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BANKRUPTCY

If you would like more information on Bankruptcy or any topics which concern a legal matter, please contact Rob Wertheimer for a free initial consultation at 715-381-1273 or click here

For many years, Rob Wertheimer had written a legal column for The Prescott Journal. The purpose of these columns were to educate the reader by providing legal information. They were written to inform and not to advise.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 makes it more difficult to get rid of debts by filing for bankruptcy, forcing tens of thousands of people to work out repayment plans instead. President Bush signed the bill on April 20, 2005.

The bill which marks the first major change to the bankruptcy code in 27 years and makes sweeping new changes which take effect on October 17, 2005.

Some of the major changes include:

Income means test. In order to file for Chapter 7 protection, a debtor must now pass a rigorous income means test or be faced with a Chapter 13 bankruptcy and a 5 year repayment plan. If your family earns over the median income, you must file Chapter 13, you are not eligible to file Chapter 7. For those close to the median, you may not qualify to file a Chapter 7 and you may have too little income to file a Chapter 13

The median incomes for Wisconsin are:

Single $ 35,885
Two People $ 46,927
Three People $ 57,968
Four People $ 69,010
Five People $ 80,052

Credit counseling. Credit counseling is now required in order to file for bankruptcy. The counseling outlines the opportunities for available credit counseling and assists with budget analysis. This "briefing" must be completed during the 180-day period preceding the date of filing the bankruptcy petition.

Tax Return Disclosure. Each debtor, at least seven days prior to the Court hearing, must file a copy of their latest federal income tax return or transcript of the return. A copy of the return is available to any of the debtor's creditors upon request.

Documentation. In order to file all information must be verifiable. The following documents will be needed for filing:

€ three years of tax returns,
€ at least one year of bank statements, credit card statements, loan statements;
€ at least 6 months of pay stubs (for all employers);
€ an appraisal on your home and vehicles;
€ a comprehensive list of personal property - furnishings;
€ a year of utility bills;

Household Goods. The new code imposes strict requirements are what household goods a debtor will be allowed to keep. The debtor will be allowed to have no more than one tv, vcr and stereo. No more than one computer and no collectibles. No riding lawn mower, no pools for the kids, hot tubs bought with the house. No ATV, scooters, adult ski equipment, adult bicycles or guns.

The new law places strict requirements upon attorneys, who must now:

(1) certify the accuracy of the debtor's schedules of assets, under penalty of harsh court sanctions;
(2) certify the ability of the debtor to make future payments under reaffirmation agreements; and
(3) identify and advertise themselves as "debt relief agencies" subject to a host of new regulations.

Consumer groups and unions have strongly opposed the bankruptcy reform legislation in large part because they argue that the means test arbitrarily and unfairly denies the benefits of bankruptcy to many people who need them.

If you have more questions regarding the new Bankruptcy Law please feel free to contact us.

Bankruptcy is a legal way to get out of paying certain debts. Those debts are eliminated by a bankruptcy court "discharging" them. A discharge of a debt in bankruptcy means that whomever you owe the debt to can no longer legally require you to pay it. The purpose of bankruptcy is so society can allow people to have a fresh start when they become heavily burdened by debt.

There are several types of bankruptcy. Bankruptcy is all a matter of Federal Law and is done in the federal courts according to laws passed by Congress. The most common form of bankruptcy is known as Chapter 7 bankruptcy. This is the form of bankruptcy which most people use. In Chapter 7, the bankruptcy court discharges your debts while it also takes certain property that you have, sells it and distributes the money among your creditors. Chapter 13 bankruptcy allows people to keep their property and the bankruptcy court supervises their paying off some parts of their debts during a 3-5 year period. Chapter 11 bankruptcy is essentially for a business. It lets the business operate while the court supervises payment of some parts of the business debts. Chapter 12 bankruptcy is for farmers.

There are also some debts which cannot be discharged in bankruptcy. Non-dischargeable debts include: child and spousal support debts; court judgments against you or settlements entered into by you for personal injuries or death due to driving while intoxicated; student loans which became due less than 7 years ago; taxes which became due less than 3 years ago; restitution ordered by a court; condominium dues or dues from a cooperative; debts which were incurred through fraud; and punitive damages from willful harm to another person.

A debtor is allowed to keep certain property in a bankruptcy. This property is known as "exempt property." The exemptions are for certain assets listed in the law, but only up to a maximum value. In Wisconsin, you are allowed to have $1200 in a motor vehicle, $40,000 in homestead equity in your house, $5,000 in household goods and personal effects, life insurance, pensions, tools of one's trade, and government assistance in the form of social security payments, unemployment compensation , etc. which you have saved in a bank account..

Immediately upon filing of a bankruptcy and notification of creditors, an "automatic stay" of all creditors' actions against you goes into effect. This means that all collection actions, lawsuits, foreclosures, evictions, etc. are immediately halted by order of the Bankruptcy Court. The court then schedules the meeting with creditors and you must attend this meeting (in this area of Wisconsin the meeting is held in Eau Claire). At the meeting, creditors present their claims and the court deals with property which is non-exempt.

You can file for Chapter 7 bankruptcy again 6 years after the date of your discharge in bankruptcy. Since you can get a discharge once every 6 years, it is very important that you not do it frivolously or for just a few minor debts.

Recently, Congress has been considering the first major revision in 20 years to the Bankruptcy Code. The changes would include a "means" test, so that if a debtor had a certain income, a portion of the debts would have to be repaid before a discharge would be allowed. The Senate and the House are working to consolidate their separate bills and it is likely that the new Bankruptcy Law will go into effect in the next year.

If you would like more information on Bankruptcy or any topics which concern a legal matter, please contact Rob Wertheimer for a free initial consultation at 715-381-1273 or click here