3 Ways Bankruptcy Could Impact Your Kids

If you are like most parents, you worry about how the choices you make will impact your children. You want what’s best for them, even if it makes your life a bit more difficult. As parents ourselves, we get it. That’s why we are not surprised that many of our Milwaukee area clients ask us how filing for bankruptcy will impact their kids. 

The answer to that question is every lawyer’s favorite answer: it depends. Families in financial distress typically find themselves in a better situation after filing for bankruptcy, which is good for the kids. However, there are a few things you should consider if you have children and are considering filing for personal bankruptcy. Here are X of them. 

  1. Child Support Payments Will Not Be Impacted 

The bankruptcy court is not a family court, and will not make changes to child support payments. If you currently receive payments, you should continue to do so. If you currently make child support payments, you must keep paying. 

Back due child support is not dischargeable in bankruptcy. Debts that are “in the nature of support” — like medical expenses, educational expenses, etc. — are also excluded from the bankruptcy discharge.

If you liquidate assets to pay off debts, your child support obligations will be at the front of the line of creditors. If you file for bankruptcy under Chapter 13, the court will not approve your repayment plan or grant a discharge unless you are current on your payments. 

  1. Your Childrens’ Bank Accounts Are Usually Safe 

If you have opened a bank account in your child’s name, the bankruptcy court may pull any money in that account into the bankruptcy estate and use it to pay off debts. However, you may be able to keep this from happening by using an exemption depending on the amount of money in the account and your available exemptions. It is important to note that transferring money to an account set up in your child’s name shortly before filing for bankruptcy is frowned upon, and the money may be pulled into the bankruptcy estate even if you could otherwise exempt it. 

If your child’s account is an educational savings account created under section 529 of the Internal Revenue Code, the money in that account will not be pulled into the bankruptcy estate. The same goes for money that is being held in trust for your child. So if you are the custodian of a bank account set up under the Uniform Gifts to Minors Act or the Uniform Transfers to Minors Act, that money is safe because it legally belongs to your child. 

  1. Applying For Student Loans 

You are probably aware that filing for bankruptcy makes it difficult to get access to credit. Parents who know their families will need to take out student loans for their children to go to college are often very worried about the impact bankruptcy might have. 

The good news is your child will not have a bankruptcy on his or her credit report because you filed for bankruptcy while he or she was a minor. He or she can apply for student loans independently, and be judged on his or her own creditworthiness. Your bankruptcy will not impact your child’s ability to obtain need-based financial aid such as Pell Grants and Stafford Loans.

Unfortunately, if your child needs additional funding, you may not be able to qualify for a PLUS Loan or Graduate PLUS Loan to help them. However, depending on your credit history and score, you may not have qualified for these loans anyway. 

Milwaukee Area Bankruptcy Attorneys You Can Trust 

If you’d like to know more about how filing for bankruptcy could affect your children, don’t hesitate to ask one of the experienced attorneys on the Hanson & Payne team. Contact us today to schedule an initial consultation.

Commercial Landlords’ Pandemic Preference Defense

The pandemic has changed a lot of things, and commercial real estate is one of them. Many retail locations are struggling to stay open, and offices are reducing their footprints as workers continue to stay home, but the demand for warehouse space is way up. It is going to take a long time for the industry to get back to the way things were, or adjust to the new normal.

In order to give commercial landlords some flexibility while things shake out, Congress passed a temporary change to the preference defense law as part of the Consolidated Appropriations Act of 2021 (CAA). Over the past year, Hanson & Payne has advised several commercial landlords and lessees in the Milwaukee area who have benefited from this legislation.

An Incentive To Negotiate 

The new law, section 547(j) to the Bankruptcy Code, incentivizes landlords to be flexible and provide payment deferments to their tenants by eliminating the fear that payments eventually made will be clawed back as preferences if the tenant ends up filing for bankruptcy. 

Under Subsection 547(j), the trustee is prevented from recovering the following payments made before the bankruptcy as a preferential payment:

  • “payment of rental arrearages” in connection with an “agreement or arrangement” made between a commercial landlord and tenant on or after March 13, 2020 “to defer or postpone rent and other periodic charges” and
  • “payment of supplier arrearages” in connection with an “agreement or arrangement” made on or after March 13, 2020, between a company and a “supplier of goods or services to defer or postpone the payment of amounts due under an executory contract for goods and services.”

Is It Working? 

These provisions have been in place for around a year now, and we are starting to see them make a difference in the Milwaukee area. They seem to be doing what Congress intended — allowing commercial landlords to work with lessees who are struggling to make payments due to disruptions caused by the pandemic (including supply chain disruptions and shifting consumer behaviors). When lessees do end up filing for bankruptcy, landlords are successfully using this new preference to hold on to the money they were paid in the last few months.

A Temporary Fix

Unless it is extended, this new preference defense is set to expire on December 27, 2022. Landlords need to keep this in mind as they negotiate with struggling lessees. 

It is possible that the expiration date will be extended since the impact of the pandemic is ongoing, but there are no guarantees. 

Landlords should consider what other preference defenses might be available to them, and structure their relationship with troubled tenants in order to take advantage of them. 

Experienced Milwaukee Bankruptcy Attorneys You Can Trust 

Hanson & Payne’s experienced team of bankruptcy attorneys is helping debtors and creditors in the Milwaukee area navigate the financial storm brought on by the pandemic. Our familiarity with the Milwaukee area’s commercial real estate market means we are well suited to assisting landlords and lessees who are in financial distress.  Please contact our office today to schedule an initial consultation.

What Happens To Leased Equipment During Bankruptcy?

Many businesses in the Milwaukee area choose to lease equipment rather than purchasing it. The Hanson & Payne team frequently assists our clients as they negotiate equipment lease agreements, extend or modify existing leases, and deal with the issues that arise when a lessor or lessee is in financial distress. 

Most equipment lease agreements are pretty straightforward. The lessor loans out equipment, for a specific period of time, for a set price, to the lessee. A typical contract also covers issues like equipment maintenance and who is responsible for removing and returning the equipment at the end of the lease. 

What is not always covered by the contract, but really should be, is what happens when things don’t go as planned. Specifically, what happens if either the lessor or lessee runs into financial difficulty? 

When Things Don’t Go As Planned

Under a properly drafted contract, the lessor should have the right to terminate the lease and recover its equipment if the lessee fails to make a payment. A properly drafted contract should also protect the lessee if the lessor runs into financial trouble. There is nothing worse than a healthy business being threatened because someone it does business with fails to live up to their end of a bargain. 

If at all possible, an equipment lease should be terminated before a bankruptcy case is filed. Bankruptcy courts will sometimes decide an equipment lease is actually a form of secured financing, and make sorting out who owns and owes what more difficult than it otherwise needs to be in the name of fairness to other creditors. 

Sometimes Bankruptcy Cannot Be Avoided

If either party files for bankruptcy while the equipment lease is still intact, and the court recognizes it is a lease and not an alternative financing agreement, the parties will need to negotiate a path forward. 

When a lessee files for bankruptcy, it typically has the option of assuming or rejecting the lease within 60 days of filing its case. A lessee that assumes its lease must cure any past defaults and prove that it is able to meet its obligations going forward. If the lessee chooses to reject the lease, or cannot meet the requirements it needs to in order to assume the lease, the lessor is entitled to recover possession of its equipment and make a claim for damages.

A lessee may be able to persuade the bankruptcy court to allow it to purchase equipment it has previously been leasing from a bankrupt lessor. It may also seek damages for harm to its business. 

Business-Minded Bankruptcy Attorneys In Milwaukee 

Whether you are a lessor or lessee, you need reliable legal counsel if you are going to enter into an equipment lease agreement. Hanson & Payne, LLC is a trusted advisor to many businesses in the Milwaukee area. We have a reputation for being business-minded in an industry that is often criticized for not understanding that working with an attorney is a means to an end. If you are looking for counsel on an equipment lease issue, please contact us today to schedule an initial consultation.

Badger Herald Highlights Dilemma Faced By Wisconsin Farmers

A recent article in The Badger Herald took a deep dive into an issue that threatens the very identity of the Badger State — farm bankruptcies. As the title of the article suggests, there is enormous pressure in the agricultural industry, and on dairy farms in particular, to “go big or go bankrupt.” 

The article details how the rise of corporate-owned farms and the preference of large food producers to work with a smaller number of larger suppliers is crushing the small family farms that built Wisconsin into America’s Dairyland. 

The Data Shows Dairyland Is In Distress 

The data is quite shocking, even for those of us at Hanson & Payne, who spend the majority of our time working on Milwaukee area bankruptcy cases and keeping up with trends in the bankruptcy system

The article, quoting Family Farm Defenders Executive Director John Peck notes “Wisconsin lost half of its dairy farms since the turn of the century and that large, corporate-contracted factory farms currently control 25% of the market, despite accounting for less than five percent of the state’s dairies. In 1987, the average number of dairy cows per farm was 80. Just 15 years later, that figure reached 275.”

Despite the drop in the number of farms, the amount of milk produced is increasing. “Nationwide dairy production rose by a factor of roughly 100,000 lbs between 2005 and 2018, even as the U.S. lost over 10,000 farms during the same period.” 

Supply And Demand Are Pushing Family Farmers Out Of Business 

An increasing supply drives down the price small farmers can sell their milk for, which puts even more financial pressure on them. “The cost of producing milk in Wisconsin was $22.70 per hundredweight in 2020, yet the price of milk reached as low as 12.95 per hundredweight during the same year.” This is simply unsustainable. 

Experienced Bankruptcy Attorneys Serving Southeast Wisconsin

At Hanson & Payne, we have worked with numerous farmers in Southeast Wisconsin who are trying to figure out how to cope with the challenges facing the dairy industry. We layout all of the options that are on the table, and help our clients select the one that works best for them. 

Whether our clients want to regroup and try to weather the current storm, or sell out and retire somewhere warm, bankruptcy is often the best path forward. Bankruptcy is a tool that can be used to help farmers find their feet. There are even special bankruptcy laws that apply just to farmers. 

Hanson & Payne’s experienced team of Milwaukee area bankruptcy attorneys know how difficult it is to consider filing for bankruptcy when you are a farmer. Farming isn’t just a job, it is a way of life. We understand this, so we work with our farming clients to find an outcome that they are satisfied with on a personal level instead of forcing them to focus solely on financials. If your farm is in financial distress, don’t hesitate to contact us. 

Scammers Target Milwaukee Area Residents Making New Year’s Resolutions

If getting your finances in order tops your list of New Year’s resolutions, you are in good company. Taking steps to better manage your money is a perennially popular resolution. Financial scammers know this and often ramp up their efforts to target new victims this time of year.

Each year, Hanson & Payne’s team of experienced Milwaukee area bankruptcy attorneys sees an uptick in the number of potential clients taken advantage of by scammers promising to help them get out of debt. Sometimes the scammers will take your money and run. Other times, they will fool you into thinking they are working hard on your behalf so you keep paying them. Meanwhile, they are pocketing your cash while you fall further and further into debt. 

These are some of the red flags to look for so you don’t get scammed: 

  • A debt relief company that demands upfront payment before it will do any work on your behalf. Many times these advisers will take your money and run. 
  • Companies or advisors that want your credit card or bank account information before they will explain what sort of work they can do on your behalf. 
  • Companies or advisors that ask you to fill out a third-party authorization form or power of attorney document. 
  • A debt relief company that guarantees it can eliminate or reduce your debt in a very specific period of time. There is no set timetable for this sort of work. It is often very time-consuming, and never guaranteed to be successful. 
  • Advisers that tell you to cut off communication with your creditors. This should only be done after you have started to work with a bankruptcy attorney, who will talk to your creditors on your behalf. 
  • Using high-pressure sales tactics to make it seem like you will miss out on an opportunity if you don’t agree to work with them right away. 
  • Companies with pompous-sounding names that send you letters with fancy seals and logos. 
  • Websites, letters, emails, or texts with spelling or grammatical errors throughout them can indicate the person who wrote them is a scammer. 

If someone uses one of the tactics above on you, you should consider reporting them to the Federal Trade Commission at ReportFraud.ftc.gov.

In addition to watching out for these red flags, the best way to avoid getting scammed when looking for financial advice is to work with a certified financial planner or seek credit counseling from one of the credit counselors approved by the bankruptcy court to serve debtors in the Eastern District of Wisconsin. Working with one of these approved credit counselors has the added benefit of giving you a bit of a head start on the bankruptcy process if it turns out that bankruptcy is your best path forward. All filers are required to go through court-approved counseling before the bankruptcy court will hear their case. 

If it seems like bankruptcy may be the best option for you, or you have questions about bankruptcy, the Hanson & Payne team is here for you. We help Milwaukee area residents, businesses, and creditors navigate the bankruptcy system. Please contact us today to schedule an initial consultation.

A Glossary Of Creditor’s Claims

Getting pulled into a bankruptcy case because a business or client you have been working with is in financial distress is not fun. Even if their case will not threaten your business, it is challenging to know how to best navigate the situation. 

The first step toward protecting your interests is often hiring an experienced bankruptcy attorney to advise you. Hanson & Payne has filled this role for numerous creditors in the Milwaukee area. 

One of the many things we do to assist our clients is explain to them their role in the case. Below is a brief overview of some different types of debt a creditor may hold, and an explanation of how the debts they are owed may be treated by the bankruptcy court. 

Lien – The right to take and hold or sell the property of a debtor as security or payment for a debt.

Secured Debt – Debt backed by a mortgage, pledge of collateral, or other lien. The creditor typically has the right to take possession of the property securing the debt if the debtor defaults. Examples of this type of debt include home mortgages, auto loans, and tax liens.

Secured Creditor – A creditor who holds secured debt. 

Undersecured Claim – A debt secured by property that is worth less than the amount owed. 

Unsecured Claim – When credit is extended solely upon the creditor’s assessment of the debtor’s future ability to pay, and there is no special assurance of payment, such as a mortgage or lien. Examples of this type of debt include credit card debt, medical bills, and personal loans. 

Priority – When there is not enough money to pay off all of a debtor’s unsecured claims, the debt will be ranked by priority. Higher priority debts will be paid off first. Low priority debts may not be paid off at all. Low priority debts may be discharged by the bankruptcy court. High-priority debts include alimony and child support, certain tax debt, and debts related to personal injury lawsuits. Low priority debts include credit card debt and medical debt. 

Preference or Preferential Debt Payment – Creditors and other businesses that have already been paid, and may not be aware that a business they work/ed with is in financial distress, can be pulled into a bankruptcy if a payment was made to them within 90 days before the debtor filed for bankruptcy. Bankruptcy law does not want for some creditors to get special preferential treatment so they may attempt to claw this money back to more fairly redistribute it among creditors. Thankfully, there are defenses a creditor/fellow business can deploy if the bankruptcy court attempts to claw back payments. 

While we hope this blog post is a helpful resource to creditors in the Milwaukee area, it is important to remember that true legal advice is not something you can get on the internet. If you have questions about bankruptcy, please contact our office to set up a meeting with a member of our team

Buying A Home Post-Bankruptcy Is Not An Easy Task

Wisconsin’s real estate market is red hot. The median price of a home in the Milwaukee region shot up to over $268,000 over the summer. It has since fallen off a little bit, but prices remain at historic highs. This is good news for sellers, but not so good for buyers. Many would-be buyers have struggled to find homes they can afford. 

Milwaukee area home buyers are also facing rising mortgage rates. After dropping to historic lows after the 2008 recession, and remaining low because of the pandemic, they are beginning to creep up. 

According to the Wisconsin REALTORS Association (WRA), “The increase in the mortgage rate combined with rising home prices pushed affordability down. The Wisconsin Housing Affordability index fell 18.1% in October 2021 compared to October 2020.”

This does not sound good, but they went on to note that, “Still, a qualified buyer with a median family income, a healthy 20 percent down payment and with the remaining balance financed with a 30-year fixed-rate mortgage can afford to buy 188% of the median-priced home in the state in October. This compares favorably to the national index for September with the latest monthly figures available, which shows that the typical U.S. buyer can only purchase 151% of the median-priced U.S. home.” 

The problem is not everyone is the sort of “qualified buyer” they describe. Most mortgage lenders won’t work with someone who has filed for bankruptcy for a period of time ranging from one year to four years after the bankruptcy case was closed. The length of the waiting period depends on the type of bankruptcy filed and the type of mortgage sought. 

Chapter 7 Bankruptcies 

Filing for bankruptcy under Chapter 7 involves liquidating a debtor’s assets and using the proceeds to pay off creditors. Most remaining debts are then discharged, or forgiven. 

Conventional lenders will typically not lend to someone who filed for Chapter 7 bankruptcy for four years. The waiting period can drop if the debtor can show their financial troubles were due to extenuating circumstances, and they are now in a better financial situation. 

Some borrowers may prefer to apply for a FHA or VA mortgage. The Federal Housing Administration (FHA) is part of the U.S. Department of Housing and Urban Development (HUD). The agency requires borrowers to wait two years after a Chapter 7 bankruptcy before getting an FHA mortgage. The Department of Veterans Affairs (VA) also requires Chapter 7 filers to wait two years before receiving a VA mortgage. Both agencies may shorten their waiting period if the borrower can prove extenuating circumstances. 

Chapter 13 Bankruptcies

A Chapter 13 bankruptcy is a court-supervised repayment plan. Borrowers don’t typically liquidate their assets to pay off debts, instead, they work to repay the debts they owe a little at a time. At the end of the years-long court-supervised repayment period, some remaining debts may be discharged.

A would-be home buyer who wants a conventional mortgage will need to wait two years after the close of their Chapter 13 case to apply for a mortgage. However, it may take longer than that for someone who has filed for bankruptcy to build up their credit score enough that a conventional loan is accessible to them. 

If an FHA or VA mortgage is an option, a Chapter 13 filer can get one 12 months after their case is filed if the bankruptcy court okays it. 

Past The Waiting Period, But Still Waiting On A Mortgage

Even after the required waiting period has passed, people who have filed for bankruptcy are often offered higher rates and lower borrowing limits than other people. This is one of the reasons why bankruptcy is not something you should rush into. There are definite downsides to it. 

If you are in financial distress, the experienced Milwaukee-area bankruptcy attorneys at Hanson & Payne can counsel you on your options, and work with you to find a path forward. Please contact us today to schedule an initial meeting with our team. 

Bill Would Limit Venue Shopping In Bankruptcy Cases

Most lawsuits have to be filed in the location where the action leading up to the lawsuit occurred. This is currently not true for bankruptcy cases. In fact, Bon-Ton, Briggs & Stratton, and Shopko all filed for bankruptcy outside the state of Wisconsin despite their strong ties to our state. A bill that is pending in Congress would change the bankruptcy law to prevent large companies from “venue shopping” when they need to file for bankruptcy. As bankruptcy attorneys who do a fair amount of commercial bankruptcy work, and regularly represent creditors in bankruptcy cases, the Hanson & Payne team is keeping a close eye on this legislation. 

Current Law Is Flexible 

The venue or location of a corporate bankruptcy case is currently governed by 28 U.S.C. § 1408, which allows companies to file a bankruptcy petition where they are incorporated, or where one of their affiliates is located. Large corporations that do business all over the country often choose to file for bankruptcy in Delaware, New York, or Texas even if they only do a little bit of business there because there is a perception that the bankruptcy judges in those venues are better at handling large, complex cases than the bankruptcy judges in other courts. 

As bankruptcy practitioners in Milwaukee, who regularly appear in the United States Bankruptcy Court for the Eastern District of Wisconsin, the Hanson & Payne team is confident that our judges are just as capable as those in other jurisdictions. We are therefore keeping an eye on a piece of legislation that would limit bankruptcy venue shopping, and potentially mean more complex commercial bankruptcy cases are heard in our local court. 

Bankruptcy Venue Reform Act of 2021

Senators Elizabeth Warren, a Democrat from Massachusetts, and John Cornyn, a Texas Republican, have introduced a bill that would curtail bankruptcy venue shopping. If the legislation passes, it would:

  • Require individual debtors to file for bankruptcy in the district where their domicile, residence, or principal assets in the United States are located;
  • Require corporate debtors to file for bankruptcy in the district where their principal assets or principal place of business in the United States are located;
  • Corporate debtors would no longer be permitted to file simply on the basis of their state of incorporation.
  • Stop debtors from filing for bankruptcy in another district simply because an affiliate of the debtor has filed there; and
  • Require bankruptcy judges to transfer or dismiss cases filed in the wrong district.

The bill includes a finding statement noting that these changes are desirable because current law “prevents small businesses, employees, retirees, creditors, and other important stakeholders from fully participating in bankruptcy cases that have tremendous impacts on their lives, communities, and local economies,” and “deprives district courts of the United States of the opportunity to contribute to the development of bankruptcy law in the jurisdictions of those district courts.” It further notes that, “reducing forum shopping in the bankruptcy system will strengthen the integrity of, and build public confidence and ensure fairness in, the bankruptcy system.”

Milwaukee Bankruptcy Attorneys 

According to a press release from the bankruptcy reform bill’s sponsors, “In the last 20 years, more than 70% of public companies with at least $100 million in assets filed for bankruptcy in a district outside of the one closest to their headquarters.” This is a shocking statistic, but we have frequently seen what we would consider Wisconsin companies file for bankruptcy in other states. 

Whether the law passes or not, the Hanson & Payne team has full confidence in the quality of the United States Bankruptcy Court for the Eastern District of Wisconsin and the competence of the judges who practice here. We will continue to serve clients who are involved in bankruptcy proceedings here in Milwaukee and across the state of Wisconsin. Please contact us today if you think we can be of service to you.

Is Johnson & Johnson Bankrupt?

Over the past decade, Johnson & Johnson has faced thousands of lawsuits over its well-known baby powder. The liability risk the company faces is so large, it is using the bankruptcy system to protect itself. However, the Bandaid maker is not going out of business. And it is not close to running out of money. Instead, it is using the bankruptcy system to resolve all the baby powder lawsuits filed against it. The Hanson & Payne team is keeping a close eye on this legal maneuver because it could have an impact on the broader business bankruptcy system

Bankruptcy As A Bandaid

Johnson & Johnson is one of the largest and most successful pharmaceutical companies in the world. It has a market cap of $430 billion, and $25 billion cash on hand. It is nowhere close to bankruptcy. And yet, it has filed for it. 

J&J is spinning off a new company that is built to go bankrupt. It is doing so in order to deal with the 38,000+ lawsuits filed against it by people, mostly women, claiming the company’s baby powder causes cancer. J&J already paid $2.5 billion to about 20 women making similar claims earlier this year. It is uncertain how much the additional 38,000+ lawsuits could cost. That’s where bankruptcy comes in. 

All of J&J’s baby powder assets and liabilities, plus a large chunk of cash have been dumped into a company called LTL Management. Almost immediately after its creation, LTL filed for Chapter 11 bankruptcy. Under bankruptcy rules, LTL can temporarily pause all the lawsuits filed against it, and work on a way to settle them by setting up a bankruptcy trust. This is a tactic that has been used by other companies, but this is on a much larger scale. 

Bankruptcy Is A Tool, Not A Weapon 

The Hanson & Payne team is watching the J&J/LTL bankruptcy case to see what happens. If the courts approve this legal maneuver, we may be seeing more cases where bankruptcy is used to forge large-scale settlements in the future. 

This case has the benefit of showing businesses how useful bankruptcy can be, and perhaps helping to destigmatize it, which would be a good thing. On the other hand, if lots of cases like this are filed going forward, it could bog down bankruptcy courts that already struggle under a hefty caseload. 

Milwaukee area businesses who are looking at this case, looking at lawsuits pending against them, and wondering if bankruptcy may be a way out, should proceed with caution. As the Hanson & Payne team frequently reminds everyone, bankruptcy is a tool, not a weapon or a magic wand. Bankruptcy is not something that businesses can rely on to resolve every lawsuit, no matter what happens in the J&J case. 

Business owners in the Milwaukee area who are facing unknown liability, or mounting legal debt, are welcome to reach out to Hanson & Payne’s experienced team of bankruptcy attorneys for advice. Typically, the sooner an issue is addressed, the more options are available for resolving it, so please contact us today. 

Too Rich To Go Bankrupt

Filing for Chapter 7 bankruptcy is the lifeline many Wisconsin residents need to keep their heads above water. Wiping out debts and getting a fresh start can be a real lifesaver. However, there are rules that prevent people who have income over a certain level from filing for Chapter 7 bankruptcy. Although it sounds hard to believe, you can be too rich to go bankrupt even if you are drowning in debt. 

Chapter 7 Means Test

Debtors who want to file under Chapter 7 must pass a means test before the court will allow their case to proceed. The means test is a government-designed set of factors that measures a filer’s income, expenses, and family size to determine whether it thinks the filer has enough disposable income to repay his or her debts.

There are two parts to the test. 

The first part looks at a filer’s annual household income. If the filer’s household median income is lower than the average median income in Wisconsin for a household of the same size, the debtor passes the means test and may file for Chapter 7 bankruptcy. 

All household income is used to calculate current monthly income. Even though your spouse may not be filing bankruptcy with you, you must include your spouse’s income when calculating the Means Test. The only income you are not required to include is income from Social Security retirement, SSI, or SSDI. If you are a Hanson & Payne client, this is not something you will have to figure out on your own. Our team will help you gather the information needed to calculate your average income, and pull the data on other Wisconsin families to compare it with. 

If you do not automatically pass the means test on the first step, you move on to the second step. The second part of the means test involves taking a closer look at your disposable income. Your disposable income is the money left over each month after paying living expenses like housing, utilities, food, clothing, child care, and transportation expenses. If your disposable income is negative or very low, you may pass the means test and be able to file under Chapter 7. 

Once again, if you are a Hanson & Payne client, our experienced team of bankruptcy attorneys will help you through the means-testing process. This is not something you need to figure out on your own. 

What Happens If I Fail The Means Test? 

If you fail the means test and are unable to file for bankruptcy under Chapter 7, you may still get some relief through the bankruptcy system. Chapter 13 of the bankruptcy code is a court-supervised repayment plan that is designed to help debtors who fail the means test reorganize their finances and make progress towards paying off their debts. 

Experienced Milwaukee Bankruptcy Attorneys You Can Trust

If you are interested in filing for bankruptcy, the Hanson & Payne team is here for you. Our experienced bankruptcy attorneys help Milwaukee area residents who want to file for bankruptcy figure out if they are eligible to file under Chapter 7 and then move forward from there. We work hand in hand with our clients, so they do not have to figure out things like the means test on their own. Please contact us today to schedule an initial consultation.