What can bankruptcy accomplish for a person who is in debt in Wisconsin?

It is always best to pay your legally incurred debt. However, if creditors will not work with you, if they harass you with telephone calls, letters and legal actions, you have a right to examine your options, including bankruptcy. If you have more debt than you can realistically pay, you have a right to protect your home, vehicles, personal property and future income for yourself and your family.

Chapter 7 is the most commonly used provision of the bankruptcy code. Under this Chapter, unless an individual or joint filer has income or asset values that exceed certain limitations, filers are able to eliminate their liability for most unsecured debts. (Some unsecured debt is not dischargeable, including child support, student loans and most taxes.)

Chapter 13 bankruptcy provides very flexible tools to help reorganize debt. Regardless of income or asset status, a person or couple can restructure debt under Chapter 13. Depending on circumstances, a Chapter 13 filer may be able to pay all unsecured debt without interest. Filers may be able to pay a modest percentage of unsecured debt and receive a discharge of the test once the Chapter 13 is complete (usually 3 to 5 years). Chapter 13 can be used to cure arrearages (or back payments) due on home or vehicle loans. A Chapter 13 filer can reduce interest on vehicle loans, or rewrite the loan entirely if the loan is old enough. A filer protects income (and some or all income tax returns) from overly aggressive creditors, including student loan lenders and tax entities.

Chapter 13 also provides for a Mortgage Modification Mediation Program through the Federal Bankruptcy Court, which has helped many debtors refinance their first mortgages to a more affordable monthly payment. This program has sucessfully helped to modify many mortgages in Wisconsin.

Both Chapter 7 and Chapter 13 bankruptcies set in motion what is called an “automatic stay.” This provision of bankruptcy law prevents creditors from contacting or harassing you while you are in bankruptcy. Filing bankruptcy will stop or delay almost all collection activity, including garnishment, repossession, and foreclosure, even if a lawsuit is already in progress.

It is very unlikely that you will lose assets that you wish to keep by filing bankruptcy in Wisconsin. Wisconsin exemption laws are more generous than in most states. An individual filer is able to protect a homestead with up to $75,000 equity. Joint filers who are husband and wife can protect up to $150,000 equity in a homestead. Cars and other assets are usually protectable.

Filing bankruptcy is usually very affordable. The most important thing is to choose a competent lawyer in your area who will make you feel comfortable with the process.