When debt becomes overwhelming, many people immediately think of bankruptcy as their only option. But if you're a resident of Wisconsin, you have a powerful and often-overlooked alternative: Chapter 128. This state-specific law, formally known as an "Amortization of Debt Action," allows you to consolidate your unsecured debts and repay them over time, all without the long-term ramifications of a federal bankruptcy filing.

This blog post is for informational purposes only and is not a substitute for legal advice. If you are struggling with debt, consulting with a qualified Wisconsin attorney is the best way to determine if Chapter 128 or another option is right for you.

What is a Chapter 128?

Chapter 128 is a unique Wisconsin statute that lets individuals with a steady income create a court-supervised repayment plan. It's not a form of bankruptcy, but rather a debt consolidation tool that protects you from creditors while you pay off your debts in a structured manner.

Here's how it generally works:

1. You File a Petition: You and your attorney file a simple petition with the Wisconsin Circuit Court, along with an affidavit listing the debts you want to include in the plan.

2. A Trustee is Appointed: A court-appointed trustee is assigned to your case. This trustee is a neutral third party who will collect your monthly payments and distribute them to your creditors.

3. The Court Issues an Order: The court signs an order that freezes your debt balances, stops interest and late fees from accruing, and prevents creditors from taking collection actions like wage garnishments or bank levies.

4. You Make Payments: You make regular monthly payments to the trustee, who then pays your creditors. The plan typically lasts for a period of up to three years.

Key Benefits of Chapter 128

Chapter 128 offers several distinct advantages over traditional bankruptcy:

• Not a Bankruptcy: The most significant difference is that a Chapter 128 filing is not a bankruptcy. It will not appear on your credit report as a bankruptcy, which can have a less severe and shorter-term impact on your credit score.

• Keeps Creditors at Bay: Once the court order is in place, it provides an "automatic stay" on most collection efforts. This means no wage garnishments.

• Stops Interest and Fees: A Chapter 128 freezes the balance of your included debts, so you are only paying back what you owed at the time of filing—without any additional interest or late fees. This can save you a substantial amount of money.

• Simpler and Less Expensive: The process for filing a Chapter 128 is generally simpler and less invasive than a federal bankruptcy. The filing fees are significantly lower, and you are not required to disclose all of your assets or attend mandatory counseling.

• Flexibility: You are not required to include all of your debts in a Chapter 128 plan. This gives you the flexibility to strategically manage which debts you want to pay off through the plan and which you may want to handle separately.

What Debts Can Be Included?

Chapter 128 is primarily designed for unsecured debts, which are debts not backed by collateral. Common examples include:

• Credit card debt

• Medical bills

• Personal loans

• Payday loans

• Unpaid utility bills

• Old rent payments

Secured debts, such as a car loan or mortgage, generally cannot be included unless the creditor agrees to the plan.

Chapter 128 vs. Chapter 13 Bankruptcy

While both are repayment plans, there are some major differences between a Chapter 128 and a federal Chapter 13 bankruptcy.

• Duration: A Chapter 128 plan is limited to three years, while a Chapter 13 plan can last up to five years.

• Debt Discharge: A Chapter 13 bankruptcy can discharge a portion of your unsecured debt, meaning you don't have to pay it back. A Chapter 128 requires you to pay all included debts in full.

• Credit Impact: Bankruptcy remains on your credit report for 7 to 10 years, whereas the impact of a Chapter 128 is typically less severe and may not be reported as a bankruptcy.

For many Wisconsin residents with a manageable amount of unsecured debt and a steady income, a Chapter 128 can be an excellent way to get back on their feet without the significant long-term consequences of bankruptcy. It's a powerful tool that every Wisconsin resident facing financial hardship should know about.

Attorney Nathan DeLadurantey offers free consultations to explain your legal rights in Wisconsin. Free consultations can be scheduled online.