Secure your financial future with knowledge of Chapter 7 exemptions and get legal advice
Are you thinking of declaring bankruptcy but worried about losing your assets? This is a typical but baseless worry many people have who file for bankruptcy. When filing for bankruptcy, there are many different tactics one can use to make sure their assets stay theirs, such as using Chapter 7 exemptions to keep their property. But bankruptcy is always complicated, so it’s in everyone’s best interest to get help from a skilled Milwaukee bankruptcy lawyer.
A bankruptcy attorney will talk you through your debt relief options so you can decide if bankruptcy makes sense for you. At Miller & Miller Law, LLC, in Milwaukee, Wisconsin, we are a team of experienced bankruptcy lawyers who help people through financial troubles. We have years of experience helping people get back on their feet again.
What is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is a kind of bankruptcy in which assets are liquidated to pay creditors. Because there is no repayment plan, it is sometimes known as “straight bankruptcy.” When a debtor files for Chapter 7 bankruptcy, a trustee is chosen to gather and sell the debtor’s non-exempt assets. The money from the sale is then utilized to pay creditors following the Bankruptcy Code’s rules. There may be liens and mortgages on some of the debtor’s assets, pledging the assets to other creditors. The Bankruptcy Code, however, permits the debtor to preserve some “exempt” assets.
People who live, work, or own property in the US are eligible to file for bankruptcy under Chapter 7. However, it is not available to people whose bankruptcy cases were dismissed during the last 180 days unless certain conditions apply. Various unsecured debts, such as credit card balances, collection agency accounts, medical expenses, and personal and payday loans, can be discharged for successful Chapter 7 bankruptcy filers.
How Do I File Chapter 7 Bankruptcy?
To file for Chapter 7 bankruptcy in Wisconsin, follow these steps:
- Determine if you qualify for Chapter 7 bankruptcy. You can qualify if you have predominantly non-consumer debts, below median income, or sufficient allowed living expenses.
- Complete a credit counseling course from an approved provider.
- Gather all necessary documents, including a list of all creditors and their contact information, a list of all assets and their value, a list of all income and expenses, and tax returns for the past two years.
- Complete and file a petition for bankruptcy with the Wisconsin bankruptcy court. The petition must include a creditor mailing matrix, a statement of Social Security Number, and a voluntary petition.
- Pay the filing fee, which is $335 for Chapter 7 bankruptcy in Wisconsin.
- Attend a meeting of creditors, where you will be asked questions about your financial situation by the trustee and any creditors who choose to attend.
- Complete a debtor education course from an approved provider.
- Wait for the court to discharge your debts, which typically happens about four months after filing.
What are the Pros and Cons of Declaring Chapter 7 Bankruptcy?
Filing for Chapter 7 bankruptcy in Wisconsin can have several benefits, including:
- Immediate relief from creditor collection tactics and wage garnishment;
- Discharge of most unsecured debts, such as credit card debt, medical bills, and personal loans;
- A fresh start financially, as you can eliminate most of your unsecured debts and start rebuilding your credit score;
- Protection from creditor harassment and lawsuits; and
- In most cases, you can keep all of your property because it is exempt.
However, there are also some disadvantages to filing for Chapter 7 bankruptcy in Wisconsin, including:
- Losing non-exempt property, which is sold by the trustee;
- If you want to keep a secured asset, such as a car or a home, you may have to continue making payments on the loan or mortgage;
- Your credit score will be negatively impacted for several years; and
- Some debts, such as student loans and tax debts, are not dischargeable in bankruptcy.
How Long Does It Take to Complete a Chapter 7 Bankruptcy?
The timeline for completing a Chapter 7 bankruptcy in Wisconsin can vary depending on several factors, including the complexity of your case and how well you prepare the necessary paperwork. Here are some general guidelines:
- Filing the petition: You will need to complete and file the necessary paperwork with the bankruptcy court. This includes collecting things like tax returns, employment history, pay stubs, deeds, and the like. Having an incomplete petition or one that needs revisions could cost you time, energy, and money.
- Meeting of creditors: You will need to attend a meeting of creditors, also known as a 341 meeting. This meeting usually takes place within 20 to 40 days after filing the petition. During this meeting, the trustee and your creditors will have the opportunity to ask you questions about your finances and your bankruptcy case.
- Discharge: For Chapter 7 bankruptcy, the discharge happens between 60 and 90 days after the 341 meeting. Chapter 7 bankruptcy is less complicated than Chapter 13 bankruptcy since it normally takes four to six months to complete. Once your Chapter 7 bankruptcy case has been filed, it will take approximately four months to receive your bankruptcy discharge.
It is important to note that the timeline for completing a Chapter 7 bankruptcy in Wisconsin can vary depending on your specific case. Working with an experienced bankruptcy attorney can help ensure that your case proceeds as smoothly and quickly as possible.
What are the Exemptions in Chapter 7 Bankruptcy in Milwaukee, WI?
Wisconsin has its own set of Chapter 7 exemptions. Here are some of the most notable exemptions:
- $75,000 homestead exemption – In Wisconsin, the homestead exemption allows a debtor to exempt up to $75,000 in equity in their primary residence. If a person owns a $275,000 homestead and has a $200,000 mortgage, then $75,000 of equity in the homestead is fully exempt. Married couples can exempt up to $150,000 in equity in their primary residence. If a debtor has less than $75,000 in equity, the homestead is fully exempt, and the debtor has no interest to which a judgment lien may attach.
- $4,000 motor vehicle exemption – An individual is protected for up to $4,000 in equity for their motor vehicle. This means that if the equity in your vehicle is less than or equal to $4,000, you can keep your vehicle in a Chapter 7 bankruptcy. However, if the equity in your vehicle is more than $4,000, the trustee may sell the vehicle to pay off creditors. It is important to note that Wisconsin residents can also add the unused portion of the consumer goods exemption for additional protection.
- $12,000 “consumer goods exemption” – Individuals are allowed to exempt up to $12,000 in consumer goods, which are non-real estate properties used by themselves or their families. The consumer goods exemption can be used to protect items such as household goods, furnishings, clothing, and electronics. Remember that the $12,000 exemption is an aggregate amount, meaning that it applies to the total value of all consumer goods claimed as exempt. Married couples filing jointly can double the exemption to $24,000.
- $5,000 wildcard exemption – Individuals are allowed to use a wildcard exemption to protect any property of their choosing up to a certain value. However, the amount of the wildcard exemption varies depending on the source. Here are the wildcard exemption options in Wisconsin:
- Federal wildcard exemption: Individuals can apply a federal wildcard exemption of up to $1,475 to any property they own.
- Wisconsin wildcard exemption: Wisconsin does not have a specific wildcard exemption, but individuals can use any unused portion of their homestead exemption, up to $13,950, to protect any other property.
- Wisconsin “wild card benefit”: Wisconsin also has a “wild card benefit” of $1,225 that can be used to protect any property.
- Retirement accounts, including IRAs and 401(k)s – Retirement accounts, including IRAs and 401(k)s, are generally taxable at rates ranging from 3.54% to 7.65%. However, Social Security retirement benefits are not taxed, even those taxed at the federal level. Wisconsin also offers a retirement income exclusion, which allows taxpayers with income from an IRA or a qualified retirement plan to subtract up to $5,000 from their retirement income.
Individuals who receive income from a qualified retirement plan or an individual retirement account (IRA) may subtract up to $5,000 of such retirement benefits from their Wisconsin income tax.
- Tools of the trade, including equipment and inventory necessary for your job or business – Tools of the trade, including equipment and inventory necessary for your job or business, can be protected under the state’s bankruptcy exemptions. The amount of the exemption varies depending on the source. Here are some of the most notable exemptions:
- Wisconsin tools of the trade exemption: Individuals can apply a $15,000 exemption to any tools, equipment, and professional books they use to pursue their trade.
- Federal tools of the trade exemption: Individuals can apply federal tools of the trade exemption of up to $2,525 to any tools, equipment, and inventory necessary for their job or business.
- Wisconsin machinery and equipment exemption: Wisconsin offers an exemption for machinery and equipment used in manufacturing, which can be exempted up to 100% of their value.
- Life insurance policies and annuities – Life insurance policies and annuities are generally exempt from bankruptcy proceedings. This means that the cash value of a life insurance policy or annuity contract is not included in the income of the policyholder or annuitant. However, the rights of a beneficiary under a life insurance policy or annuity contract are subordinate to those of an assignee unless the beneficiary was effectively designated as irrevocable.
Under Wisconsin law, the exemption for life insurance policies and annuities is subject to certain limitations. For example, if the life insurance or annuity contract was issued less than 24 months before the applicable date, the exemption under this paragraph may not exceed $4,000. It is recommended to consult with an experienced bankruptcy attorney to determine which Chapter 7 exemptions apply to your specific situation.
- Personal injury and wrongful death awards – Personal injury and wrongful death awards are subject to certain limitations and regulations. Here are some key points to keep in mind:
- In a wrongful death case, judgment for damages for pecuniary injury may be awarded to any person entitled to bring a wrongful death action.
- Additional damages not to exceed $500,000 per occurrence in the case of a deceased minor, or $350,000 per occurrence in the case of a deceased adult, for loss of society and companionship may be awarded to the spouse, children or parents of the deceased, or the siblings of the deceased, if the siblings were minors at the time of the death.
- Emotional pain and suffering are capped at a certain amount for the spouse and the children in a wrongful death case.
- In Wisconsin, the spouse or domestic partner of the deceased is first to be considered for compensation in a wrongful death claim. If there are minor children, they may also be eligible for compensation.
- Wisconsin law allows for a wrongful death lawsuit in cases where a person died as the result of a “wrongful act” by another party. These cases are civil and are separate from any criminal charges that may be filed against the responsible party.
- Alimony and child support payments – In Wisconsin, alimony and child support payments are two separate issues that are handled differently. Here are some key points to keep in mind:
- Wisconsin law does not require alimony to be paid in every case. Alimony is only awarded when it is necessary for the case.
- The Wisconsin courts can grant alimony to either party in cases of annulment, divorce, or legal separation. Whether alimony is awarded depends on factors such as the length of the marriage, the property division in the case, the age and physical and emotional health of each party, and each party’s education level at the beginning and end of the marriage.
- Four types of alimony can be awarded in Wisconsin, depending on the reason alimony is paid and how it is paid. Alimony begins at the end of the divorce unless it is temporary alimony which is during the divorce.
- Child support payments are required in Wisconsin. Wisconsin law requires that child support payments be withheld from the paying spouse’s wages and sent by the spouse’s employer to a state agency.
- Child support payments do not directly impact the amount of alimony awarded in Wisconsin. However, child support can indirectly impact the amount of alimony awarded if the paying spouse’s income is reduced due to child support payments.
- Either party can file to adjust their alimony if there is a substantial change in a party’s finances. Changing support could mean pausing payments or adjusting them.
Call Our Bankruptcy Attorney If Chapter 7 Bankruptcy Makes Sense For You!
People in Milwaukee and throughout Wisconsin can get legal advice and assistance from our Chapter 7 bankruptcy attorneys here at Miller & Miller Law, LLC.
To better serve you, we have offices in Milwaukee, Madison, and Kenosha. We also cater legal services in Chapter 13 bankruptcy, bankruptcy alternatives, tax debt resolution, debt negotiation, worker’s compensation, Social Security and Social Security Disability, and civil litigation.
To arrange your free initial consultation, call us today!