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Wisconsin Chapter 128 Filings
By Graham Billings on August 23, 2010

480642_35511440-(1).jpgWisconsin has a unique and interesting bankruptcy plan that has become a popular option for debtors in the past few years. The bankruptcy plan, called Chapter 128, is from an old law that has just recently become popular as an individual bankruptcy method. The plan is different from national bankruptcy plans, and the differences are worth discussing.

Chapter 128 is similar to a Chapter 13 bankruptcy plan in that you must repay your debts, but it offers more flexibility. In Chapter 128, you declare the debts that you want to be included in the filing. Instead of declaring all debts like under Chapter 13, you can choose any other than secured debts, which are those that have property backing them. Chapter 128 provides all the same protections as the main bankruptcy filings – it stops creditors from taking assets, charging late fees, and so on. All that happens is, a bankruptcy trustee compiles all the debts that you submitted and creates a three-year payment plan based off it. In fact, you do not even have to show up in court or take credit counseling classes!

Chapter 128 may allow for more flexibility in the bankruptcy process, but it has its risks. Since you are not nationally protected, if you miss payments, then the trustee will throw out your payment plan and you will be stuck in the same hole as before. In addition, you will still have your debts – unlike Chapter 7, where they are cleared. Since taking advantage of the law is a new process, many filers do not understand the best way to use it. They either claim debts that they would be better off just paying, or they file for Chapter 128 when they would be better off negotiating with creditors to reduce their debt. Still, creditors generally like Chapter 128, because it increases the likelihood that they will be paid, compared to a Chapter 7 filing.

As Chapter 128 becomes more popular, it will be interesting to see if it picks up in other states. Still, it is an interesting view on another potential bankruptcy option that may become more prevalent in the future.
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