Are you one of the thousands of Americans struggling to overcome debt that seems never ending? Filing a bankruptcy may be able to help you finally get rid of that debt! The two main types of personal bankruptcy were created as a way for individuals or families, no matter what their situation, to find a way out of debt. The two types of personal bankruptcy are Chapter 7 and Chapter 13; you can find more information about them below!
What many people don’t know is that the benefits of filing bankruptcy extend well beyond just erasing debt. In fact, individuals and families use Chapter 7 and Chapter 13 bankruptcy to stop a foreclosure on their home, repossession of their car, and even garnishment of their wages.
There are certain kinds of debts that cannot be erased, no matter which kind of bankruptcy you decide to file. Debt that falls in that category are: back taxes, child support, alimony, or anything else owed to the government such as library fines or parking tickets. These are considered non-dischargeable debts and cannot be reduced or erased by filing bankruptcy.
Chapter 7 Bankruptcy
Chapter 7 is the most common type of personal bankruptcy filed in the United States today. Why? Because the qualifications to file Chapter 7 reflect the situation of most Americans. Typically, Chapter 7 bankruptcy is most beneficial to individuals or families with a high amount of unsecured debt (credit cards, medical bills, payday loans, etc.) and a low amount of assets (paid in full homes and/or vehicles). If successful, a Chapter 7 bankruptcy completely eliminates the high amounts of unsecured debt, giving the debtor a “fresh start.”
In most cases eligibility for Chapter 7 bankruptcy involves evaluation the amount of your income and the amount of your debt. If your income is lower than your state median income for your household size then you will most likely qualify for a Chapter 7. In Wisconsin the median income for a household of 1 is $43,202, and $57,428 for a household of 2. If your income exceeds these amounts then the bankruptcy court may conclude that you have enough income to pay back some of your creditors and suggest that you file a Chapter 13 bankruptcy.
Chapter 13 Bankruptcy
The second type of personal bankruptcy available to individuals or families in America is Chapter 13 bankruptcy. Although Chapter 13 bankruptcies are not filed as often as Chapter 7, they are still popular. Filing a Chapter 13 bankruptcy involves a 3-5 year repayment plan in which the court allows the debtor to pay back a certain percentage of their overall unsecured debt. Due to the complex calculations involved in creating the repayment plan, it is best to hire an attorney to assist you in filing a Chapter 13 bankruptcy. Once the 3-5 year repayment plan has been completed the debtor will not only be debt free, but completely caught up on payments involving secured debt such as a car or mortgage.
Chapter 13 is also unique because it is the only type of personal bankruptcy that limits the amount of debt you can have. The current debt limits for Chapter 13 are: $360,475.00 for unsecured debt and $1,081,400.00 for secured debt. These figures are in place because that is the most that the bankruptcy court thinks someone feasibly pay over a five year period.
Advantages of Retaining a Bankruptcy Attorney
In most cases, hiring a Milwaukee bankruptcy attorney makes the filing process easier. There are certain forms, and calculations that must be filled out accurately in order to ensure that the bankruptcy will be filed the right way with the court. One small mistake could result in having to re-file the cause altogether. Another advantage to hiring a bankruptcy attorney is that you will be able to have any questions answered with a phone call.
Once you have met with several potential attorneys and decide on the best one for your situation the process follows a typical pattern. First, you and your attorney will decide upon his/her fees for filing your case. The attorney fees will depend on what kind of chapter you file, the amount of debt involved in the case, and in general how much work the attorney will have to do in order to file your case. Once the fees and payment schedule are decided upon your bankruptcy attorney will request certain documentation from you so that he/she can begin work on your “petition,” the actual paperwork filed during a bankruptcy. Documents commonly requested are: pay stubs, bank statements, tax returns, lease or mortgage information, and vehicle loan paperwork.
Once the bankruptcy attorney has all of your documentation he/she will prepare the petition, show and explain it to you, and finally file the petition with the bankruptcy court. 30-45 days after your case has been filed you will be required to attend a short hearing at the local bankruptcy court. Your attorney can attend this hearing with you and prepare you for what questions to expect from the trustee.
Wisconsin Bankruptcy Laws
Although bankruptcy is governed by federal law each state has specific bankruptcy rules known as exemptions that they create themselves. Exemptions are rules that specify a value of certain objects that can be protected from liquidation while you file bankruptcy. For instance, in Wisconsin the homestead exemption protects up to $75,000 of equity in your home, meaning that unless the equity in your home more than $75,000 you will not be at risk of losing it. Wisconsin exemptions also protect automobiles up to $4,000, and household goods and furnishings, wearing apparel, keepsakes, jewelry and other articles of personal adornment, appliances, books, musical instruments, firearms, sporting goods, and animals up to $12,000.
The state of Wisconsin is broken down into 2 bankruptcy districts: Eastern and Western. The Eastern district covers the major cities of Milwaukee and Kenosha and files many more cases per year than the Western district which covers cities like Madison and Eau Claire.