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Understanding Chapter 128 and Bankruptcy: Key Differences in Wisconsin

Posted by Nathan DeLadurantey | Nov 06, 2023

In Wisconsin, individuals and businesses facing financial challenges often explore various legal options to manage their debts and regain control of their finances. Two commonly considered approaches are Chapter 128 and bankruptcy. While both are legal mechanisms to handle debt, they operate differently and cater to different financial situations. It is essential to understand the nuances between Chapter 128 and bankruptcy to make an informed decision when navigating through financial difficulties in Wisconsin.

Chapter 128:

Chapter 128, also known as Wisconsin's wage earner's plan, is a state-specific debt repayment tool that allows individuals to create a plan to repay their debts over time. It is essentially an alternative to bankruptcy, offering debt relief and protection from creditors while enabling the individual to maintain control over their assets and finances. Some key features of Chapter 128 include:

  1. Voluntary Repayment Plan: Unlike bankruptcy, Chapter 128 involves the creation of a voluntary repayment plan that outlines how the individual intends to pay off their debts within three years.

  2. No Asset Liquidation: Chapter 128 does not involve liquidating assets to repay debts, allowing individuals to retain control over their property and assets, which may include homes, vehicles, and other valuable possessions.

  3. Protection from Creditors: Upon filing for Chapter 128, individuals are granted protection from creditors, preventing them from taking legal action to collect debts during the repayment period outlined in the plan.

  4. No Creditors' Approval Required: The plan under Chapter 128 does not require approval from creditors, making it a viable option for individuals who wish to manage their debts without the involvement of creditors.


Bankruptcy, on the other hand, is a federal legal process that allows individuals and businesses to either eliminate or repay their debts under the protection of the bankruptcy court. While bankruptcy provides a more comprehensive debt relief option, it comes with certain implications that may not be suitable for everyone. Key elements of bankruptcy in Wisconsin include:

  1. Asset Liquidation (Chapter 7): In Chapter 7 bankruptcy, the debtor's non-exempt assets are liquidated to repay creditors, providing a fresh start by eliminating most unsecured debts. However, this process may lead to the loss of valuable assets.

  2. Debt Repayment Plan (Chapter 13): Chapter 13 bankruptcy involves creating a court-approved repayment plan spanning three to five years, allowing debtors to retain their assets while repaying their debts over time.

  3. Impact on Credit Score: Filing for bankruptcy can have a significant impact on an individual's credit score, making it challenging to secure loans or credit in the future.

  4. Creditors' Involvement: Bankruptcy involves the active participation of creditors in the process, as their approval is necessary for the confirmation of the repayment plan or the discharge of debts.

Key Differences:

  1. State vs. Federal Process: Chapter 128 is a state-specific process, while bankruptcy operates under federal law, governed by the United States Bankruptcy Code.

  2. Asset Retention: Chapter 128 allows individuals to retain their assets, whereas bankruptcy may involve the liquidation of assets depending on the type of bankruptcy filed.

  3. Creditor Involvement: Chapter 128 does not require creditor approval, whereas bankruptcy involves the active participation of creditors in the process.

  4. Credit Score Impact: While both Chapter 128 and bankruptcy may have an impact on an individual's credit score, bankruptcy often has a more pronounced and longer-lasting effect.

In conclusion, understanding the differences between Chapter 128 and bankruptcy in Wisconsin is crucial for individuals and businesses facing financial challenges. Both options offer debt relief and protection, but they operate under different legal frameworks and have varying implications for one's financial standing. It is advisable to consult with a legal professional specializing in financial law to determine the most suitable approach based on individual circumstances and financial goals. With the right guidance and a clear understanding of these legal tools, individuals can navigate their financial difficulties with greater confidence and make informed decisions for a more stable financial future.

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

About the Author

Nathan DeLadurantey

Nathan DeLadurantey ATTORNEY [email protected] Nathan is a skilled consumer lawyer who handles cases and trials all over Wisconsin. Phone consultations are always free and welcomed. Nathan has helped clients receive large jury verdicts and settlements stemming from consumer law violations, and is ready and able to assist.


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