If you have ever tried to make a cake from scratch, you are a more ambitious baker than most members of the Hanson & Payne team. While we may be able to draft a bankruptcy petition with our eyes closed, we are much more likely to crack open a box of cake mix or buy a fully decorated one from the grocery store than attempt to make one by following a recipe.
Starting from scratch is a challenge whether you are in the kitchen or the courtroom, which is why many of our Milwaukee area clients are hesitant to pull the trigger and file for Chapter 7 bankruptcy. We often talk about these types of bankruptcies as providing a fresh start or a clean slate. That is an appealing idea when you are buried under mountains of debt, but you may start to second guess it when you think about what it means for any assets you have.
Debtors filing under Chapter 7 of the bankruptcy code are expected to sell most of their assets and use the proceeds to pay off creditors. Most people assume this means they must start from scratch when they walk out of the courthouse doors.
Fortunately, state and federal laws exempt some property from being turned over to creditors. Policymakers set things up this way because they realize that not being required to start over from scratch gives filers a better chance of success, and makes the whole process seem more approachable.
What is Exempt Property?
Property that a Chapter 7 filer is able to keep instead of turning over to creditors is known as exempt property. And to be clear, property means more than land or a house. In the legal world, property is anything you can own — from cars to tools to family heirlooms.
Each state decides how much and what type of property it will allow people who file for bankruptcy to exempt from being claimed by creditors.
Under Wisconsin law, bankruptcy filers can exempt bank deposits, cemetery and burial funds, crime victims’ compensation, fraternal benefit society benefits, homestead or residential property, insurance benefits, benefits paid by the public employee trust fund, motor vehicles, partnership property, pensions and retirement benefits, personal property, prisoner property, trade implements, unemployment compensation, veterans’ benefits, wages, workers’ compensation.
Some of these items can be exempted in full, but some can only be exempted up to a certain amount.
Wisconsin filers also have the option of relying on federal exemptions instead of Wisconsin exemptions. Federal law allows filers to exempt a home or land, a motor vehicle, animals, crops, clothing, appliances, household goods, jewelry, health aids, wrongful death recovery, personal injury recovery, lost earnings, retirement accounts, crime victim compensation, alimony, child support, life insurance, disability and unemployment benefits.
Unfortunately, this isn’t a mix and match situation. A filer must choose to use Wisconsin exemptions or federal exemptions. This is not a choice Hanson & Payne clients have to make on their own. Our experienced bankruptcy attorneys always take the time to figure out which set of exemptions gives our clients a better deal based on what property is important to them.
A Milwaukee Area Bankruptcy Attorney You Can Trust
If you are ready to file for bankruptcy and get your family back on a firm financial foundation, but you don’t want to start from scratch, the Hanson & Payne team is here for you. Our Milwaukee-based team will guide you through the bankruptcy process, and help you protect as many assets as possible from your creditors. Please contact us today to schedule a meeting.