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Chapter 7 bankruptcy involves the liquidation of non-exempt assets to settle debts. As such, it is known as the “liquidation” bankruptcy.
With Chapter 7, individual or business options are available. Individuals most often petition for this type of bankruptcy, but companies may also use its provisions to seek relief.
Once Chapter 7 bankruptcy is filed, all collections efforts against the petitioner must cease. This is called the Automatic Stay in Bankruptcy, where creditors are stayed – or prevented – from continuing their collection activity. For example, all wage garnishment, harassing phone calls, and pending lawsuits must come to a halt after filing Chapter 7. When the case is concluded, all debts that are discharged are subject to a Discharge Injunction that prevents any further collection activity after the case as well.
The means test is an analysis employed to determine whether a petitioner’s income allows them to file for Chapter 7 bankruptcy. The test involves analyzing a petitioner’s income and applying relevant deductions, to determine if the petitioner has the means to pay some portion of the debt back. If so, a chapter 13 or chapter 11 reorganization might be required, but a petitioner who “passes the means test” may proceed with chapter 7 and obtain relief more quickly, without entering into a repayment plan. Certain individuals are exempt from the means test requirements, including individuals with primarily non-consumer debt. This can allow an individual who is facing a business failure (and the large business-related debts associated with the failed business) to seek relief in chapter 7, even if their income might otherwise have caused them to fail the means test.
Wisconsin law allows petitioners to exempt certain property from bankruptcy liquidation. If property is exempt, that means it is protected from creditors’ claims, and you get to keep it through the bankruptcy process. Wisconsin petitioners must choose between the federal and the state list of exemptions, which differ significantly in some cases.
For example, Wisconsin offers a $75,000 homestead exemption in home equity ($150,000 for spouses filing jointly), while the federal exemption sits at only $27,900 ($55,800 for spouses filing jointly), but allows some of that homestead exemption to be used as a “wildcard” to protect any type of property, assuming it is not used to protect homestead equity. Other exemptions exist in varying amounts which protect property including but not limited to:
Given the varying dollar amounts between the Wisconsin and federal governments’ allowed exemptions, it’s helpful to consult with an experienced bankruptcy lawyer. They will help ensure that you choose the most appropriate exemptions for your circumstances, and plan ahead to help you keep as much of your property as possible.
Every case is unique, and the following is a broad description of the general flow of a chapter 7 case. In Wisconsin, bankruptcies proceed as follows:
For years, we have walked thousands through Chapter 7 bankruptcy, ensuring they are more than prepared and well-informed about what comes next. With our representation, you will avoid the delays and unfavorable results that can arise without experienced counsel.
We’re ready to listen and help you get out from under crushing debt through bankruptcy. Call to schedule a consultation with our Wisconsin bankruptcy lawyers and learn how our team can help. With offices in Madison, Oshkosh, and Milwaukee, and remote meeting options available, we serve clients throughout the State of Wisconsin.
