Wisconsin Chapter 13 Bankruptcy Explained
Chapter 13 debtors repay a portion of their debts by making payments to a trustee. After making payments and complying with other requirements of Chapter 13, the court grants the debtor a discharge of debt.
This page contains general information. Contact a Chapter 13 bankruptcy lawyer for specific advice.
Table of Contents
- Why Choose Chapter 13?
- How do I file a Chapter 13 bankruptcy?
- Eligibility
- Preparing to File Chapter 13
- The Plan
- Filing
- Automatic Stay
- Trustee Meeting
- Plan Confirmation
- Discharge
Looking for something else? Try our FAQ page.
Why Choose Chapter 13?
Chapter 13 vs. Chapter 7. Chapter 13 bankruptcy:
- is more complex than Chapter 7,
- takes three to five years, in contrast to a Chapter 7, which typically takes about four months, and
- costs more than Chapter 7 in both legal fees and payments to the trustee.
So why choose Chapter 13 instead of Chapter 7? Three main reasons:
- You don’t qualify for Chapter 7 because of a discharge received in a previous recent bankruptcy,
- You don’t qualify for Chapter 7 because you can’t rebut the “presumption of abuse” under the means test, or
- Your house is in foreclosure because you missed payments and you want to keep your home.
This page contains general information. Contact a Wisconsin Bankruptcy Guide attorney for specific advice.
How to File a Chapter 13 Bankruptcy
A Chapter 13 bankruptcy in the western part of Wisconsin begins with the payment of a filing fee and the submission of a petition, a creditor mailing matrix, a statement of social security number, and a credit counselling certificate. Within 14 days thereafter you must file 8 schedules of financial information, a financial questionnaire, a plan, something called a Chapter 13 Statement of Your Current Monthly Income and Calculation of Commitment Period, and, perhaps, something called a Chapter 13 Calculation of Your Disposable Income. You can learn more about all this here.
Starting a Chapter 13 in the eastern part of Wisconsin is equally complicated. You can find the requirements here. Plus, courts in the eastern part of the state have complex rules you’ll need to follow. You can read those here.
The bottom line: filing a Chapter 13 on your own is like walking into a legal minefield while blindfolded. Protect yourself by hiring a Wisconsin Bankruptcy Guide attorney to guide you through the process.
Eligibility
To qualify for Chapter 13 bankruptcy you must have (1) regular income sufficient to fund a payment plan, (2) less than $419,275 in unsecured debt, and (3) less than $1,257,850 in secured debt. The Chapter 13 debt limits apply only to noncontingent, liquidated debts. Your attorney can tell you whether your debts count toward the limits. Entities (LLC, S-Corp, etc.) cannot file Chapter 13.
Preparing to File Chapter 13
Debtors can – and sometimes do – file bankruptcies quite quickly. But it’s best to take the time to plan ahead. With that time you and your attorney can –
Prepare the bankruptcy petition and schedules. As part of a bankruptcy you must give a complete disclosure of your financial affairs. This means filling out long and complicated forms. The more time you have to fill out these forms the greater the chances that you will list everything required. And, if you do that, you greatly reduce the chances of an unpleasant surprise after you file your bankruptcy.
Prepare the Chapter 13 plan. A Chapter 13 plan must provide for payment in full to certain creditors and may have to provide for a minimum dividend to unsecured creditors. All of your available income (after taxes and allowed living expenses) must be paid into the plan. If your available income is not sufficient to make the required payments, you’ll have to cut expenses, surrender assets, or consider filing Chapter 7 instead.
Act strategically. Depending upon your circumstances you may benefit by postponing your bankruptcy to, for example, reduce the chances of creditors contesting your bankruptcy.
Protect assets. You can only exempt a certain amount of property in a bankruptcy. If you have assets you can’t exempt and you have enough time then you may be able to rearrange your affairs to your maximize what you can keep. Otherwise, you’ll have to either give your non-exempt assets to the trustee or pay the value of those assets over the life of the plan.
This page contains general information. Contact a Wisconsin Bankruptcy Guide attorney for specific advice.
The Plan
A Chapter 13 plan of reorganization modifies the rights of your creditors. You have a lot of flexibility in a Chapter 13 plan. As long as it complies with the Bankruptcy Code, the plan may propose to catch up on past due mortgage payments over time, pay a lower interest rate to creditors with liens on your vehicle, pay income tax debts over time without incurring additional interest, and more.
The biggest advantage of Chapter 13 is often stopping a home foreclosure. If you’re $10,000 behind on your mortgage payments and the lender has started a foreclosure proceeding, a Chapter 13 could allow you to pay back that $10,000 over time. You would have to start making your regular mortgage payments in addition to the Chapter 13 plan payments, so it’s not an inexpensive option. But if you can afford to cure the arrearage over 3 to 5 years then Chapter 13 is a great way to rescue your home from foreclosure. Although it’s done via an adversary proceeding and not through the plan, Chapter 13 may also let you “strip off” a second mortgage from your home. If successful, you may emerge from bankruptcy with only one mortgage on your house instead of two.
Filing
Before filing a bankruptcy you must take a brief credit counseling course. Bankruptcy begins with the filing of a petition and the financial disclosure paperwork discussed above. You file these documents with the clerk of court. Wisconsin clerks’ offices are located in Eau Claire, Green Bay, Madison, Milwaukee, and Oshkosh. You must also file the prepared plan of reorganization and provide additional documents to the trustee.
This page contains general information. Contact a Wisconsin Bankruptcy Guide attorney for specific advice.
Automatic stay
The bankruptcy filing creates an injunction called an automatic stay. The automatic stay stops almost all collection activity. The Chapter 13 stay extends to certain co-signers, stopping them from collecting from you during the bankrutpcy. However, creditors may collect from co-debtors once the stay terminates.
Trustee meeting
A month or so after you file your bankruptcy you will meet with a trustee. In Wisconsin the meetings are in –
- Eau Claire (also for Chippewa Falls, Hudson, Menomonie, and River Falls cases),
- Green Bay (also for De Pere cases),
- Onalaska (also for La Crosse, Sparta, and Tomah cases),
- Madison (also for Beloit, Janesville, and Sun Prairie cases),
- Milwaukee (also for Waukesha, West Allis, and West Bend cases),
- Oshkosh (also for Appleton, and Fond du Lac cases),
- Racine (also for Kenosha cases),
- Rothschild (also for Marshfield, Stevens Point, Wausau, and Wisconsin Rapids cases),
- Sheboygan (also for Manitowoc cases), and
- Superior.
At the meeting the trustee will swear you in and ask you questions about your debts, assets, income, and related matters. The trustee will also ask if you believe your plan will work and if you feel you can afford the payments. Creditors may appear and ask questions as well; however, they seldom do. If the trustee is satisfied that your plan is feasible and complies with the bankruptcy law, he or she will recommend that the bankruptcy judge confirm your plan. If the trustee has any issues with your plan, he or she will object to confirmation.
This page contains general information. Contact a Wisconsin Bankruptcy Guide attorney for specific advice.
Plan confirmation
Each Wisconsin bankruptcy judge handles the confirmation process differently. Some will confirm the plan without a hearing if there are no objections. Others will hold a hearing even if there are no objections. The time between the trustee meeting and confirmation of your plan will vary by judge as well. In the Western District of Wisconsin, the order confirming the plan may be entered within a week of the meeting if there are no objections. In the Eastern District of Wisconsin, plans are usually confirmed 60-90 days after the meeting. If you retain experienced bankruptcy counsel, your lawyer will know what to expect from your judge.
Discharge
Once the judge confirms your plan, your main responsibility is making all of your plan payments to the trustee. This is fairly easy if you have a wage assignment set up and the payments come directly out of your paychecks. If any issues come up during the 3 to 5 years of your plan, let your attorney know immediately so they can help you resolve it.
The trustee will take your payments and use those funds to pay creditors according to the terms of your plan. Priority and secured creditors will usually get paid in full before the unsecured creditors get anything. After all your required payments end and you have complied with the other requirements of Chapter 13, the court will grant you a discharge. You won’t get a list of debts that were discharged, so ask your attorney for clarification if you’re not sure about a specific debt. In general, student loans, domestic support obligations, and some taxes will not be discharged in Wisconsin Chapter 13 cases.
This page contains general information. Contact a Wisconsin Bankruptcy Guide attorney for specific advice. Wisconsin Bankruptcy Guide is provided by law firms designated as Debt Relief Agencies by the federal government because we help people file for relief under the Bankruptcy Code. We also provide other types of debt relief options.