Yearly Reminders

As we get our feet firmly planted into 2017, this is a courtesy reminder of periodic changes…

  1. If you own real estate and your bankruptcy case is not yet filed, you will need to provide a copy of your 2016 property tax bill (which would have been issued in December 2016).  If you previously submitted your 2015 tax bill, it is no longer useful.
  2. Although 2016 income tax returns are not due to the IRS and Wisconsin Department of Revenue until April 2017, Chapter 13 cases filed after December 31, 2016 cannot be confirmed until the 2016 tax returns are filed.  So, if you’re expecting to file a Chapter 13 case in the near future – file your 2016 tax returns ASAP.
  3. If you are filing Chapter 7, you should provide a copy of your 2016 tax returns if they are filed before your bankruptcy case is filed.  2016 tax returns will be required for any bankruptcy case filed after April 15, 2017.
  4. The winter moratorium on power shut-offs ends on April 15, 2017.  If you are delinquent on paying your utility bills, talk to a bankruptcy attorney now and get your case ready to file ASAP.  Do not wait until April to decide you need to do something – you won’t be the only person rushing to file to avoid a shut-off.

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.

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.

End-of-the Year Reminders

  • Debtors who have not yet filed for bankruptcy and own real estate – you should be receiving your 2014 property tax bills within the next couple of weeks.  If you have previously submitted your 2013 property tax bill to my office for review in preparation to file, be aware that you should update your file with the 2014 tax bill once received.  This will be mandatory on or after 1/1/2015.
  • Debtors who have not yet filed for bankruptcy but intend to file under Chapter 13 – if you hope to file in early 2015, be advised that Chapter 13 Plans cannot be confirmed without the current year’s tax returns on file.  Even though your 2014 taxes are not due to the taxing authorities until 4/15/2015, they will be required for confirmation of your Chapter 13 Plan if you file on or after 1/1/2015.
  • Debtors who have already filed Chapter 13 Bankruptcy – remember to submit your 2014 tax returns to my office so I can relay them to the Chapter 13 Trustee.  Those of you who are required to – remember to submit one-half of your income tax refunds.  If you’re not sure whether you have that requirement, call my office or consult the most recent version of your Chapter 13 Plan.
  • If you have defaulted on your energy bill during the more expensive winter months, remember that the winter moratorium ends on 4/15/2015, after which, your utilities can be disconnected.  If you need the bankruptcy stay to prevent a utility shut-off, please consult with me well before 4/15/2015.  Bankruptcy cases take time to prepare, and you’re probably not the only person who will be facing a shut-off.  Also remember that Chapter 128 is no longer a viable option to stay a disconnection of utilities.

Notice to WE Energies Customers

Section 366 of the Bankruptcy code permits utility companies to demand a security deposit from bankruptcy debtors, and failure to remit such payment can result in a disconnection of services.  This is a power that utility companies have had for some time, but historically, one that they have exercised only occasionally (typically in cases with high delinquencies).
In recent months, it has become apparent that WE Energies has gotten into the custom of demanding these deposits on a regular basis.  It took some time to detect that pattern, since most of our clients are Wisconsin Public Service customers.  But that pattern has become obvious recently, so this note is to serve as a reminder to bankruptcy debtors – especially those with delinquent accounts with WE Energies – to expect a deposit demand.

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.

Winter Moratorium – what it doesn’t mean.

In less than two months, Wisconsin’s winter moratorium will be in effect.  From November 1 through April 15, utility companies such as Wisconsin Public Service, WE Energies, WP&L, and Alliant – will be prohibited from disconnecting utility services for nonpayment.  Wis. Adm. Code PSC 113.0304.  However, if utility services are disconnected before November 1, the administrative rules do not compel the utility companies to restore services on November 1.If your utilities become disconnected before November 1 and you need to get those services restored before the cold winter weather arrives, you will need to take action.  The calendar changing from October to November will not automatically renew your services.  You can restore services by bringing your account current.Alternatively, filing bankruptcy (either Chapter 7 or Chapter 13) imposes an automatic stay that will restore your utility services.  Additionally, your past-due utility bill is a dischargeable debt in bankruptcy – just like credit cards, payday loans, and medical bills.  You may be able to wipe your account clear and start fresh with the utilities.If you’re facing a utility shut off, contact us to discuss how bankruptcy can offer you relief.  Don’t wait until after your services have already been terminated.

Is Bankruptcy the Best Option for Me?

Can I file bankruptcy?

Should I file bankruptcy?
Is bankruptcy right for me?

My first job out of law school was for a highly profit-driven law firm that believed that everyone could benefit from bankruptcy in some way, and that there was no excuse for an attorney to not get a prospective client to retain our services.
I won’t say who that law firm is, but you can identify firms like these pretty easily.  Many of them will have a short survey posted on their website that asks you a few questions to determine if you should file for bankruptcy.  The survey is coded and rigged in such a way that no matter how you answer the survey (or if you answer ‘yes’ to even one question, and the questions are designed that 99% of people would), then the result would be a profound warning that you needed to file for bankruptcy right away.
That law firm I used to work for – and other firms like it – are absolutely wrong.  Bankruptcy is not for everyone.  Admittedly, it is true that there are few people in the world who – if they filed for bankruptcy – would not get any benefit from it.  But those people are out there.  Sometimes they land in my office.  If someone would not benefit from bankruptcy – I will tell them, even though it costs me business.  I, as all attorneys do, have a duty and ethical obligation to look out for my clients’ (and prospective clients’) best interests.
So… rather than post a gimmicky survey, I’m going to walk you through some of the factors you should consider if you’re thinking about bankruptcy.  It won’t be as easy and fast to go through as a six question survey, but I feel that you will have a much clearer idea of what you need to do after reading this article.
Of course, since I can’t know the specifics of your financial circumstances, this article paints with very broad brush strokes.  There is no substitute for getting a consultation from an experienced bankruptcy attorney who can analyze your particular situation.  Most attorneys – including myself – offer free initial consultations.  There is no risk or commitment.  Just an opportunity for you to arm yourself with information and options.
Fundamentally, what is bankruptcy?
Declaring bankruptcy, in its most fundamental sense, is nothing more than asserting that you cannot afford to pay all of your debt obligations as they become contractually due.
Put another way, if your income is X, your ordinary living expenses are Y, and minimum payments on your debts is Z, then X – Y < Z.  The shortfall could just be a few dollars a month, or a few thousand.  Either way, the equation is unbalanced.  Ideally, you want it to look like either X – Y = Z or X – Y > Z.
But I’m not poor…
Bankruptcy is not just for poor people living off of unemployment benefits or food stamps.  In fact, many people on public benefits would benefit the least from bankruptcy protection – essentially because they have little or nothing to lose.  In Wisconsin, those receiving public assistance are protected from having what little wages they have from being garnished.
People have a tendency to look at key items of their financial circumstances in isolation.  “I make $100,000 per year, therefore, bankruptcy isn’t for me.”  “I only have $10,000 in debt, therefore, bankruptcy isn’t for me.”  Well, if you’re making $100k a year and only have $10k in debt, I might be inclined to agree.  But if you’re making $100k a year and trying to pay back $500k in taxes – then you might need some help.  And a single mother raising two kids on $30k a year might get a lot of benefit from bankruptcy even if her debt is only $10k.
It’s not just about your debt or your income, but your debt-to-income ratio.
But I have excellent credit…
Have you pulled your credit report and score?  Recently?  Most people who tell me this haven’t.  They think their credit is excellent because they have never missed a payment.  But your credit score is much more than just a record of your payment history.  Your credit score is affected by numerous factors, including your income, your assets, debt-to-income ratio, minimum monthly payments, number of active accounts, types of credit accounts, your indebtedness relative to your available credit, residential stability, occupational stability, length of credit history, and credit inquiries.
All we’re saying is – if you’re reading this article and you haven’t pulled your credit recently, it might not be as high as you think.
That being said, impact on your credit score is a valid concern.  Bankruptcy does negatively impact your credit – there’s no denying that.  If there is a feasible way to get out of debt without bankruptcy, it is something worth considering.
But bankruptcy isn’t a permanent black mark against your credit, either.  I tell my clients to think of bankruptcy as a reset button on a video game.  You start with a clean slate – just like when you turned 18.  No credit.  You start over and build a new history.  If you happen to have a preexisting debt that will survive the bankruptcy (mortgage, car loan, student loan, etc.), that will help you rebuild even faster.
I’m not in trouble… yet.
If you think you’re headed down a path where bad things are going to happen, talk to an attorney now.  Don’t wait until disaster strikes.
  • Has a creditor filed a lawsuit against you?  They may be looking to garnish your wages.  Why wait until after your wages have started to be garnished before speaking to an attorney?
  • Have you not paid your utility bills all winter?  Your services will likely be disconnected on or after April 15.  Why wait until April 14 to do something about it?
  • Are you behind on your car payment?  In Wisconsin, it doesn’t take long for a creditor to repossess a car.  If they do, you have a very short window (and limited possibilities) to get it back.
  • Are you falling behind on your mortgage payment?  Foreclosure takes a bit longer in Wisconsin, but the longer you wait, the more expensive it could be to stop the foreclosure action.  Don’t gamble with your home by waiting until the eve of the Sheriff’s Sale to speak to an attorney.

It doesn’t necessarily have to take a long time to file a bankruptcy case.  But to do it properly, you should plan on meeting with an attorney several weeks (if not months) before you need to file for bankruptcy.  Why so long?
Chances are that you are not your attorney’s only client.  Your attorney will need time to prepare a proper petition for you, to review all of the relevant documents and information you provide, and to advise you accordingly.  If you drop a case in your attorney’s lap and expect him to drop everything and file a case for you in 24 hours – you can expect the quality to suffer, and you can expect problems.  In fact, I would urge you to avoid any attorney willing to file a case that quickly.
Furthermore, you are going to have certain obligations and responsibilities in bankruptcy.  You’re going to want time to digest these, and make sure that you’re making the right decision before you commit to filing your bankruptcy petition.
Okay, I want to file bankruptcy.  Here’s some information.  Get it done for me.
Bankruptcy is a privilege, not an absolute right.  And it’s a privilege that usually confers a tremendous financial benefit.  In exchange for that benefit, the bankruptcy court is going to have some expectations of you.  They expect a full disclosure of your income, assets, and debts – to determine what, if anything, you can reasonably be expected to pay on your debts.  They also expect you to conduct yourself in a manner that doesn’t unfairly and unjustly impact your creditors (meaning not racking up a bunch of debt right before you file your case, not paying certain creditors at the expense of others, and not selling or giving away valuable assets).
Your attorney’s job – my job – is to help guide you through this intensely bureaucratic process; to advise you to avoid legal pitfalls; and to make sure that you follow the laws and procedures properly.  But that doesn’t mean you can sit back and not take an active and serious role in your own case.  If you cannot bring yourself to disclose information or to follow explicit instructions and advice from your attorney, then you may want to seek some other form of debt relief with less rigid expectations.

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.

Creditor Superpowers

Not all creditors are created equal.
Some debts are “secured” which means the lender can exercise security rights in collateral you own if you default under the terms of the note.  For example, if you stop making payments on a secured loan, a mortgage lender can foreclose your home, and an auto lender can repossess your car.
Other debts are non-dischargeable in bankruptcy.  A full list of these can be found at 11 U.S.C. § 523(a), but it includes items such as taxes, student loans, debts incurred by misrepresentation and fraud, domestic support, and certain governmental debts, among other things.
Secured debts and non-dischargeable debts are the two most common distinctive classes of debts that people going through bankruptcy are made aware of.  But there are a number of superpowers that certain creditors have over other creditors, and we’re going to go over some of the most pertinent ones here.
Utility Companies – are given special status under 11 U.S.C. § 366, and may discontinue utility services if the debtor does not provide adequate assurance of payment, such as a deposit.  In my experience, requests for deposits have been relatively rare, but they do occur from time to time.
Internal Revenue Service and State Taxing Authorities – in addition to the non-dischargeable and priority status that many tax debts enjoy, taxing authorities are also allowed to file claims in a debtor’s Chapter 13 case for tax debts that arise after the bankruptcy case is filed under 11 U.S.C. § 1305.  For example, John Doe files a Chapter 13 Bankruptcy in 2011 with a 5 year term.  In 2013, John Doe finds that he owes taxes to the IRS for the 2012 tax year.  The IRS can file a claim in John’s existing bankruptcy case and force the debt to be paid in the plan.  On the one hand, this is a good thing, because the tax won’t incur interest while it’s paid in the plan.  On the other hand, it may be difficult for John to fund his plan when it is saddled with the new debt, particularly if John is nearing the end of this plan (no plan can go longer than 60 months, so the later in the plan that this happens, the less time you have to spread the payments out).
Student Loan Creditors – filing bankruptcy can trigger higher default interest rates, which is particularly a problem for Chapter 13 debtors who are not paying off their student loans in full during the Chapter 13 Plan.  Since student loans are currently non-dischargeable (there has been a lot of buzz in Washington lately about possibly amending the bankruptcy code to allow certain types of student loans to be discharged under certain conditions), those post-petition rates continue to be incurred throughout the life of the bankruptcy plan.  Bruning v. United States, 376 U.S. 358 (U.S. 1964).