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THE BASICS OF A CHAPTER 7 BANKRUPTCY

In Green Bay, Wisconsin and other states, a Chapter 7 bankruptcy is often referred to as “straight liquidation,” meaning that the debtor’s unsecured and nonexempt assets are sold, and the proceeds from the sale of those assets are used to pay the administrative expenses of the bankruptcy along with the claims of the unsecured creditors.  More often than not, however, in a Chapter 7 bankruptcy, the debtor does not have any nonexempt assets and therefore there are no proceeds to pay to the unsecured creditors.

WISCONSIN BANKRUPTCY STEPS
When a Chapter 7 bankruptcy is filed, a trustee is appointed whose main purpose is to discover if there are any unsecured nonexempt assets in order to pay the debtor’s unsecured creditors.  The trustee also investigates whether the debtor made any preferential transfers to any unsecured creditors or family members within 90 days of the bankruptcy filing or made any fraudulent conveyances within 2 years of the filing.

 In most Chapter 7 bankruptcies, the only major event that occurs is that the debtor receives a discharge of his or her liability on dischargeable debts.  In addition, the debtor is also able to retain assets subject to secured liens through reaffirmation agreements with the secured creditor, provided that all or the majority of the equity in the property is exempt and the debtor pays the secured debt.

CHAPTER 7 BANKRUPTCY ELIGIBILITY
There are several factors to consider to determine if a person is eligible for a Chapter 7 bankruptcy.  This includes an evaluation of the debtor’s income (i.e. the mean’s test) and a review of the debtor’s prior bankruptcy filings.  In addition, a Chapter 7 bankruptcy might not be the best scenario for a debtor who wants to keep certain property that is not exempt from creditors.  In such a situation, other options should be explored including a possible Chapter 13 bankruptcy.

A Chapter 7 bankruptcy case is commenced with the filing of a petition and numerous supporting schedules with the respective bankruptcy court which essentially discloses all the assets, liabilities, income and expenses of the debtor.  Once the case is filed, an automatic stay becomes effective immediately which prohibits creditors from bringing most actions against the debtor and against the debtor’s property.  In certain circumstances, creditors may obtain relief from the automatic stay so that they may continue the pursuit of their claims against the debtor while the bankruptcy case is pending.

A meeting of creditors is held between 20 and 60 days after the bankruptcy case is filed.  The trustee presides at the meeting and questions the debtor about the schedules and the debtor’s financial dealings.  Creditors are allowed to question the debtor at this meeting but often do not attend.  If it is found that the debtor is entitled to a discharge of his or her debts, the debtor will be granted a discharge about two months following the meeting of creditors and the case will be closed.

GREEN BAY WI BANKRUPTCY LAW FIRM
This is a basic overview of some of the key concepts of bankruptcy.  There are many other details involved and this article should not be construed to be an exhaustive list.  In the Green Bay, Wisconsin area, if you have any questions regarding bankruptcy, contact Attorney Greg Babcock at our law firm:Wanezek, Jaekels, Daul & Babcock. Our experienced attorneys are ready to help you learn your bankruptcy rights.

Tags: bankruptcy

FRAUDULENT TRANSFERS VS. PRE-BANKRUPTCY PLANNING

A person who merely transfers non-exempt assets to exempt assets on the eve of a bankruptcy filing is not by itself proof of fraud which would necessitate a bar to that person’s bankruptcy discharge. Rather, extrinsic evidence is required in order to set aside a transfer as fraudulent. This is what the Bankruptcy Court in the Western District of Wisconsin, by Judge Thomas Utschig, held in one particular bankruptcy case, In re Bronk, No. 09-15224-7. In that case, the debtor took out a loan on his mortgage free home in the amount of $95,000.00 and used that money to fund several college savings plans for his grandchildren. In addition, the debtor converted a certificate of deposit in the amount of $42,000.00 to an annuity. By doing this, the debtor was transferring his non-exempt assets to exempt assets in attempt to protect them in the bankruptcy action. The bankruptcy trustee objected on the grounds that the transfers were attempts to defraud the debtor’s creditors. The Bankruptcy Court disagreed with the trustee and found that pre-bankruptcy planning does not bar a discharge of one’s debts absent some act extrinsic to conversion that indicates fraud. A person’s desire to protect one’s assets in a legitimate way by proper use of the available exemptions is simply not evidence of fraudulent intent.

Tags: bankruptcy

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