Bankruptcy Questions and Answers
People throughout Milwaukee and Waukesha who are having difficulty paying their debts sometimes consider bankruptcy to obtain relief from collection efforts, eliminate some or all of their debts, or restructure their debt payments to a more manageable level. The bankruptcy process can seem a bit overwhelming. Lombardo Law Office has put together the following bankruptcy questions and answers (FAQs). By answering these common questions about bankruptcy, we hope to reduce the stress associated with an unfamiliar process. The following information should give those considering a bankruptcy a good understanding of the bankruptcy basics.
What is Bankruptcy?
Bankruptcy is a uniform, federal court-supervised procedure to relieve individuals and businesses from debts, while protecting and preserving the rights of secured creditors and providing unsecured creditors with equal treatment of their claims.
There are four types of bankruptcy that individuals may select, depending on their particular financial circumstances. Most individuals in Wisconsin file under Chapter 7 of the Bankruptcy Code (the Code), sometimes known as “straight” or “liquidation” bankruptcy. Chapter 11 is available to individuals, but generally is used by corporations to reorganize their business affairs. Chapter 12 is designed for use by farmers. Chapter 13, also referred to as a “wage-earner” or “debt-adjustment” plan, is available to individuals and unincorporated businesses that intend to use future income to pay some or all of one’s debts according to a plan designed by the individual (within certain statutory limitations) to meet his or her needs.
Who may declare bankruptcy in Wisconsin?
There are relatively few limitations on who can file bankruptcy in Wisconsin. The decision of whether to file, and under what Chapter, is based on each individual’s need for relief from debts, their ability to pay, and their capacity and willingness to undertake a procedure that will have long-term consequences on their financial life. A debt counselor or attorney can help you consider alternatives to bankruptcy.
Who is involved in bankruptcy proceedings?
The Debtor – the person who files bankruptcy, also known as “the petitioner”
The Creditors – any persons, firms, or entities that claim the debtor owes them money
The Trustee – a court-appointed person, often a Wisconsin attorney, who administers the bankruptcy proceedings and any property available for distribution to creditors (called the bankruptcy estate). The trustee represents the interests of the unsecured creditors, and must liquidate nonexempt assets, investigate the debtor’s financial affairs, examine creditors’ proofs of claim, provide information to parties of interest, file reports, estate tax returns and recommend, when appropriate, criminal or civil proceedings against the debtor who has committed fraud or other crimes in connection with the case.
The Bankruptcy Judge – the person who presides over any hearings on disputed matters in connection with the case
The Credit Counselor – an independent financial adviser who must certify both before filing and before the debtor’s discharge is granted that the debtor has completed the required credit counseling and financial management courses
What constitutes the bankruptcy estate?
In general, the bankruptcy estate consists of all property owned by the debtor or in which the debtor has an interest, whether individually or as a co-owner with any other person. In a Chapter 13 case, this also includes post-filing income from all sources, including the income of a non-filing spouse. The estate includes property the debtor acquires by gift, devise, inheritance, divorce settlements, and life insurance precedes the right to which arises within 180 days after the filing of the case, and also includes property recovered by the trustee under certain Code provisions. The estate is reduced by exempt assets protected under federal or Wisconsin exemptions. The balance of any property remaining for administration by the trustee constitutes the final bankruptcy estate.
What happens when you file for Chapter 7 Bankruptcy?
Bankruptcy involves a series of steps that usually include the following actions:
- The debtor gathers financial information for use in preparing the petition for bankruptcy and the schedules of assets, debts, income and expenses, the statement of financial affairs, and statement of intentions concerning secured debts;
- The debtor obtains the required pre-filing credit counseling from an Eastern District of Wisconsin approved credit counselor;
- The debtor files the petition, schedules, and statement of financial affairs, and pays the filing fee to the bankruptcy court;
- The court notifies scheduled creditors of the case filing, the meeting of creditors, the injunctive stay against creditor actions, the last date for creditors to file challenges to the debtor’s discharge or the dischargeability of a particular debt, the initial status of assets available in the case, and other pertinent information;
- The debtor appears under oath and on record before the trustee to be examined at the meeting of creditors and submits to creditors’ questions;
- The debtor completes the reaffirmation, redemption, or surrender of secured collateral according to the Statement of Intentions filed with the case; and
- All parties receive the discharge notice approximately 90 days after filing a Chapter 7 case or at the conclusion of payments in a Chapter 13 case. A discharge will not be issued unless the debtor has completed a prescribed course in financial management.
Do I need a lawyer to file bankruptcy in Wisconsin?
As with most other legal matters, any person may represent himself or herself before the bankruptcy court. Bankruptcy, however, is a highly refined procedure that is full of detail and interpretations based on prior case law. Each case is different, as are the consequences to the debtor. Proper planning in anticipation of bankruptcy may save a debtor money or property and countless hours of revising improperly completed documents. That is why you need a local, experienced bankruptcy attorney. For over 15 years, Lombardo Law Office has guided our clients in Wisconsin through the bankruptcy process. Lombardo Law Office will take the time to fully analyze your situation, answer your bankruptcy questions, and find the solution that works best for you, and do so in a friendly and welcoming environment.