What Is Chapter 7 Bankruptcy and How Does It Work?
When you file a Wisconsin Chapter 7 bankruptcy case, two things happen. First, creditors might urge the judge to keep some or all of your debts from being discharged. This happens infrequently.
Another thing that happens in a Chapter 7 is that a trustee looks for assets that he can take from you to pay creditors. To safeguard your property from the trustee, you can declare it exempt. The debtor's property is exempt in the great majority of Wisconsin Chapter 7 cases, and the debtor keeps all they own.
Keep in mind that your discharge won't cover property backed by a mortgage, security interest, or other lien, unless there are rare exceptions. If you don't pay on a secured obligation, the creditor may be able to collect the collateral.
Why File for Chapter 7?
Chapter 7 bankruptcy is less complicated than Chapter 13 bankruptcy; it normally takes four to six months to complete, whereas Chapter 13 takes three to five years; it costs less than Chapter 13 bankruptcy; and it does not require payments to a trustee.
So why would you prefer Chapter 13 over Chapter 7? There are three basic reasons:
You don't qualify for Chapter 7 because you received a discharge in a previous recent bankruptcy, or you can't refute the "presumption of abuse" under the means test, or your house is in foreclosure because you skipped payments and you want to keep it.
How Do I File for Chapter 7 Bankruptcy in Wisconsin?
In the western part of Wisconsin, a Chapter 7 bankruptcy begins with the filing of a petition, a creditor mailing matrix, a statement of social security number, and a credit counseling certificate, as well as the payment of a filing fee. You must file 8 financial information schedules, a financial questionnaire, and a document called Chapter 7 Statement of Your Current Monthly Income within 14 days following that.
In the eastern portion of Wisconsin, starting a Chapter 7 is just as difficult. Furthermore, courts in the state's eastern region have complicated rules that you must observe.
In the end, filing a Chapter 7 on your own is like blindfolding yourself and stepping into a legal minefield. Hiring a Chapter 7 bankruptcy lawyer to guide you through the process is a good way to protect yourself.
Eligibility
Individuals who have (1) primarily non-consumer debts, (2) income below the median, OR (3) sufficient authorized living expenditures can declare a Chapter 7 bankruptcy. The bankruptcy "means test" is made up of the second and third gateways to Chapter 7.
Corporations, for example, can file Chapter 7 without restriction. They do not, however, receive Chapter 7 discharges.
Getting Ready to File for Chapter 7 Bankruptcy
Debtors may – and do – petition for bankruptcy very swiftly. Planning ahead of time, on the other hand, allows you and your attorney to:
Prepare bankruptcy paperwork. A comprehensive disclosure of your financial affairs is required as part of a bankruptcy filing. This entails completing lengthy and difficult forms. The more time you have to fill out these papers, the more likely you are to list everything that is required. And if you do that, the odds of getting a nasty surprise after you file bankruptcy are considerably reduced.
Make strategic decisions. Depending on your circumstances, deferring your bankruptcy may be advantageous, for example, to lessen the likelihood of creditors disputing your bankruptcy.
Safeguard your valuables. In a bankruptcy, you can only exempt a specific amount of property. If you have non-exempt assets and enough time, you may be able to adjust your affairs to maximize the amount of money you can keep. Otherwise, you'll have to either give the trustee your non-exempt assets or pay the value of those assets over the plan's duration.
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Filing
You must attend a brief credit counseling course before filing for bankruptcy. The filing of the financial disclosure documentation mentioned earlier is the first step in the bankruptcy process. These documents are filed with the clerk of court. Eau Claire, Green Bay, Madison, Milwaukee, and Oshkosh are among the Wisconsin clerks' offices. You must then furnish the trustee with further documentation. Furthermore, the law requires you to (a) disclose your objective with respect to property you've pledged as collateral for obligations, and then (b) follow through on that desire.
Automatic Stay
An "automatic stay" is imposed as a result of the bankruptcy filing. Almost all collection activity is halted by the automatic stay.
Meeting of the Trustees
You will meet with a trustee about a month after filing your bankruptcy.
The trustee will swear you in as well as interview you about your debts, assets, and other related issues. Creditors may also show up and ask inquiries, but this is uncommon.
Discharge
If everything goes smoothly, as it usually does, the court will grant you a discharge two to three months after the trustee meeting. The discharge will cover the majority of your debts. Many (but not all) taxes, most student loans, and all obligations coming from a divorce decree are examples of debts not covered by a Chapter 7 discharge. Debtors in Wisconsin can get satisfaction on discharged judgements according to a specific provision.
If things don't work out, a creditor can file a new lawsuit (known as a "adversary proceeding"), requesting the court to either (a) deny your discharge or (b) exclude the creditor's debt from your discharge.
Estate administration
A Chapter 7 usually ends with a discharge. However, in some circumstances, the trustee believes they can recover money for creditors. The bankruptcy could then remain open for months, if not years, as the trustee “administers” the case.
Consult with a Lawyer
Request a consultation with an attorney. Call our office at (630) 324-6666 or schedule a consultation with one of our experienced lawyers today. You can also fill out our confidential contact form and we will get back to you shortly.
To learn about judgement liens on property in Wisconsin read our article, How to Place a Judgement on Property in Wisconsin
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