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Disclosure, Disclosure, Disclosure!

Madison Attorney David Krekeler is known for putting on entertaining and informative seminars for bankruptcy attorneys. I have attended several of them, and one thing that he often emphasizes in these talks is the importance of disclosure. As David puts it, just as the three most important things in real estate are “location, location, location,” the three most important things in bankruptcy are “disclosure, disclosure, disclosure.” If someone gets into trouble in a bankruptcy case, it is often because of a failure to disclose something about their finances. An example of this was reported by the Peoria Journal Star on 11/27/2017.

A man from Brimfield, Illinois “was sentenced last week to home confinement and a $3,000 fine for concealing $100,000 worth of insurance policies when he filed for bankruptcy.” Initially, the man had reported no life insurance policies on his bankruptcy schedules. He then amended his schedules to reflect his ownership of one life insurance policy worth $3,000. It was later discovered that he in fact owned seven life insurance policies worth a total of $100,000. “He also admitted he hid three cashier’s checks worth $65,000 and a 2005 motorcycle.”

Obviously, this guy was pretty outrageous in his failure to disclose, but his story shows that it is important that a debtor take the completion of his or her bankruptcy forms seriously. However, this shouldn’t cause the debtor to lose sleep over whether their 10 year old couch is worth $200 or $250. You need to provide information to the best of your knowledge and ability. If you make an honest mistake and forget to provide some information in your forms, you are allowed to amend your forms accordingly.

Means Test Numbers Change

The Median Income numbers for the State of Wisconsin used in determining whether a debtor is allowed to file their bankruptcy under Chapter 7 and to determine monthly disposable income and length of plan options in Chapter 13 bankruptcy cases have gone up as follows. A 1 person household has gone from $48,407 up to $48,521. A 2 person household has increased from $62,914 to $63739. A 3 person household has changed from $76,179 to $76,378. The biggest change came in the 4 person household which went from $89,245 to $93,500, a significant increase of $4,255. For each person in the household over 4, an additional $8,400 is added. That number has not changed. The above changes in median income went into effect on 11/1/2017 for purposes of the bankruptcy means test.

Wisconsin Student Loan Debt reports that Wisconsin student loan debt has now topped $24 billion. These figures were obtained from the Consumer Financial Protection Bureau. The article also reported, “According to a survey of 1,116 registered Wisconsin voters conducted by Public Policy Polling on October 16 and 17 an overwhelming 79 percent supported ‘a plan to allow student loan borrowers to refinance their loans, just like you can with a mortgage.’” Unfortunately for bankruptcy filers, it remains very difficult to get student loans discharged in a bankruptcy.

Student Loans Increase 149% in 10 Years

According to an article from ACA International, the credit reporting agency, Experian recently conducted a study which found that student loan debt has increased to an all-time high of $1.4 trillion. “And while student loan debt has surpassed home equity loans/lines of credit, credit card and automotive debt, the percentage of consumers with delinquent student loans has declined from 9.9 percent in 2009 to 8.9 percent in 2017.” Student loans are usually very difficult to discharge in a bankruptcy because an undue hardship has to be shown, and the courts have made this standard a very high hurdle to overcome. If you are having difficulty with repayment of a student loan, it is usually going to be a better approach to contact your lender to see if you qualify for an Income Based Repayment Plan rather than trying to qualify for an undue hardship in bankruptcy.

Connecticut’s Capital City Threatens to File for Bankruptcy

According to an article by Joseph De Avila in the Wall Street Journal, “[Hartford]City officials warned Gov. Dannel Malloy, a Democrat, and state lawmakers that Hartford, which has a deficit approaching $50 million, wouldn’t be able to pay all of its bills within 60 days. Hartford officials said it would file for bankruptcy at that point unless the state legislature passes a budget that gives the city more funding or otherwise provides it with more cash.” Municipalities can file for bankruptcy under Chapter 9 of the Bankruptcy Code, a chapter that is rarely used compared to the other bankruptcy chapters. The article reports that according to Attorney James Spiotto only 64 bankruptcies have been filed by municipalities in the past 63 years.