of the link between a wealth shock and a decline in health revealed by this study is shocking, the fact that a link exists is not shocking. Over the years, we have noticed that some of our clients suffer physically and emotionally as they go through the bankruptcy process. That’s one of the reasons why our firm goes out of its way to make the bankruptcy process as stress-free and straightforward as possible. We do this by being responsive to our clients and brutally honest with them.

When a client calls or emails with a question, we get back to them as quickly as possible. Even if all we can say is, “That’s a good question, I’ll look into it and get back to you,” we want our clients to know that we are taking their case as seriously as they are. We treat every client we work with like they are our number one client because that is what they deserve.

We are also committed to being upfront with our clients about what is really going on with their case. We don’t sugar-coat our assessments in order to make things sound better than they actually are. We give a straightforward analysis of the issues at hand and the paths we can take to move forward. Being direct helps eliminate confusion and uncertainty, which we find are some of the most stressful parts of the bankruptcy process.

While we will never be able to make going through bankruptcy as stress-free as a walk in the park, it is our hope that having us by their side makes the process less intimidating. Bankruptcy is supposed to be a way forward, not a dead end, and we strive to make that true for our clients.

Involuntary Bankruptcy Threatens To Shutter America’s Oldest Candy Maker

The New England Confectionery Co., creator of the iconic Necco wafer, and the oldest continually operated candy maker in the United States may soon be closing its doors. Three businesses that are each allegedly owed hundreds of thousands of dollars by the wafer-maker are reportedly asking a Massachusetts court to force the struggling company into bankruptcy. Could this spell the end of the chalky wafers and other confectionary delights we all so love to hate?

Necco Wafers, Mary Janes, Clark Bars, Squirrel Nut Zippers, and Sweethearts – those Valentine’s Day goodies with little messages written on them – are some of the most polarizing treats out there. You either can’t live without them, or you can’t stand them. But they have stood the test of time. Their maker, the New England Confectionery Co. has been in business since before the Civil War.

However, the iconic candy company is in trouble. The Boston Business Journal is reporting that the company’s debtors have filed a petition seeking to force the company into involuntary bankruptcy. The business is now looking for a buyer that will save them, and a former CEO has set up a GoFundMe account in hopes of raising the $20 million he claims is necessary to save Necco wafers.

Being forced by creditors to file for bankruptcy is somewhat uncommon in this day and age, when businesses and people can voluntarily file for a reorganization bankruptcy and use the process to get their affairs in order, but involuntary bankruptcy is obviously not dead.

Involuntary bankruptcies are a way for creditors to protect themselves when they think a company is on shaky financial footing, or when a company is believed to have the ability to pay its creditors, but for some reason is refusing to do so.

If a company has more than 12 creditors, at least 3 of the creditors must band together to file a bankruptcy petition. If a company has fewer than 12 creditors, a single creditor can push for bankruptcy. Either way, additional creditors can join the case as it progresses.

Businesses have the right to respond to and fight a petition for involuntary bankruptcy, which is what the New England Confectionery Co. is doing now. If they cannot find a buyer, the court will decide if the creditors’ petition should be granted. If so, things will proceed as if this is a typical, debtor-filed action.

No matter what your opinion on Necco wafers, it will be interesting to see how this case turns out. The search for a buyer, and the attempt by the former CEO to crowd-fund a purchase mean everything is playing out very publicly. Plus, fears that Necco wafers will be no more has caused people to start stockpiling the snack. This is definitely a case to keep an eye on if you are a creditor of a well-known brand.

Bankruptcy & Taxes

As Benjamin Franklin noted, “[I]n this world nothing can be said to be certain, except death and taxes.” It’s good advice when you need some perspective, and when you are filing for bankruptcy. While you’re probably going to want to hire a different lawyer to work with you on the death part of the equation, we work to make sure our clients are ready to handle the tax consequences of a bankruptcy filing.

The first thing to know about bankruptcy and taxes is that most tax debt is not dischargeable. This means you cannot wipe it away by filing for bankruptcy. You will still owe most of the taxes you owed before you filed for bankruptcy after you come through the process.

The only exception to the debt-is-not-typically-dischargeable-rule that is worth noting is that it is sometimes possible to discharge income tax debt that is a few years old. If the taxes came due over three years ago, and you filed your tax returns on time, and you did not commit fraud, it might be possible to have some or all of the older income taxes you owe forgiven. You will, however, still owe any penalties the IRS imposed that are related to the debt.

If you have a lot of non-dischargeable tax debt that you are struggling to pay off, you should ask your bankruptcy attorney about negotiating a settlement or entering into an installment payment plan with the government. This obviously isn’t as helpful as having that debt forgiven, but it can help you get your finances under control so you can move forward without stressing about how you will ever pay off what you owe.

Another tax-related thing that your bankruptcy attorney should help you with is your yearly tax filing. Depending on what chapter of the bankruptcy code you file under, you may need to file a separate tax return on behalf of your “bankruptcy estate.” Your personal return will cover the stuff it usually does while all your debts and assets taken over by the bankruptcy court will be accounted for in the other filing. It is critical that this be done properly or the government can impose harsh penalties.