Ch 13 Reorganization

When many people think about Bankruptcy, they are thinking about liquidation, also known as Chapter 7 Bankruptcy, and all the worries about exemptions that come with it.  Many common questions we get from potential clients include the following:

• I make more than Wisconsin’s median income level, so I am not eligible for Chapter 7. Can I still file bankruptcy?

• I have over the exemption limit in _________ asset (many times this is too many cars, although it can be firearms, maritime investments, etc), is there a way to still file bankruptcy and not lose all of my assets?

• I have more than $75,000 ($150,000 for a married couple) equity in our homestead, and I am afraid the bankruptcy trustee will sell our home.  Can I keep my home?

• I am in foreclosure proceedings and my house is about to be sold at a sheriff’s sale. Is there any way a Waukesha bankruptcy lawyer can help me so late in the process?

• I make a regular income and do not want my debts completely liquidated.  I instead want to pay some of my debts back, but only what I can afford. Is this possible?

• How can I have the protection of the bankruptcy court for longer than a couple months?

• (If you have a specific question regarding the various bankruptcy options, call us at 844-ZAP-DEBT!)

If one of the above concerns fits your situation and Chapter 7 is not longer an option, Chapter 13 bankruptcy could be the option for you!

What is Chapter 13 Bankruptcy?
Chapter 13 Bankruptcy is, in general terms, a court-ordered repayment plan for individuals or families with regular income.  It is not just for people who don’t (or can’t) file Chapter 7.  Anyone who makes a regular income and has debt issues could potentially benefit from a Chapter 13 and its protections. Depending on your income limit, you may enter be able to enter into a plan of either 36 or 60 months, and you will pay only what is available after figuring out your net monthly income and deducting expenses (your “monthly disposable income”) to reach your monthly plan figure.

The Chapter 13 Plan:
Your Chapter 13 plan will be composed of your monthly disposable income and a term length that will depend on your gross family income and whether that amount is above the median income for your household size. The plan will also explain in detail how the debts you are to repay will be paid and which debts will be discharged at the end of your plan period.  Certain obligations may also be paid outside the plan.  For example, let’s assume a Chapter 13 filer has a home mortgage, two car payments, student loans, and credit card debt.  The mortgage would typically be paid directly (outside the plan); however, if there is any arearage on the mortgage, that would be paid inside the plan. Car payments are generally paid inside the plan (but can be paid directly provided a good reason). Student loans would depend on the total plan, and the credit card debt would be paid out next to the student loans. The unsecured debts (the student loans and credit card debt) will only be paid after all administrative claims, secured debts, and priority claims are paid out.  Essentially, the debt that you would usually get discharged in a Chapter 7 has to wait “at the end of the line” on the payment schedule.

How does the plan determine how much the unsecured creditors get paid?
A common question we get as Waukesha bankruptcy lawyers is how it is decided how much money general unsecured creditors get.  Or, in non-Waukesha lawyer lingo, how many pennies on the dollar your credit card debt, medical debt, consolidation loan debt, etc., will receive. The general test is that in a Chapter 13, the unsecured creditors should receive at least as much as they would receive in a Chapter 7 bankruptcy. This is where your non-exempt assets and median income come into play.  Let’s assume a person does not wish to file Chapter 7 because he or she is above the exemption limit in vehicles; furthermore, let’s assume that the amount in vehicles that the person cannot exempt is around $5,000. In that situation, the plan would have to provide that the general unsecured creditors get paid the $5,000 through the plan that they would have received if the trustee in a Chapter 7 case would have sold the assets.  Another example is for the median income limit. In most instances, Chapter 7 is available only to those individuals and families who, depending on size and gross income level, are below the median income limit for the state in which they live. In a Chapter 13, you can be above the median limit and still file bankruptcy, but keep in mind that you may have to pay back a certain portion of your unsecured debt in order to receive a discharge.  The math determining the exact amount can get quite complex, that is why it is imperative to have a Waukesha bankruptcy attorney in these types of cases!

Similarities between Chapter 7 and Chapter 13:
The similarities between Chapter 7 and Chapter 13 lie in the protections given by the bankruptcy court, the prerequisites to filing, and the debtor education courses needed.  Regardless of which chapter you file, you will be protected from garnishments, civil suits and calls from collection agencies.  The filing fee for Chapter 13 is $310 (for Chapter 7 it is $335), and you will need to have the same forms and schedules filled out in order for your case to proceed.  A final similarity is the credit counseling course and debtor education course. Prior to filing your Chapter 13 filing, you will need to have taken a credit counseling course by an approved agency.  At McAvoy & Murphy, we will sign you up for the course and this is all included in your flat fee!  The second course you need to take regarding debtor financial management has to be completed prior to the end of your plan term.  This is a longer timeframe to complete the second course as Chapter 13 last at least 3 years from the inception of the case.  Both Chapter 7 and Chapter 13 have an Initial Meeting of Creditors that last roughly 5 to 10 minutes per case.  Although there are many similarities, there are many complex situations that arise in Chapter 13 bankrupties, which is why it is important to call a good Wisconsin bankruptcy attorney today!

What should I bring to my initial consultation with Waukesha bankruptcy lawyers McAvoy & Murphy to help start my Chapter 13 ?
Please see our bankruptcy documents section for a fillable expense sheet; preferably, this will be completely filled out to help our attorneys analyze your situation.  Also, please bring the tax returns, both federal and state, for the last 2 years that you have filed, as the trustee will need the tax returns prior to your Initial Meeting of Creditors. We also recommend bringing the last 6 months of any pay stubs from employers you have had over that timeframe, as well as copies of any and all bills that you wish to include in your bankruptcy. If you don’t have or misplaced a bill, do not worry, we will pull your credit report (again, charge included in your flat fee) to make sure no debt is forgotten!

How do I set up an appointment with McAvoy & Murphy Law Firm’s Waukesha Bankruptcy Attorneys?

Regardless of if you are located in Brookfield, Pewaukee, Elm Grove, Delafield, Hartland, or anywhere else in the surrounding Waukesha and Milwaukee area, you can schedule an appointment by calling us toll free at 844-ZAP-DEBT or by filling out the contact form below! We look forward to serving your legal needs!