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Should I File Bankruptcy ?

Cheyenne Bankruptcy Lawyer

Each situation is different. You need to consult with an attorney to know what’s right for you. Hours on the internet searching advice from forums are no substitute for specialized advice when deciding to file bankruptcy. Lund Law Office offers a low-cost confidential consultation with an attorney to determine the level of assistance you may need.  Call us to set up an appointment.

You may have alternatives outside of bankruptcy available to you. You also need a thorough analysis to determine which chapter of the bankruptcy code your case will be filed under, and what assets you can keep after filing. But the right question is the first question: “should I file bankruptcy?”

Here are my recent estimations, based on case law and experience when helping people decide if they should file bankruptcy or not: the decision to file is highly dependent on the income and expenses of your household and the nature and amount of your debt. Please note I’ve seen most of these situations firsthand.

 

Should I File Bankruptcy?

PROBABLY

  • Your unsecured debt is over 40% of your gross income (before taxes are taken out)
  • You owe child support arrears but can pay them back over five year period
  • You are getting garnished and have already maxed credit cards and pay day loans
  • You lost your job, the debt is mounting, but a new job is on the horizon
  • You owe income taxes and can realistically pay them off within a five year period
  • Your medical bills are gigantic, but you now have affordable health insurance for the foreseeable future

 

Should I File Bankruptcy?

SLOW DOWN (This is where you *really* need an experienced bankruptcy lawyer)

  • You transferred property to a relative so the spouse wouldn’t get it in the divorce
  • You transferred the cabin to your brother not thinking you would ever file bankruptcy
  • Your debt is old and past the statute of frauds, or personal income taxes are almost three years old
  • You just received your big tax refund and paid back family and friends with it
  • You have medical problems and insurance isn’t helping in the near future
  • You owe your spouse for alimony, or for marital debt, from the divorce
  • You lost your job, the debt is mounting, and there are no new jobs in sight
  • You live on social security and have no assets
  • You’ve been paying relatives back on loans that they have, or you co-signed with them
  • You’ve filed bankruptcy in the last eight years (with some exceptions involving a Chapter 13)
  • Most of your debt is business debt and you think you should file bankruptcy for your business
  • You plan on filing bankruptcy before you settle your personal injury case
  • You might receive an inheritance
  • You share a bank account with relatives or non-spouses and help support them
  • You are married but plan on filing with your spouse
  • You recently took out a 401k loan and gave it to (often help) friends and family
  • You recently took a mortgage out on your property and used the money to pay credit cards or family

 

Should I File Bankruptcy?

CHAPTER 13, or OTHER DEBT RESOLUTION STRATEGIES ARE NEEDED

  • Most of your debt is from student loans
  • Most of your debt is from restitution for fraud or criminal behavior in other cases
  • Most of your debt is in the form of payroll or withholding taxes (I can help you handle property or income taxes)
  • You have astounding child support arrears
  • Your only debt is the mortgage arrears and you are underemployed and upside down on the house

 

Should I File Bankruptcy?

A CONSULTATION WITH A CRIMINAL LAWYER IN CONJUNCTION WITH YOUR BANKRUPTCY LAWYER IS RECOMMENDED IF YOU DON’T DISCLOSE THESE SITUATIONS BEFORE YOU FILE, AND EVEN THEN, YOU HAVE TO REASSESS ON WHETHER YOU SHOULD FILE

  • You recently took out pay day loans and maxed out credit cards, knowing you would file bankruptcy on them (possible crime)
  • You transferred the cabin to your brother innocently thinking that it would “stay out” of the bankruptcy (can settle, usually)
  • Insurance proceeds came in for the loss of the house or the car but you didn’t pay the bank on the loan (possible crime)
  • You intentionally sold your fleet of Harleys and deposited the proceeds into your 401k (can settle, usually)
  • You took student loans out for somebody other than yourself or used the proceeds to help with other people’s debt (possible crime)
  • You plan on hiding assets and deceiving the bankruptcy court, trustee and your lawyer (bankruptcy fraud)

For many people I’ve helped, some of the reasons listed above might conflict with whether you should file or not.  I can identify these issues and help you answer ” should I file bankruptcy? ” in a more in-depth consultation by appointment if necessary.

Loan Modifications and Short Sales

Consumers are getting shelled with letters, radio ads and offers from lenders and companies to modify home loans and “consolidate” debt.

It’s the same bill of goods: stay tied to debt you can never afford to repay. How many times do these commercials warn you not to file bankruptcy?  I often wonder if they are trying to imply that you will lose your home if you file for bankruptcy.  In the vast majority of cases, you can file bankruptcy and keep your home and avoid foreclosure.

What I hear when the ads warn you to not file bankruptcy is: don’t file bankruptcy until we’ve capitalized on your fears and taken every last cent from you before you have no other choice but to file bankruptcy. Your best bet when considering a loan modification, or a short sale, is to work with your bank or lender directly.  Anybody in the middle will just increase your debt.

Loan Modifications

You’ve received that promising letter in the mail from your lender or third-party program to save your home: now what?

Go ahead and try,  but prepare for a long, drawn out process and a lot of paperwork.  In years past, some people report getting foreclosed upon during the process of negotiation the loan modification. Talking heads on the television will tell you that a bank will do anything to avoid foreclosure.  Not true.  The banks usually choose the route that leads to a more secure bottom line and improved risk portfolio.   The banking industry does not sail their collective ship with a moral compass to reduce payments to keep you in your home.   Some people who successfully get a mortgage loan modification still end up going into default soon after.  There are exceptions, but be forewarned.

Take a good look at your budget.  I like Dave Ramsey’s rule of thumb: “Limit your monthly payment to 25% or less of your monthly take-home pay.” Remember that if it is the loan modification that takes you under that threshold, you’ll pay a lot more interest in the long run for that sort term decrease in mortgage payments. If your loan modification won’t take you under that 35% threshold – you should take a deep breath and explore other housing options.

Short Sales

A short sale is where the bank agrees to allow you to sell your home for less than what you owe the bank.  I think they call them short sales because it’s designed to leave the seller short.  Watch out for short sale brokers, who you may end up wasting a lot of money on if the bank refuses to work with them.  It is best to negotiate your short sale price directly with the bank.  One of the dangers a short sale may bring you is that you will be responsible for any deficiency. So, what’s in it for you?  You can avoid foreclosure and there is the possibility that it may give you favorable treatment for future credit.  Surprisingly, walking away from the home via foreclosure can be a better alternative than dealing with a deficiency (provide they waive it via the foreclosure) than the nightmare of waiting month after month for a bank to approve the sale only to grant you the privilege of owing them a deficiency after the sale.

Why Loan Modifications and Short Sales May Not Work

It’s hard to tell folks sometimes, but there is a real possibility that some people cannot afford to keep their home, and no loan modification or short sale will change that reality.  Debt counseling or working with our office can reveal a budget and give people  ideas on how to move forward.  There are options that wont involve increasing your debt load through debt consolidation schemes, loan modifications and short sales, and if you are faced with a difficult decision concerning your house, contact us for a low-cost initial  bankruptcy consultation.

Bankruptcy Wisdom

What follows is a bankruptcy memo written by a long-time friend and mentor, Don Reckseen, who is among many things, a bankruptcy attorney in Colorado.  I have tremendous respect for him and his approach to bankruptcy, and with his permission, I’m sharing his perspective.

 One of the areas I got the most from was bankruptcy. You can see people heave a sigh of relief—they are scared, frustrated, embarrassed and disillusioned all at once. Curing their debt problems is easy—any secretary can do it—but reinstating their morale, now that needs an expert. I got so good at this and got such satisfaction that I fidgeted waiting for the next BR client. (I quit before the new rules.)

Here is my bankruptcy speech:  First, you need to understand that bankruptcy is not a declaration of defeat or failure like it was in your parents time (anytime before 1970). It is now a financial planning tool, and it is an effective one.

Next, there are two things about history you should understand.

1) When Columbus sailed, everyone thought he was “going over the edge”, so he could not find crews. But a faraway voice from the debtor’s prison wailed “I’ll go”. After reaching America, the men came ashore, found a big rock, and chiseled “In this country, you do not have to pay your debts” on it. This simple factor is the main reason why our economy developed in a unique (and it still is) way because it took the government out of private business. Until then, no one believed that private individuals could run an economy, but it not only worked, it exploded into an incredibly powerful economy. The new rule, however, having a huge effect on the economy, was largely ignored because there was very high social pressure for people to pay their bills. This pressure lasted until after WW II. Then, strange things began to happen.

2) Ford discovered that you could make more money by giving your workers more money. Sears discovered that you could make more money by not requiring your customers to pay. Your parents and grandparents preached: “Whatever you do son, protect your credit.” That advice was valid in the cash economy of the time, but the economy shifted dramatically to a credit economy, and that advice needs modificati9on. What your ancestors were talking about when they used the word “credit”, was “your good name and community reputation”. But soon, the credit economy changed everything*, and now, NO ONE has a good name or a community reputation. (Do any of your friends, associates or relatives pay all their bills in a timely fashion?? A) You don’t know, and B) You don’t care.)

*If $100,000 worth of groceries leaves the supermarket on Friday, the night deposit will be $10,000 or less. Today the word credit has a new meaning (ask Dad or Granddad if this is what they meant by “credit’.) “Credit” now means the ability to buy things you cannot afford. To the extent this is true, we should advise our children—“Do not get credit.” (This is Suzy Orman’s advice—she gets it.) This is the second historical development you should try to understand.

Finally, since you are so saddled with the “credit” brainwashing of your ancestors, take heart. Look at your creditors. They sold you things on credit or paid for things you wanted but could not afford.

That is their business.

On the day they did this, as businessmen, they knew just how many of their borrowers would file bankruptcy, and, just like Sears knows just what they will lose to shoplifting, they add this cost into their transaction with you.

Read your contract—it says: “I promise to pay $____ per month, unless I elect to file bankruptcy, in which case, you get zero. In return for your allowing me this option, I agree to pay 19 percent interest.” So, by filing bankruptcy, you are not “breaking a promise”, you are simply electing an option given to you by the creditor.

The simple new economic fact is that the lenders and sellers do not need to ever collect on the principal, so long as they are paid an extremely high interest rate. Sears built its tower with money borrowed from insurance companies that was secured by Sears customers accounts, and pays its Tower mortgage with interest collected from those same accounts. The principal is irrelevant.

DON’T FEEL BAD.

Become a one unit cash economy and you will be much happier than almost everyone—it is orange crate furniture until you save enough for a kitchen table, just like your granddad. Or participate in the credit economy, but not with vigor, and “don’t buy things you cannot afford.”

Amen, Don.  I hope others gain relief from your perspective.

Wisconsin 128 Debt Relief Option

One alternative to bankruptcy, available only to Wisconsin residents, is a “Wisconsin 128.” I advise this option for clients who are only facing issues with unsecured debt, and who can afford to pay back some or all of their unsecured creditors, over a three year period. Once you identify all the unsecured creditors that you wish to include, a plan is proposed and filed in state court, who then appoints a trustee who acts as a receiver for the plan payments and makes distributions according to the plan. You enjoy the protections of the Wisconsin 128 plan if you remain current on your payments to the trustee (which can be deducted automatically from your paycheck and save you on trustee fees.)

What benefits do I receive if I put my bills in a Wisconsin 128 plan?

Upon filing your plan, all collection efforts of the creditors included in the plan must cease, including garnishments. The creditor then files a claim, and future interest and penalties are not included in the claim. Interest accrued prior to filing the Wisconsin 128 is usually included in the creditor’s claim, which must be paid through the plan. You receive many of the same benefits that you would under a bankruptcy stay (I won’t address distinctions here, which could be important to your case and why you should speak to an attorney who is familiar with both bankruptcy and the laws of the Wisconsin 128, before deciding.)  However, the creditor may still pursue a judgment (but can’t collect on it) and if you fail your plan, the interest and penalty can accrue as though you never filed.   Always be sure you can afford a Wisconsin 128 before going into it.

What debts can be included in a Wisconsin 128 plan?

Unsecured debt that can be placed in a Wisconsin 128 includes medical bills, dental bills, late rent, credit card bills, pay day loans, personal loans, civil judgments, tickets and fines, past due utility bills, and in limited cases, state and municipal taxes.

What debts cannot be included in a Wisconsin 128 plan?

Secured debts cannot be solved through a Wisconsin 128, such as past due mortgage payments, and past due car payments. Domestic support obligations such as child support arrears should not be included. A Wisconsin 128 cannot resolve property taxes, and the IRS will not recognize a Wisconsin 128 for any tax liability.

Must I include all my unsecured creditors in a Wisconsin 128 plan?

No. There are some circumstances where it won’t make sense to include all of your unsecured debt, and you can always include creditors that you initially left out of the plan by amendment.

How do I know if I should consider a Wisconsin 128 plan?

A Wisconsin 128 is an excellent solution for the right circumstance. You should speak to an attorney who is familiar with both bankruptcy and Wisconsin 128 procedure before you decide. A good starting point is to estimate your plan payment after you total the unsecured debt balances you wish to include, add 10%* to represent costs and administration, and then divide it by 36. For example, if you are getting garnished on a debt that is $3,000.00 and wish to only include that debt in your Wisconsin 128 plan, you would estimate a total debt obligation of $3,300.00 ($3,000 + $300) and divide it by 36 to estimate a payment of: $91.67 per month.

*The trustee will usually only charge 7% if withheld through your paycheck.

Can I file a Wisconsin 128 without an attorney?

A Wisconsin 128 can be filed through my office for a fraction of the price of a bankruptcy. I’ll give you a firm price once I’ve met with you and reviewed your circumstances.

Can I file a Wisconsin 128 without an attorney?

Certainly. I could pull my own teeth, too, I suppose. However, it is advised you have an attorney advocate at all stages of the Wisconsin 128 filing. Call my office at 307-460-8598 and schedule a low-cost consultation to see if a Wisconsin 128 is right for you.

What is Garnishment?

What is a Garnishment?

Once a judgment is entered against you, the judgment creditor can apply to garnish either your wages or your bank accounts if the balances are high enough, which depends on the state exemption (or protection) limit.

Garnishments can make a significant impact on your ability to support yourself and your family. The garnishment procedure is easy to start and often difficult to challenge. The amount garnished will include payment for the judgment creditor’s attorneys’ fees and the cost of filing the garnishment.

The law may allow you to avoid the garnishment if you can show your income is below the poverty guidelines, which are included with the garnishment forms. In most states, you can also avoid garnishment if you can prove that you receive need-based public assistance, or if you are eligible for such assistance.

Child support payments take precedence over garnishments.

Our office can easily spot defenses during a consultation and review of the garnishment paperwork, and a recent pay stub. You may still have time to challenge your garnishment. However, there is a strong possibility that your employer and the judgment creditor followed all the rules and you’re stuck with the garnishment.

How Can I Stop Wage Garnishment?

There are four ways to avoid an earnings garnishment:

Change jobs?

Job-hopping is an unwise strategy in a recession, and can cost you far more than what you hope to save by ducking the wage garnishment. Furthermore, some aggressive judgment collectors will find out where your new job is, or focus on your bank accounts instead. All the while, post-interest judgment continues to accrue.

Pay it off?

Your financial circumstances might be favorable enough to pay the underlying judgment of your garnishment, but our office would need to know more about your situation before advising that you borrow money from another source of money to pay the judgment in full.

File a “Wisconsin 128”?

There is a procedure under the Wisconsin Statutes, sometimes referred to as a “Wisconsin 128” or “Chapter 128.” Filing for relief under the state statute also stops the garnishment. This procedure is less expensive, easier to apply for, and allows you to choose which debt you wish to be restructured. However, you must pay off all the debt that you allocate to the plan within three years. The plan can be changed and restarted, as circumstances arise, but the law insists that the debtor doesn’t abuse the system.

File Bankruptcy?

Should you file bankruptcy?  Bankruptcy stops garnishment proceedings upon filing your case, and with limitation, can return money seized through garnishment back to you.  Bankruptcy can also provide effective relief for any other debts you may have. Explore this website to learn more about bankruptcy and dispel some of the myths. For example, you typically won’t lose your house, or your car, or your household belongings. Your overall credit profile can improve in some cases, especially if you avoid incurring debt after you file. You can get rid of most types of debt, including the judgment used to garnish your wages. Contact our office for a low-cost bankruptcy consultation, and get rid of your garnishment for good.

Foreclosure: How Much Time Do You Have Before They Take the House?

Foreclosure:  Timing is Everything

THIS ARTICLE ONLY PERTAINS TO WISCONSIN RESIDENTS

Question: We already know we aren’t keeping the house and we can’t afford to make any more payments toward the mortgage. How much time will we have to stay in the house until we get kicked out?

How much time you have left to stay in your home when facing a foreclosure lawsuit depends on a few key facts, but in Wisconsin, it won’t happen overnight.  Wisconsin is a state where you own the home until a foreclosure order is signed or ‘confirmed’ by a county judge.  Several months elapse between the first time you receive notice that you are behind, and the confirmation order.  The sheriff or other party cannot enter the premises to remove you until after the confirmation order is signed.

Foreclosure Process (Ultra Short Version)

1. Breach Letter. A certified letter will arrive warning you of their intent to foreclose and they will invite you to pay to get current, “or else.” (The “else” follows)

2. Summons and Complaint. Handled like any other civil case. Always file an Answer and have an experienced attorney look for all possible defenses to your case. RESPA, TILA, HOEPA and other consumer protection laws can help, especially if your mortgage originated in the era of ‘fast and loose’ lending.

3. Judgment. Failure to file an answer, or a successful defense, may result in a judgment for the mortgagor.

4. Publication. There is a time period established by statute that requires publication of the foreclosure sale.

5. Sale. This is your last chance to find funds to buy the house. It is rare, but some folks have been able to save their home at the foreclosure sale.

6. Confirmation. Once the sale is complete, the judge reviews the paperwork to see if all the statutes were followed concerning the foreclosure, publication, notice and sale.

7. Deed. The deed is transferred to the highest bidder at the sale (which is the bank in a vast majority of cases.)

8. Eviction. Once the deed is transferred, the successful bidder now has the option of evicting anyone who remains in the home. I hope you can see that the foreclosure process does not happen overnight. The stories you may hear of couples living in foreclosed homes for over a year, are likely true. After all, some banks may have trouble selling the homes they repurchased in foreclosure and would rather have folks in the house keeping the pipes warm and tending the property.

Timing Depends on Facts

Real Estate Foreclosure is governed by Chapter 846 of the Wisconsin Statutes. The statutes specify how much time must elapse before certain actions can be taken during foreclosure. For residential property, the timing of the foreclosure depends on one of the following three fact categories:

1) House is abandoned. (Two month redemption period)

2) House is occupied and the lender does not seek to sue the homeowner for money during the foreclosure (Six month redemption period)** MOST COMMON

3) House is occupied and the lender wants to sue the homeowner for money during the foreclosure (One year redemption period) The redemption period is the time from judgment (Step 3, above) to sale (Step 5, above.) The law encourages lenders who wish to have a quick return of the property, to forgo suing the homeowner for money damages (deficiency.)

The law also encourages folks who are faced with a foreclosure not to abandon the house.

The Sale, Confirmation and Eviction

Once sold, the Sheriff has up to 10 days to report the sale, and the foreclosure attorneys must schedule a hearing with the court to confirm the sale, and must allow at least 5 days of notice to all parties in interest prior to said hearing. Don’t forget that an eviction action is a separate proceeding with it’s own time line. The fastest evictions are in the range of two to three weeks, if all the hearings, notices and service fall in place.

Commencement of the Case Depends on Contract

The commencement of the case is governed by the actual terms of the mortgage and note, and when followed, certain consumer protection statutes. Most contracts allow a cure period before a lawsuit may be commenced, and the time line from the drafting of a complaint to getting a summary judgment can vary by jurisdiction and lender practice. Filing an answer can slow down the process for several months, especially if there are merits and the case is tried. However, using an answer as a mere delay tactic can incur further costs and fees under some circumstances if the lender is willing to pursue them. But don’t forget: ALWAYS FILE AN ANSWER TO A FORECLOSURE COMPLAINT.

Conclusion

Thus a conservative answer to how long you have until they take the house in foreclosure, is:

Answer: It depends on what redemption period applies, if you file an answer, and how aggressively the lender pursues the property. For most Wisconsin residents who are living in the home, and who will not be sued for money damages, the answer is at least seven months or more from the time you are sued.

If you take nothing else of value from this article, take this: you probably have more time than you think. Don’t fall victim to foreclosure rescue scams. The Wisconsin State Library has a wonderful resource page to help answer basic questions, including an article on how to answer your foreclosure complaint. Gaining the advice of an attorney is critical, and you should always know your options before making a decision on how to handle the foreclosure, especially when you think you don’t have any options left. We charge a flat minimal fee for all consultations concerning foreclosure lawsuits.