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How Does Chapter 13 Bankruptcy Work in Wisconsin

— June 6, 2022

Filing Chapter 13 bankruptcy is a big decision. You are committing to a bankruptcy repayment plan that could last for up to five years.

You may have experienced a recent financial hardship and are considering filing bankruptcy in Wisconsin, specifically Chapter 13. Filing Chapter 13 bankruptcy is a big decision. You are committing to a bankruptcy repayment plan that could last for up to five years

This is why understanding the bankruptcy differences and understanding your Chapter 13 plan payment is crucial to making the most informed decision. Let’s get started.

1) Wisconsin Bankruptcy Cases — Chapter 13 or Chapter 7

Most consumer debtors (the person filing for bankruptcy relief) file under Chapter 13 or Chapter 7 of the Bankruptcy Code. You may want to understand the differences as Chapter 7 bankruptcy is often less expensive and can get you out of debt sooner.

Chapter 7 bankruptcy can be a liquidation bankruptcy. Bankruptcies filed under Chapter 7 are intended for individuals who cannot afford to repay their debts after paying normal living expenses. You must meet income qualifications to file under Chapter 7. Even though Chapter 7 may be less expensive to file than a Chapter 13 case, it does not offer some of the benefits of filing Chapter 13.

Chapter 13 bankruptcy allows debtors to voluntarily reorganize their debts in a payment plan. Through a Chapter 13 repayment plan, you can:

  • Lower the amount you owe on unsecured debts (debts that are not secured by collateral like credit card debts and medical debts)
  • Catch up back mortgage payments to stop foreclosure
  • Lower your car payments, if you qualify
  • Stop wage garnishments and repossessions
  • Catch up back taxes, alimony, and child support
  • Protect your property from creditors and the court

Chapter 13 has distinct advantages. However, you are committed to a three to the five-year bankruptcy plan. You cannot borrow money or sell major assets without court approval. However, you can get rid of debts and rebuild your financial well-being without fear of losing your home, car, and other assets.

2) Calculating the Chapter 13 Plan Payment in Wisconsin

The cost to file bankruptcy in Wisconsin is one of the most important things to consider, including the attorney and trustee fees.

The Chapter 13 bankruptcy Wisconsin plan payment estimate factors in the IRS National expense figures in addition to specific Wisconsin expenses. The calculations are complex and are unique to your financial situation.

A Chapter 13 plan payment is one of the most important things to consider when considering a Chapter 13 bankruptcy. Are you able to afford the plan payment each month when compared to your other expenses? The plan is based on a variety of factors that are accounted for in the calculator below, which is based on the official bankruptcy forms.

The calculation of your Chapter 13 plan includes the following (but is not limited to the following):

  1. Assets – What you own and how much of that asset you own.
  2. Debts – Do you have priority debts such as taxes, alimony or child support or unsecured debt such as medical bills and credit cards?
  3. Disposable Income – Do you have anything left over each month after paying your 

Let’s talk about the Wisconsin means test for Chapter 7 as Chapter 7 bankruptcy is often more affordable than Chapter 13 bankruptcy, but there are pros and cons. 

3) Wisconsin Means Testing for Chapter 7

The Means Test compares your income to the income of households in Wisconsin. If your average income is below the median income in Wisconsin, you may qualify for a bankruptcy discharge under Chapter 7. You can check the Chapter 7 income limits in Wisconsin to understand where you stand.

The income is based on the number of people in your household. The data used to calculate the figures for the Means Test is updated periodically to reflect the most recent statistical data for income and expenses.

Calculator and paperwork; image via Pxhere, CC0.
Calculator and paperwork; image via Pxhere, CC0.

The most recent data for the Wisconsin Means Test applies to cases filed on or after May 15, 2022. You must ensure that you are using the most recent figures available when calculating the Means Test.

4) Wisconsin Bankruptcy Exemptions

Bankruptcy exemptions allow debtors to claim a certain amount of equity in specific property exempt from the bankruptcy case. In a Chapter 13 case, exempt equity is not used when calculating a Chapter 13 payment.

In Wisconsin, you can choose between federal bankruptcy exemptions or Wisconsin bankruptcy exemptions. The federal and state bankruptcy exemptions differ. Therefore, you want to carefully analyze the allowed exemptions to determine whether the federal or Wisconsin bankruptcy exemptions offer better protection in your case.

The federal bankruptcy exemptions can be found in 11 U.S. Code §522. The federal bankruptcy exemptions are revised periodically.

Wisconsin bankruptcy exemptions can be found in the Wisconsin Statutes. A bankruptcy attorney can help you compare the most current federal and state exemptions to determine which set of exemptions you should use when filing Chapter 13 in Wisconsin. 

5) Bankruptcy Courts in Wisconsin

There are two bankruptcy districts in Wisconsin — Eastern and Western. You can locate which district and division your Chapter 13 case will be filed in by locating your county on this Wisconsin bankruptcy jurisdictional map.

The Bankruptcy Court for the Western District of Wisconsin has two court locations or divisions. One is located in Madison at 120 North Henry Street and the other is located in Eau Claire at 500 South Barstow Street. The Chapter 13 trustees hold 341 Meetings (First Meeting of Creditors) in several locations. For example, your county of residence determines your 341 Meeting location. A list of 341 Meeting locations are available on the bankruptcy court website.

The Bankruptcy Court for the Eastern District of Wisconsin has just one division. The bankruptcy courthouse is located in Milwaukee at 517 East Wisconsin Avenue. 341 Meeting locations in the Eastern District are also determined by your county of residence.

6) Wisconsin Chapter 13 Bankruptcy Trustees

A bankruptcy trustee is assigned to your Chapter 13 case to administer the bankruptcy case. The Chapter 13 trustee receives your payments each month and distributes payments to your creditors according to your confirmed Chapter 13 plan.

Three Chapter 13 trustees serve in Wisconsin. You are assigned a Wisconsin Chapter 13 trustee based on the location of your bankruptcy filing. 

Should I File a Chapter 13 Bankruptcy Case?

Deciding whether to file a Chapter 13 bankruptcy case can be difficult. There are many things to consider before filing for bankruptcy relief, including alternatives to bankruptcy. You can take a Chapter 13 payment calculator to estimate a Chapter 13 plan payment example to help you understand your options.

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