Wisconsin Bankruptcy Law: How It Affects Unsecured Debts

Wisconsin bankruptcy law provides individuals and businesses with a legal way to address overwhelming debts, including unsecured debts such as credit card balances, medical bills, and personal loans. Understanding how Wisconsin bankruptcy affects unsecured debts is crucial for anyone considering this financial option.

Under Wisconsin law, individuals who file for bankruptcy can choose between two main types: Chapter 7 and Chapter 13 bankruptcy. Each type has different implications for unsecured debts.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy, often referred to as "liquidation bankruptcy," allows filers to discharge most of their unsecured debts. This means that once the bankruptcy process is complete, they are no longer obligated to pay those debts. This can provide much-needed relief for individuals struggling to keep up with multiple creditors.

However, it’s important to note that not all unsecured debts can be discharged under Chapter 7. Certain obligations, such as student loans, child support, and certain tax debts, are not eligible for discharge. Additionally, individuals must pass a means test to qualify for Chapter 7, which examines their income and expenses to determine their ability to repay debts.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy, on the other hand, allows individuals to restructure their debts rather than discharge them outright. This type of bankruptcy is often suitable for those who have a regular income and wish to keep their assets while paying off their debts over time, typically over three to five years.

In Chapter 13, unsecured debts are categorized into different priority levels, and the repayment plan will focus on paying back a portion of these debts based on the debtor’s income and expenses. While many unsecured debts can be reduced or significantly written off, any remaining balance must be included in the repayment plan. This makes Chapter 13 an appealing option for debtors who want to retain their property and catch up on missed payments.

Exemptions in Wisconsin Bankruptcy

Wisconsin law provides various exemptions for filers, protecting certain assets from liquidation in Chapter 7 bankruptcy. Exemptions can include a portion of equity in a home, a vehicle, personal belongings, and retirement accounts. Understanding these exemptions can help individuals retain essential assets while dealing with unsecured debts.

Impact on Credit Score

Filing for bankruptcy in Wisconsin, whether Chapter 7 or Chapter 13, will have a significant impact on your credit score. A bankruptcy filing can remain on a credit report for up to 10 years for Chapter 7 and up to 7 years for Chapter 13. This can affect future loan approvals, interest rates, and insurance premiums. However, many individuals find that their credit scores begin to improve after discharging or reorganizing their debts, as they are no longer burdened by overwhelming financial obligations.

Consulting with a Bankruptcy Attorney

Given the complexities of bankruptcy law, it is highly advisable for individuals considering bankruptcy in Wisconsin to consult with an experienced bankruptcy attorney. An attorney can provide personalized guidance on the best course of action based on individual circumstances, helping to navigate the intricate laws pertaining to unsecured debts.

In summary, Wisconsin bankruptcy law offers valuable relief for those struggling with unsecured debts through Chapter 7 and Chapter 13 filings. While these options can provide a fresh start, understanding their implications and consulting with a professional can lead to informed decisions about managing financial recovery.