in bad shape...

[davepete]

I need some advice. I've been reading about going Chapter 7, but let me describe my situation and see what you all think I should do. First, I live in Wisconsin and have no job at the moment, so income is 0. I own a house with something like $20-$30K in equity. I also own a Ford F150 with a blue book value of about $8700 and a Harley motorcycle with a BB of about $8,000. Both are free and clear. I have roughly $30,000 in credit card debt and about $5000 in cash assets at the moment, which won't last much longer if I can't find a job. So, I think Chapter 7 is the way to go here.

I'm pretty sure I would end up as an asset case due to the motorcycle if nothing else, but what has me all bound up in the gut tonight is, after some reading on Wisconsin's Ch. 7 property exemptions, it looks like I could lose not only the motorcycle (which I expected to lose), but also the truck. Here's why. Apparently you are only allowed to keep vehicles with an equity of $1200. I thought the idea behind Ch. 7 was to give people a fresh start, not gut them. How am I supposed to conduct a job search if they take my only means of transportation? If this is indeed the way it works, would it make sense for me to simply go trade it in now and pick up some worthless old $1200 rust bucket which the trustee will abandon back to me? At least I'd have wheels (of a sort) coming out of the discharge.

And another thing. They apparently only allow you to keep $1000 cash? How am I supposed to pay rent, pay for medical insurance, and feed myself on that for more than about 60 days? This sounds like an absolutely inhuman process to me. This is no fresh start, this is a gutting. I didn't expect to come out of this smelling like a rose, but I have no idea how I'd even be able to survive long afterwards. Can someone please tell me I've got this figured wrong?

[JackBondLove]

I understand where you're coming from. You can thank your state legislators and governor for not having better exemptions. Probably the only way out of your situation is to take some cr@p job which will leave you enough to survive, yet still be able to do Chapter 7. As for your car, you probably will be able to get on a post filing payment plan to pay the trustee the difference in the cash he could get from selling the car and the exemption.

Another way to think about it is that you're going to have to get a job doing something in any case since you only have $5000 in cash, and you will eat your way out of that eventually. Another thing you could do is stockpile groceries so that you would have something to eat.

As for myself, I am tapping my retirement accounts to survive (I plan to basically live a very frugal early retirement from now on in any case.)

[Flamingo]

Unfortunately, BK does not solve cash flow, personal or unemployment problems. Remember you will need funds to survive even after filing BK.

[davepete]

I hear you. I wish you luck in your early retirement. I kind of did the same thing about 5 years ago and wish to God I hadn't, now. Anyway, I've been thinking a little more tonight, and there may be a better way out for me. I'm going to try to get the bike sold fast - I'll have to price it below market, but if I can get some extra money, I can use it to make a few needed improvements to the house. Then I should be able to sell at closer to market value. At full market I'd be able to pocket about $40K, at least as far as the assessor's office says. Probably still won't get that much, but if I can even pocket $30K, that gets me about even on the credit cards. I'd probably have to move in with family for a while, but at least I'd have transportation and clean credit. That's a hell of a lot better than the ridiculous hole it seems bankruptcy would put me in.

What a crock that Chapter 7 is ostensibly the "fresh start" path. They barely leave you with the shirt on your back.

[davepete]

Unfortunately, BK does not solve cash flow, personal or unemployment problems. Remember you will need funds to survive even after filing BK.

Well, I never expected it to solve those problems. I only expected it to leave me enough resources so I could solve them myself. Think about this: isn't unemployment a pretty common reason people would declare bk? Is the state in the business of utterly wrecking those people's lives? Because that's exactly what this procedure does. Nobody owns a vehicle with less than $1200 in equity these days unless it was built in the 80s. And if you have enough money to buy out the equity, why would you go through bk in the first place?

As for the funds you need to survive, it sure seems like bk doesn't leave unemployed people more than a pittance. It's utterly ridiculous.

[tigergem]

I don't know if this is helpful for you or not. But have you looked at Wisconsin's Chapter 128? I guess it is some sort of state run bankruptcy scheme, instead of federal bankruptcy. I don't really know anything much about it, being from Texas, I just glanced at the info and thought "that's neat" and moved on. But you might want to investigate it to see if this is a possibility for you.

[HakunaMatata]

It appears Wisconsin has recently increased State exemptions. You also have the choice of using WI or Federal Exemptions.

http://www.legalconsumer.com/bankruptcy/bankruptcy-law.php?&ST=WI#exemptions

[davepete]

I don't know if this is helpful for you or not. But have you looked at Wisconsin's Chapter 128? I guess it is some sort of state run bankruptcy scheme, instead of federal bankruptcy. I don't really know anything much about it, being from Texas, I just glanced at the info and thought "that's neat" and moved on. But you might want to investigate it to see if this is a possibility for you.

I'll have to check that out - thanks!

Ok, after more reading, now I see that the Federal exemptions can be used instead. While they don't look hugely better, a thought has occurred to me. The homestead exemption says "Real property, including co-op or mobile home, to $17,450; unused portion of homestead to $8,725 may be applied to any property". I wonder if I could ask them to cut the homestead exemption, since I would lose the house anyway, so that I could apply the $8725 wild card to my truck. That would cover the equity in the truck and let me keep it.

Now that I think more about this, in fact, what exactly does this stuff mean when they say, for example, under homestead "Real property, including co-op or mobile home, to $17,450". Does that mean I get to keep $17,450 of my home equity if they take the house and sell it? Or in the case of the Wisconsin exemptions, $40,000? If so, I withdraw my earlier remarks criticizing this process. Does anyone know the answer to this?

[davepete]

It appears Wisconsin has recently increased State exemptions. You also have the choice of using WI or Federal Exemptions.

http://www.legalconsumer.com/bankrup...=WI#exemptions

Thanks for the pointer, Hakuna. Looks like WI is up to $75K on homes and $5K on vehicles (and you can supplement with unused personal property exemption). Now we're getting somewhere. Whew, I'm feeling much better. It looks like my earlier fears may have been unfounded. I'm still unclear on what happens with sold assets, though. Does the exempt portion of the equity get returned to you? For example, if they took my truck and sold it, would I get $5K for it?

[WhatMoney]

I think you have an old list of WI exemptions. The new ones seem pretty generous to me:
-----------------------
Property you occupy or intend to occupy to $75,000; sale proceeds exempt for 2 years if you intend to purchase another home (husband & wife's exemption may double)

Auto/Truck (aka Motor Vehicle)
Motor vehicles to $5,000 (husband & wife may double; unused portion of $12,000 personal property exemption may be added)
Other Property

Household goods and furnishings, clothing, keepsakes, jewelry, appliances, books, musical instruments, firearms, sporting goods, animals, and other tangible personal property to $12,000 total (husband & wife may double)

Deposit accounts to $5,000

Equipment, inventory, farm products, books, and tools of trade to $15,000 total.
-----------------------
My state finally upped the auto exemption from $2150 to $3000 for a single vehicle - mighty generous of them...

[WhatMoney]

Does the exempt portion of the equity get returned to you? If they took my truck and sold it, would I get $5K for it?

Yes.

(sorry I repeated info you already found on exemptions.)

[HakunaMatata]

If the Trustee sold your truck, you would be entitled to the exempt portion (the remaining portion would be distributed to unsecured creditors).

[davepete]

Yes.

(sorry I repeated info you already found on exemptions.)

Ok, I think I'm getting a more complete picture of how it works now. Thanks for the answer. No problem on the repeat - you were just being helpful.

Now I've got some more questions. On the homestead clause, it says "Property you occupy or intend to occupy to $75,000; sale proceeds exempt for 2 years if you intend to purchase another home".

Question is, what exactly does the second part of that clause mean? "sale proceeds exempt for 2 years if you intend to purchase another home". Maybe my brain is addled a bit tonight, but I'm not clear on that one.

In my case, if I go through a Ch. 7, and the house comes through still mine, which seems likely since my equity is nowhere near $75K, I'd still likely have to put it right on the market since I still may have no job and little cash in the bank. In that case, I'd be able to pocket the equity from the property. Would the recently closed bk case have any bearing on that transaction? Or would the court not like that because I no longer "intend to occupy the property"? My guess is, once the case is over, it's over, right? You can do what you like with what you still have? Oh, and one other question. Do you still have to pay the mortgage during the case? After all, my understanding is that the estate technically owns the house at that time, not me. How does that work? I'm just wondering if it'd be possible that the case could drag out long enough where I'd run out of money to pay the mortgage before the case closes.