Utility Reminder

Wisconsin’s winter moratorium laws prohibit your utilities from being shut-off, even if you are delinquent on your utility bill, until April 15, 2016.
Case law from 2012 has made it such that a Chapter 128 filing is no longer a guarantee of staying a utility disconnection.  Although Wisconsin Public Service has continued to honor the Chapter 128 stay, the only guaranteed way of preventing a disconnection (aside from catching up on the past-due amounts you owe) is to file bankruptcy.
Bankruptcy cases take a while to prepare properly.  If you are struggling with your utility bills this winter, consult with an attorney now.  Don’t wait until April to explore your options.

Alternatives to Bankruptcy: is Chapter 128 a good idea?

Most people don’t want to file for bankruptcy, even if they have to.  There’s a lot of stigma attached to bankruptcy, and so people try to avoid it except as a last resort.  In the process of trying to avoid bankruptcy, people try certain alternatives.  Some of them are wise efforts.  Others – not so much.
Generally-speaking, efforts to modify your budget and living without incurring additional debt are the best way to try to avoid bankruptcy without causing yourself more harm.
One of the more common tactics people use is to file a Chapter 128.  Is this a good idea?
Answer: it depends.  As with most complicated situations like this, your best options will always depend on the specific facts of your case.  No two people are identical, and what may work for one person is not always the best option for another person.  An experienced attorney can help you parse the pros and cons of various approaches to determine which is likely to be the best option for you.
That being said, it has been my experience that Chapter 128 is useful only in a small percentage of situations.  Here are some of the common reasons why:

  1. There is no eligibility for a discharge in Chapter 128.  Whatever debts you fold into the filing must be paid in full.
  2. All debts rolled into a Chapter 128 filing must be paid in full within a 3 year plan.
  3. Chapter 128s are ineffective against federal debts (like taxes or student loans) and not effective at preventing foreclosure or repossession.
  4. In contract, a Chapter 13 bankruptcy can be amortized out over 5 years with the possibility of a discharge, can cover federal debts, and can stop both foreclosure and repossession.
In short, Chapter 128 is a cheaper and simpler version of Chapter 13.  And while certain people with low amounts of debt or people who are ineligible for a discharge may benefit from Chapter 128, Chapter 128 offers fewer protections and has less flexibility where flexibility is important (you get what you pay for).  Accordingly, most people benefit from a Chapter 13 more than they do a Chapter 128, assuming Chapter 7 isn’t a viable choice for the individual (which it might be).

Utility Reminder

As the temperatures plunge below zero for much of the week, a lot of furnaces are going to be working overtime.  For many of you, the expensive gas and electric bills will mean becoming delinquent on your utilities.
The winter moratorium protects you from a shut-off until April 15.
If you fall behind on your utilities and are facing a shut-off in the spring, call an attorney now.  Don’t wait until April 14 to do something about it – you won’t be the only person with this problem.
Wisconsin Public Service has been cooperating with Chapter 128 debtors to avoid shut off, despite a Milwaukee County court decision that ruled they were under no obligation to do so.  Chapter 128 can be a fast and inexpensive way to get relief from a utility shut-off.  WE Energies customers, however, cannot rely on a Chapter 128 stay.

Overcoming the Guilt or Shame of Bankruptcy & Chapter 13 as an Option

“I was taught growing up that if you incur a debt, you’re responsible for paying it.”
“I always pay my bills.  I never wanted to have to file for bankruptcy.”
“I could have avoided this if only my credit card company would drop my interest rate.”
Despite all of the jokes and political rhetoric about people who welch on their debts, deadbeats, welfare recipients, the “moocher class”, etc., the fact of the matter is – the stigma associated with bankruptcy and not paying one’s bills is extremely prevalent.  These are ethical principles that are ingrained into our minds at an early age, and difficult to overcome.
Unfortunately, some people get so bogged down by these dogmas, that they delay doing anything about their finances until it’s too late – and they are faced with imminent invasive collection actions such as wage garnishments, bank levies, utility shut-offs, lawsuits, repossessions, and foreclosures.
Instead of getting the fresh start they needed, they dragged their heels until their debts spiraled out of control.
For those of you that believe that bankruptcy is morally repugnant, I urge you to consider Chapter 13 Bankruptcy.
Some debtors are required to file for Chapter 13 instead of Chapter 7 because they are ineligible to file Chapter 7 due to a prior bankruptcy or their income disqualifies them.  Others file Chapter 13 to obtain extra protections for assets or to avoid foreclosure.
As your bankruptcy attorney, I owe you a fiduciary duty.  In the past, I’ve discouraged people from filing Chapter 13 unless they absolutely had to.  Let’s be honest – Chapter 13 is longer, more difficult, and requires adherence to a disciplined budget.  But if someone insists on filing Chapter 13 strictly for moral reasons, I would rather they do that than not do anything at all, which would only make financial matters worse in the long run.
What is Chapter 13?  Generally-speaking, it is a 3 to 5 year debt consolidation and repayment program.  We take all of your debts, pool them together, and break them up into different categories.  Based on the types of debts you have and the circumstances of your case, certain types of debts must be paid in full while most of your debts are paid pennies on the dollar.  That percentage is based primarily on income, but sometimes other non-income factors come into play.  The unpaid percentage is usually discharged (with the exceptions of certain non-dischargeable debts, such as student loans) just like in Chapter 7 Bankruptcy.
Debts that are not dischargeable in Chapter 7 Bankruptcy – such as domestic support obligations, taxes, and student loans – can be rolled into and paid in a Chapter 13 Bankruptcy.  Virtually everyone qualifies for Chapter 13 Bankruptcy (there are debt limitations that few people ever come close to breaching – $383,175 unsecured debt and $1,149,525 secured debt, as of the date of this post).
And if you absolutely, positively are unwilling to do bankruptcy at all, consider alternative debt relief options, such as Chapter 128 or our Budget Counseling Services.

Bitter cold wind chills and expensive heating bills.

Though the twenty-below temperatures and fifty-below wind chills that have plagued northeastern Wisconsin over the past several weeks seem to be over (knock on wood), cold temperatures will persist for some time (as one would expect they would, since it is only the beginning of February).
So, today is as good a day as any to remind you that if you’re falling behind on your utility bills and can’t afford to catch back up before the winter moratorium ends, you should consider consulting with a bankruptcy attorney now.  Come April 15th, the power companies can shut you off if you’re delinquent, but bankruptcy can prevent utility disconnects.
April 15th is still 2-1/2 months away, but remember that it takes time to prepare a proper case, so don’t wait until the last minute to do something.  Also keep in mind that Chapter 128 is no longer a viable method for preventing a disconnection.
For what it’s worth, Punxsutawney Phil is indicating six more weeks of winter.  Though, if you ask me, six weeks of winter is an early spring in this state, to say nothing of the questionable wisdom of using marmot-modeled forecasts.

Your yearly April 15 reminder…

As the calendar races nearer to April 15 once again, we at Holbus Law Office LLC would like to issue a few reminders as this important day approaches.
Those of you presently in Chapter 13 must send a copy of your 2012 federal and state income tax returns to the trustee.  This is true REGARDLESS of whether or not you are required to remit 1/2 of your tax refunds.
Some Chapter 13 debtors must send in 1/2 of their tax refunds to the trustee.  This should be done promptly to avoid dismissal of your case.  If you are not sure if this requirement applies in your case, please consult your copy of the Chapter 13 Plan or contact your attorney.
If you have not yet filed for bankruptcy, your 2012 federal and state income tax returns should be filed by April 15.  Unless you are not required to file tax returns because your income is too low, it is the policy of this office that, after April 15, the current year’s tax returns be filed before a bankruptcy case is filed.
If you have defaulted on your utility bills, remember that Wisconsin’s winter moratorium ends on April 15, and that your services may be disconnected for nonpayment.  If you are behind on your utility bills, please do not wait until April 14th to consult with an attorney!  You will not be the only person facing this problem.
Also be advised that Chapter 128s are no longer a viable method for staying utility disconnections under the Joyce Smith case from 2011.

The Joyce Smith Case – Declaratory Judgment re: Chapter 128s & Utility Disconnections

I have had many clients over the years inquire about alternatives to bankruptcy, specifically Wisconsin’s unique “Chapter 128”.  Chapter 128s are cheaper, faster, simpler, and impose fewer requirements on the debtor, compared to federal bankruptcy.  However, they also offer far fewer protections.  Namely, all debts must be paid in full within 3 years.  There is no chance of discharge.  There is no stay against repossession or foreclosure.
So limited are the protections of Chapter 128, that I have found only three scenarios in which I would consider recommending them to my clients:

  1. When the client’s debt is so low, that the cost of a federal bankruptcy would outweigh the benefit.
  2. When the client is ineligible for a discharge, even under Chapter 13, due to a prior bankruptcy, and has no secured or priority debts worth curing in bankruptcy.
  3. The client is facing a utility shut-off and cannot afford the time or expense necessary to file bankruptcy.

That is, until now.  Milwaukee County Circuit Court Judge, the Hon. William S. Pocan issued a declaratory judgment sought by WE Energies.  The case is 11-CV-8212, In the matter of the Voluntary Amortization of Debts of Joyce S. Smith.  The judge ruled that Wis. Stat. § 128.21 enumerates several collection actions that are prohibited when a petition is filed, and disconnection of utility services (or failure to reconnect) is not listed among them.  Therefore, under the plain-meaning of the statute, Chapter 128 no longer prevents a utility disconnection, nor does it guarantee that disconnected utility services will be reconnected.  And remember, this decision is not just for WE Energies.  Expect Wisconsin Public Service (WPS), Alliant, and Wisconsin Power & Light (WP&L) to exercise their newly spelled-out rights pursuant to this judgment.
Debtors facing utility disconnect must either bring the account current or seek federal bankruptcy protection.

Chapter 128

At the Law Office of Gregory A. Holbus, L.L.C., we are always looking for ways to better serve our clients and meet their needs. We’ve had a number of clients inquire about alternative ways to pay legal fees, and in a few days, we will be offering ACH/EFT as a new method to do so. We’re in active negotiations with a title company to re-introduce real estate deeds, mortgages, and tax bills to the list of things our Document Retrieval System can obtain for you.
We are now offering services to file debt amortization plans under Wis. Stat. § 128.21. What is it? In a lot of ways, it is similar to a Chapter 13 Bankruptcy debt consolidation and repayment plan. Unlike Chapter 13, “Chapter 128s” are cheaper, have less restrictive qualification requirements, and require far less paperwork/disclosures to sign and file. Both Chapter 13 and Chapter 128 pay unsecured creditors at 0% interest and can prevent wage garnishments and utility shut-offs. Chapter 128s do not show up on your credit report as a bankruptcy, there are no counseling courses to take, no hearings to attend, and you have the freedom to selectively include and exclude debts.
But, as I always say: you get what you pay for. Chapter 128 may be Chapter 13’s cheaper, faster, and easier cousin, but there is a trade off. You are not eligible for a discharge in Chapter 128 – all of your debts must be paid in full. You can’t do a 5 year plan like you can in Chapter 13 – a Chapter 128 may go no longer than 3 years. Chapter 128s do not prevent repossession or foreclosure. Though both Chapter 13 and Chapter 128 are a matter of public record, it is much easier for your friends to learn about your Chapter 128 via Wisconsin’s free and publicly-accessible Circuit Court Access (CCAP) web-site. Finally, Chapter 128 is limited to Wisconsin residents.
As your attorney, it is my job to make sure that you make a decision that is in your best financial interests. I do not recommend Chapter 128 for people who have a personal aversion or distaste for bankruptcy. I do, however, recommend Chapter 128 for people in unique circumstances. For example, if your debt is so low that the cost-to-benefit ratio of filing bankruptcy would be negligible, then a Chapter 128 might make more sense. If you are ineligible for a discharge under Chapter 13 because you filed bankruptcy too recently, then a Chapter 128 might make sense. If you are facing a utility shut-off, and cannot afford a bankruptcy (or can’t afford it in the time window you have before the shut-off), then Chapter 128 might be a good temporary solution to your problem.