Bankruptcy

SHOULD YOU FILE FOR BANKRUPTCY?

Top Ten Reasons You Need to File:

1) Your wages are being garnished. Bankruptcy stops almost any kind of wage garnishment, except support collection.  Having 15-20% of your net pay taken for a medical bill, student loan or back taxes can make it hard or impossible to pay your rent or mortgage, keep the phone connected and food on the table. Even debts that cannot be “discharged,” like student loans and taxes, can have a payment arrangement imposed on them by the bankruptcy court.

2) You are missing mortgage payments or a foreclosure is filed on your house.  Depending on the circumstances, you may be able to save the house with a reorganization bankruptcy or loan modification, or by getting rid of other debt that keeps you from paying the mortgage.  If you cannot afford to keep the house, bankruptcy can keep you from owing money on a second mortgage or from owing taxes on debt that is “cancelled” through foreclosure, short sale or deed in lieu of foreclosure. 

3) You are behind on car payments, got a court notice to repossess the car, or a fifteen day notice from the lender.  If you can afford some amount of payment and want to keep the car, you may be able to reduce the monthly payments and/or amount you pay through a reorganization Chapter 13 or redemption loan in a Chapter 7 case.  If you cannot afford to keep the car, a bankruptcy will eliminate any deficiency you could owe if the car sells for less than the debt.

4) Payday loans are gobbling up your income.  Payday loans charge extremely high rates of interest and can put a borrower inside the hamster wheel of never being able to pay them off, but having to borrow repeatedly or take out more payday loans when you can’t pay the rent or heat.  These can be discharged in bankruptcy or put into a 36 month amortization plan (Chapter 128) to be paid with no interest outside of bankruptcy.

5) Where did the lights/heat go?  Utility disconnections can be stopped, although a deposit may be required or a reconnection fee to restore service.  The utility that provides heat to a Wisconsin customer’s residence cannot be disconnected from November 1 to April 15 (winter).  Bankruptcy can also terminate a service contract for a cell phone or other service without an early termination fee.

6) Back taxes.  Actually some back taxes can be discharged in bankruptcy.  The return must have been due over three years ago, and the return must have been filed over two years ago, and some types of taxes have special rules.  Taxes that cannot be discharged can be paid through a reorganization to prevent levies on bank accounts and wages, and tax sales of real estate.

7) Overwhelming credit card debt.  Credit cards do not hesitate to call repeatedly when payments are late, jack up your interest rates, turn you over to collections or debt buying companies, and sue and garnish you if you don’t make those minimum payments on time.  Even if you have a great credit score, too much credit card debt will prevent you from refinancing or borrowing for important things, because a high debt to income ratio makes you untouchable to creditors. 

8) Massive medical bills.  Fortunately, as more people can access health care through expanded Badgercare, the health insurance marketplace, being able to stay on their parents’ insurance as young adults, etc., this is less common than it was, but an uninsured trip to the emergency room or hospital can quickly result in tens of thousands of dollars in debt.  Medical creditors do not have to accept partial payments or a nominal amount each month.  Some hospitals will forgive medical bills with a hardship application.

9) Uninsured car accident.  No one plans a car crash, but not having insurance can mean your license is suspended or you get sued by others or their insurance companies.  These debts can be discharged and your license reinstated with proof of insurance, although death or injury caused by intoxicated use of a vehicle cannot be discharged. 

10) Death, divorce and unemployment.  Illness, unemployment and family breakup are the three major predictors of who will file bankruptcy, according to studies cited by Sen. Elizabeth Warren, who wrote several books on the topic as a Harvard law professor. Bankruptcy has evolved from a device to collect debts (debtors’ prisons) to a means for individuals and businesses to salvage the necessities of life or continue operating under restructured debt.

 

Our firm includes two attorneys who have helped consumers file Chapter 7 and 13 bankruptcy cases in Wisconsin bankruptcy courts and Chapter 128 debt amortization cases in state courts for decades.  We handle your case personally, are based here in Madison and are available to answer your questions and help you through the process at fees you can afford.