Chapter 7 Bankruptcy Explained

Filing for Bankruptcy under Chapter 7 is a basic liquidation. It is available to individuals and businesses. The process begins by filing a bankruptcy petition. At that time a judge and Interim Trustee are assigned to the case. The Interim Trustee will examine the debtor’s petition, schedules, and assets to determine if any nonexempt property exists. If there is nonexempt property, the Interim Trustee will liquidate or sell the property and distribute the proceeds to the creditors. Due to Federal and State exemption laws, most or sometimes all of a debtor’s assets are protected (exempt). This sometimes results in most creditors’ debts unpaid when there are not enough assets to cover liabilities. If all of a debtor’s assets are exempt, this is referred to as a “no asset” case. This usually results in most creditors’ debts not being paid anything.

Certain transfers of property made by the debtor within 90 days before filing (within one year in the case of relatives or other “insiders”) can be recovered by the trustee for the benefit of creditors through bankruptcy court litigation. It is very important to be honest and disclose these transfers to your attorney prior to filing. Often pre-bankruptcy planning can help deal with these potential issues.

The Bankruptcy court will also notify the creditors by mail about the bankruptcy when the petition is filed. Once your petition is filed, you are under protection of the Court. Creditors may not call you, mail you bills, sue you, garnish your wages or cut-off your utility service. Any actions, including foreclosure actions, are stopped and cannot proceed further without special permission from the bankruptcy court.

About 30 to 45 days after the petition is filed, a Meeting of Creditors is held. The debtor is required to attend this meeting. This meeting will last only five or ten minutes. The trustee will ask the debtor questions about the bankruptcy forms and the debtor’s financial situation. Creditors rarely attend this meeting.

About 8-10 weeks after the meeting of creditors the debtor will get a discharge order in the mail, which completely eliminates the debtor’s dischargeable debt. Chapter 7 bankruptcy is often referred to as “fresh start” bankruptcy, where your debt is discharged and does not have to be repaid. At this point the debtor can rebuild your credit and move forward in your life with a fresh start. Certain debts — such as sales taxes and other trust-fund taxes (e.g., employer withholding tax), debts created by a debtor’s intentional conduct (e.g., assault, defamation, embezzlement or fraud), parking violations, fines, penalties and criminal restitution, alimony and child support obligations, and guaranteed student loans, among other items — are not discharged in most cases and are unaffected by a Chapter 7 bankruptcy filing. More often than not, most usual types of consumer debts are discharged through a Chapter 7.

Chapter 11 Bankruptcy Explained

Chapter 11 bankruptcy is a form of bankruptcy reorganization available to partnerships, corporations, or individuals whose debt levels exceed the limits of Chapter 13 bankruptcy. Most often, Chapter 11 is utilized by businesses seeking to restructure their debt. Many times, business bankruptcy may be the only means of preserving the value of the business for sale, or of forcing its creditors to accept a debt reorganization plan. The debtor usually remains in possession of its assets, and operates the business under the supervision of the court and for the benefit of creditors.

Chapter 11 is probably the most flexible of all the chapters. Chapter 11 can be used to accomplish the following:

1. Reject and renegotiate unfavorable leases, as well as other contracts.
2. Renegotiate terms of secured financing, including interest rates, when payments are due, and allow the debtor to maintain the secured collateral.
3. Stop forced liquidation of assets and allow the business time to sell its assets or the entire business for its going concern value.
4. Stop lawsuits or other litigation costing the business lots of money.
5. Negotiate new credit terms with suppliers and other creditors.
6. Repay overdue payables and debts over a greater period of time.

Chapter 11′s flexibility makes it generally much more expensive to the debtor. They require far more work than Chapter 7 or Chapter 13s including monthly operating reports, quarterly trustee payments, negotiating with creditors, coming up with a reorganization plan unique to the situations, soliciting votes, working out adequate protection orders, and possibly having to file a cash collateral motion.

Chapter 13 Bankruptcy Explained

Chapter 13 bankruptcy is designed for individuals who have gotten behind on house and/or car payments, or who owe substantial tax debt and need a structured plan of repayment to the IRS or state. Another reason people file Chapter 13 bankruptcy is their income is too high under the Means Test to file Chapter 7.

Chapter 13 bankruptcy provides individuals with the opportunity to pay their delinquent house and/or car payments over the period of 3 to 5 years, instead of all at once.  During the term of the Chapter 13 case, the individual must resume making the regular monthly mortgage payments and also make a Chapter 13 Plan payment, a portion of which goes to the mortgage holder(s) to pay down the delinquent payments.  If you are delinquent with car payments, Chapter 13 allows you to repay the balance of the car note over the period of 3 to five years, regardless of the original term of the note, and may provide for a reduction of the interest rate on the car note.  

When a Chapter 13 is filed, the debtor is also protected by an “automatic stay” similar to a chapter 7. While the automatic stay is in place creditors cannot try to collect against you, unless they get special permission from the courts. This includes harassing phone calls, collection letters, wage garnishments, foreclosure actions, repossessions, lawsuits, and utility shutoffs.

Before you file a Chapter 13 case, we determine the monthly amount required to be paid into your Chapter 13 Plan and you determine whether you can afford the Plan payment.  In most cases, our clients find the monthly Plan payments fit comfortably within their budget without affecting their standard of living.

For individuals who owe substantial tax obligations (commonly self-employed or other small business owners) Chapter 13 offers the opportunity to repay tax debt over a much longer period than the IRS or Wisconsin Dept. of Revenue will allow outside of bankruptcy.  In some cases, the Chapter 13 can eliminate tax debt (typically requires that the tax be for a tax period at least 3 years old) and can eliminate penalties and interest on other tax debt.

Although there is a trustee in every Chapter 13 case, Chapter 13 greatly differs from Chapter 7 in how the case is administered. The debtor remains in possession and control of that property throughout the Chapter 13 case without interference from the trustee. If the debtor is in business, the debtor can continue to operate that business during the course of the Chapter 13 case.

Chapter 13 is truly a unique opportunity to regain control of your finances and repay all, or in many cases just a portion, of your debt obligations in a reasonable time with the protection of the courts.

Pre-Bankruptcy Planning Explained

Pre-bankruptcy planning can be extremely important in protecting your assets during your bankruptcy case. This can be done by transferring non-exempt assets into exempt assets, a process that is specifically permitted in the Bankruptcy Code legislative notes. However, it is important to have a qualified attorney who is familiar with what is proper and legal pre-bankruptcy planning, as well as exemption planning.

Pre-bankruptcy planning can be very tricky and detail oriented. Attempting to accomplish asset restructuring without the help of a knowledgeable can result in irreversible damage to your case and allegations of fraud. This can lead to litigation against you and possibly anyone you transferred assets to during asset restructuring.

While Bankruptcy laws allow for pre-bankruptcy and exemption planning, there is always some level of risk involved. Generally, the larger and quicker the restructuring of assets is, the greater the risk. These risks include loss of assets, certain debts declared as non-dischargeable, loss of bankruptcy discharge, and even criminal liability.

Unlike large “bankruptcy mills” that crank out as many bankruptcy filings a day as possible, Zimmermann Law Offices takes the time to analyze each case individually and tailor pre-bankruptcy planning to each case’s unique needs. The attorneys at Zimmermann Law Offices are dedicated to ensuring you keep all your assets allowed by law.

Section 128 Explained

Wisconsin Statute Section 128 allows Wisconsin wage earners to consolidate most types of unsecured debt. Through 128 you can pay-off creditors, including credit cards, without interest, without late fees, and without bankruptcy. A 128 requires you to pay these obligations within a period of 3 years. The following types of debts are typically consolidated through 128: credit cards, unsecured personal loans, NSF checks, payday loans and medical bills. If you include a creditor in a 128, the balance you owe freezes and will not increase due to accruing interest or late fees. The creditor cannot sue you or try to collect while they are included in the Section 128.

Creditor’s Rights Explained

Zimmermann Law Offices has experience representing both debtors, as well as creditors. Our unique experience provides us the opportunity to provide aggressive strategies for collecting on judgments and claims. Unlike collection firms where your claim is a mere number among thousands, Zimmermann Law Offices handles creditors’ cases on an individual basis and analyzing each situation thoroughly. Our approach to collecting on judgments and claims is unique, utilizing a creative approach custom to each situation.

Zimmermann Law Offices also represents creditors in bankruptcy situations, protecting creditors’ rights within bankruptcies and uses the bankruptcy code to creditors’ advantage. We do handle the following creditors rights services within bankruptcy:

1. Adversary Proceedings to determine fraud or whether a debt is dischargeable.
2. Preparing and filing proof of claims.
3. Protecting priority status within bankruptcy.
4. Objections to confirmation of plan on behalf of creditors.
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Debt Negotiation Explained

Depending on your situation, you may be a good candidate for debt negotiation. Utilizing several strategies, Zimmermann Law Offices can reduce your debts in exchange for a lump sum payment or a few payments. Our firm has experienced good success, sometimes achieving settlements that reduce the balance owed by 70-85%.

Whether you are a good candidate for debt negotiation depends on several factors, such as how much you owe and to whom it is owed, as well as timing and how much cash you have on hand.

Zimmermann Law Offices has the experience and knows the strategies that work for achieving reduced settlements far below the balanced owed.

F&Q - Debt Negotiation

Why do I need to hire an attorney to negotiate a debt when I can do it on my own?

There are several reasons why hiring an experienced attorney to negotiate debts, such as credit cards, is important.

Timing is very important. Calling too early makes it difficult to achieve a good settlement and calling too late can make the situation worse, as well as far more difficult to settle.

Knowing how to communicate and who to communicate with is also important. Certain departments within a credit card company may be willing to give you a better settlement. Certain collection staff may be willing to give you a better offer than others. We know the departments and collection professionals to contact. We also know how to use federal and state laws to your benefit and bring the creditors to the bargaining table.

An attorney can also approach your creditors rationally and calmly. Creditors use trained collectors to put lots of pressure on you and to use techniques that psychologically force you into a bad settlement. They want to cloud your judgment and make it difficult for you to make clear decisions. It is very important to have an objective professional on your side when dealing with these creditors or their collection agencies.

Most importantly, an attorney can properly document the settlement so you don’t have to worry about that creditor suing you later. Don’t let them take advantage of you by getting a payment and then asking for more money later!



How much money do I need to negotiate?

Negotiation usually requires a lump-sum payment. It is unusually for a creditor to agree to payment plans.

You should expect to pay anywhere from 20% to 70% of what you owe your creditors. Again, each creditor is different. We know of many creditors who will only want 20-30% of what you owe them. However, a few may want as much as 70% of the balance you owe.

Do I need to have all the funds on hand before hiring an attorney?

It is best to have the funds ready before hiring an attorney, but many do not. Some creditors settle quickly, but negotiations can take anywhere from 6-12 months. This allows you to get the necessary funds together.

Many people liquidate assets to come up with the money, use savings, or borrow from relatives or friends. Every person’s situation is different.

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