The usual story of people with too much debt is that they try harder and harder to make ends meet as they struggle to service the debt. Although this is admirable, hanging on for a few more months or years likely delays the inevitable, and technically it may be servicing the interest rather than paying the actual debt.
Certain assets protected
It is a common mistake for people trying to pay off the debt to use home equity, retirement accounts or some protected asset. However, Chapter 7 and Chapter 13 Bankruptcy enable the individuals, couples or families to hold onto many of their possessions. The list of exemptions in Wisconsin include:
- There is a $75,000 to $150,000 (married couples) homestead exemption
- Equity up to $4,000 in a motor vehicle, plus any unused amount of the $12,000 property exemption
- Tax-exempt pensions and retirement accounts like IRAs and Roth IRAs
- Public benefits like unemployment, social service payments or veterans’ benefits
- Up to $15,000 for tools of the trade
- Other assets as well
It may make sense to file Chapter 13 if Chapter 7 does not exempt certain crucial assets. While Chapter 13 enables families to restructure their debt, Chapter 7 liquidates more assets. The merits of each should be weighed when choosing which to type to file.
Is it time to rebuild?
After years of struggle, the decision to file enables the client to move on to the business of rebuilding a new life with a strong credit rating. It starts by making payments on the remaining debt, getting secured credit cards and taking other steps to rebuild the credit rating. Those with questions often find it helpful to work with an experienced bankruptcy attorney practicing here in Wisconsin. In fact, clients are often surprised how quickly filing bankruptcy can right a ship taking in water for some time.