A Primer on Wisconsin Bankruptcy Exemptions

How can I protect my property if I file for Chapter 7 bankruptcy?

Even though the number of bankruptcy filings in the state of Wisconsin has fallen to pre-recession levels, many individuals still may be faced with insurmountable debt burdens, in which case filing for bankruptcy may be the only option.

Eligibility for Bankruptcy

An individual whose income is less than the median for a household of a similar size is generally eligible for Chapter 7. If the debtor’s income is above the median, Chapter 7 may still be available provided that a means test of expenses and payments shows that the individual’s income is insufficient to meet those needs. Prior to filing for bankruptcy, it is necessary for an individual to receive credit counseling, within 6 months before filing, from an agency approved by the U.S. Trustee in the state.  It is also necessary to take a debtor education course after filing before a discharge will be granted.

Wisconsin Bankruptcy Exemptions

While filing Chapter 7 bankruptcy is a difficult endeavor, it does not necessarily mean that a debtor will be forced to sell all of his or her property. In fact, certain property is protected, or exempt, from being sold to pay off debts. In Wisconsin, a debtor who is filing a bankruptcy petition has the ability to choose between Federal and  state exemptions.

Some of the exemptions available in Wisconsin include:

  • Residential Property – up to $75,000  in a residential dwelling, $150,000 for married couples filing jointly
  • Motor Vehicles ­- up to $4,000 in motor vehicles
  • Wages – 75% of net weekly income
  • Personal Property – up to $12,000 in the total value of household goods and furnishings, clothing, jewelry, appliances, books, firearms, sporting goods and other tangible personal property

Other exemptions include savings accounts up to $1,000, personal injury (up to $50,000) and wrongful death settlements, insurance benefits (including Federal disability benefits, fire and accident insurance proceeds, un-matured life insurance policies and annuities, and life insurance payments). In addition, pensions are exempt for certain municipal employees, firefighters and police officers, military personnel, and other public employees.

Moreover, public benefits such as social security, unemployment compensation and Veteran’s war pension benefits are also exempt. Finally, Wisconsin bankruptcy also exempts certain other property. Understanding these exemptions and navigating a bankruptcy petition, however, require the skills of an experienced bankruptcy attorney.

Small Business Bankruptcy: To file or not to file

Under what conditions should a small business file for bankruptcy?

Small businesses are essential for economic growth in Wisconsin, but some business owners may find themselves with debts that are unmanageable. While no entrepreneur launches a venture with failure in mind, being unable to pay off creditors can jeopardize the business as well as the owner’s personal assets. If the situation becomes untenable, the only way out may be to file for bankruptcy.

Small Business Bankruptcy

Bankruptcy does not necessarily mean financial ruin, and a business has options that can enable it to continue operating while reorganizing its debts, depending on the circumstances. Filing for bankruptcy also protects the business from liquidation proceedings by creditors while giving it time to reduce and delay debt payments as it regains its footing.

There are three types of bankruptcy protection, Chapter 7, Chapter 11 and Chapter 13. Each form of bankruptcy grants the business a “temporary stay” which stops all collection activities and gives the business time to put a plan in place. A sole proprietor may file under any of these forms of bankruptcy while corporations and partnerships can only file under Chapter 7 and Chapter 11.

In a Chapter 7 bankruptcy, the business is closed and the assets are liquidated to pay off the debts. If the business is a sole proprietorship, the owner must file a personal bankruptcy for both personal and business assets. On the other hand, a Chapter 11 filing allows the business to come up with a creditor-approved plan to reorganize its debts while retaining its assets and continuing to operate. Finally, a Chapter 13 bankruptcy is utilized by an individual to personally pay off business and personal debt with proceeds from future income over a 3 to 5 year period.

Reasons to File a Small Business Bankruptcy

A business owner may need to file Chapter 7 bankruptcy if credit problems cannot be resolved. This might be the best route to take when the relief of the debt burden outweighs the downside of losing the business and the long-lasting damage to the owner’s credit history. On the other hand, a Chapter 11 bankruptcy is designed for a business that is still viable, but needs to reorganize its debts in order to return to profitability. Regardless of the circumstances facing your small business, an attorney with expertise in bankruptcy law can help you explore your options.

 

Bankruptcy Numbers Down In Wisconsin

Why has there been a decrease in bankruptcy filings in the state?

Bankruptcy filings peaked both nationally and in the State of Wisconsin during and after the recent recession. Now, bankruptcy numbers are coming down and returning to a normal level.  But, why are the numbers coming down? Apparently, many of the factors that drove them up are no longer present.

During and after the recession, most bankruptcy filings were for Chapter 7, which allows the debtor, in most situations, to take advantage of a fresh start. The major causes of bankruptcy were, and still are, job loss, divorce and medical costs. During the recession, an exponentially increasing number of job losses drove the number of bankruptcies through the roof. Now that many people are working again, the number of bankruptcies filed because of unemployment is coming down. Although many people are not making as much money as they used to, they are seemingly making enough to keep them afloat and up to date with their bills.

Rock bottom real estate values are also less of a problem these days. While the numbers are still not where they were, the market is slowly rebounding, allowing owners to see an increase in their assets. This increase in wealth is allowing more and more people to steer clear of bankruptcy.

Another major cause of the recession, easily accessible credit, is less of an issue at this time. Before the recession, too many unqualified individuals were able to obtain credit in various forms. Now, tougher restrictions have made it much more difficult than it once was to obtain credit cards and mortgages. This has made it harder for people to get into financial trouble.

While it seems that the recent recession taught the country a lesson in several areas, we shouldn’t get ahead of ourselves. There is still plenty of work to be done. Some experts believe that even though we are at a more normal level of bankruptcy filings, that the numbers should go even lower. Things could also go the other way. Experts are keeping their eye on the student loan crisis. Many individuals are unable to pay back their student loans and are turning to bankruptcy for relief. This might cause an uptick in the number of filings in the near future.

If you are considering bankruptcy, you should speak to a qualified Wisconsin bankruptcy attorney today.

Lottery Prize of Bankruptcy Debtor Being Auctioned Off

Can a lottery prize be considered non-exempt property and sold by a bankruptcy trustee?

In the current financial climate, many Americans are struggling to pay their bills.  These people might look to personal bankruptcy for relief from overwhelming debt.  In many situations, Chapter 7, or liquidation bankruptcy, might give them the best chance of getting back on their feet.

Chapter 7 bankruptcy is called liquidation bankruptcy because it requires that the debtor hand over non-exempt property to a bankruptcy trustee and the ownership of this property to be transferred to a bankruptcy estate.  At this point, the trustee sells or liquidates the property in order to pay back the debtor’s creditors.  The debtor can keep property that the trustee finds is not worth selling and is abandoned by the trustee. Almost any type of non-exempt property can be transferred into a bankruptcy estate, even lottery winnings, as is the case in a personal bankruptcy case coming out of the State of Michigan.

A 73-year-old Michigan man named Donald Magett has been collecting $1000 a month since winning on a Cash for Life game in 1984.  As you might suspect, Magett is entitled to receive $1000 a month for life.  At some point after his winning this prize he filed for personal bankruptcy.  The main asset of the bankruptcy estate is the lottery winnings, which are currently being used to pay creditors.  But, the trustee in this case has recently been granted the authority to auction off the lottery winnings.  The sale will take place online and the bidding will start at $30,000.  Therefore, if Magett lives approximately two and a half more years, the purchaser will have made money on the ticket (not considering taxes).

If you are considering filing for personal bankruptcy, and you have questions about exempt and non-exempt property, you should speak to an experienced attorney.