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What Are the Different Bankruptcy Chapters?

Lewis & Van Sickle, LLC Jan. 27, 2025

Person filling bankruptcy form with penBankruptcy law provides individuals and businesses with options to regain control of their financial futures. Wisconsin residents facing financial challenges have several bankruptcy chapters available, each designed for specific situations. Not sure where to start? It’s time to contact an experienced law firm.

Here at Lewis & Van Sickle, LLC in Green Bay, Wisconsin, our experienced attorney has helped many clients understand their choices. We offer over 20 years of experience to our clients. If you’re unsure about bankruptcy in Wisconsin, this guide outlines the most relevant bankruptcy chapters to consider.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is often referred to as liquidation bankruptcy. This chapter is ideal for individuals or businesses without significant disposable income who can’t meet their debt obligations. In Wisconsin, filing for Chapter 7 allows for the discharge of most unsecured debts, such as:

  • Credit card balances

  • Medical bills

  • Personal loans

During this process, a court-appointed trustee oversees the sale of non-exempt assets to pay creditors. Wisconsin law provides exemptions to protect certain assets (up to specific limits), including:

  • Your home

  • Your car

  • Your retirement accounts 

Many people filing under Chapter 7 can keep most, if not all, of their essential property. This chapter typically provides relief within three to six months, offering a fresh financial start.

Eligibility for Chapter 7 depends on passing the means test, which evaluates your income and expenses. If your income is below the Wisconsin median, you’re likely eligible. For those with higher incomes, the test examines whether you have enough disposable income to repay a portion of your debts.

Filing for Chapter 7 also requires attending a mandatory credit counseling session and completing a debtor education course before the discharge is granted. These steps provide valuable context for managing finances and avoiding future debt issues.

Chapter 13 Bankruptcy

For individuals who want to retain their property while repaying debts over time, Chapter 13 bankruptcy may be a better fit. Known as the wage earner’s plan, Chapter 13 allows for the restructuring of debts into manageable monthly payments over three to five years.

Wisconsin residents with a steady income can use this chapter to catch up on missed mortgage payments, car loans, or tax obligations while protecting their assets from foreclosure or repossession. Unlike Chapter 7, this chapter doesn’t involve liquidating assets.

The repayment plan is based on your disposable income and is subject to court approval. Priority debts, such as child support or alimony, must be paid in full, while unsecured debts may be partially paid or discharged entirely by the end of the plan. 

Successful completion of a Chapter 13 repayment plan can help rebuild your financial stability while maintaining ownership of your property.

Chapter 13 also offers an automatic stay, halting creditor actions such as wage garnishments, lawsuits, or harassing phone calls. This breathing room allows debtors to focus on crafting and following their repayment plan without additional financial pressures.

Chapter 11 Bankruptcy

Chapter 11 bankruptcy is primarily designed for businesses, though individuals with substantial debts and assets may also file under this chapter. In Wisconsin, Chapter 11 allows businesses to continue operations while reorganizing their financial obligations. 

This chapter provides the flexibility to renegotiate terms with creditors, restructure debts, and develop a plan to return to profitability. That flexibility can be crucial for maintaining normalcy throughout the process.

The debtor, often referred to as the “debtor-in-possession,” retains control of the business during the bankruptcy process. A plan of reorganization is created and must be approved by the creditors and the court. 

While Chapter 11 can be more time-intensive and costly than other chapters, it offers businesses the opportunity to preserve jobs and maintain community services while addressing financial challenges.

For small businesses, there is a streamlined version of Chapter 11 known as the Subchapter V process. This option simplifies the reorganization process, reduces costs, and makes it easier for smaller entities to regain financial stability.

Chapter 12 Bankruptcy

Wisconsin’s agricultural heritage makes Chapter 12 bankruptcy particularly relevant for family farmers and fishermen. This chapter provides debt relief tailored to the unique financial challenges faced by those in these professions. Similar to Chapter 13, Chapter 12 involves creating a repayment plan, but it’s specifically designed to account for seasonal income fluctuations common in farming and fishing.

Debtors can restructure secured debts, such as equipment loans or mortgages while addressing unsecured obligations. Chapter 12 allows family farmers and fishermen to maintain their operations, protecting essential assets like land, equipment, and tools. 

By enabling continued production, this chapter supports both the individual debtor and the broader Wisconsin community.

Chapter 12 also allows for the adjustment of debt payments to align with seasonal income variations, providing flexibility that’s critical for those in the farming and fishing industries. This way, the repayment plan reflects the realities of these professions, helping debtors succeed in their financial recovery.

Factors to Consider When Choosing a Bankruptcy Chapter

Selecting the right bankruptcy chapter depends on several factors, including:

  • Your income

  • Your assets

  • Your financial goals

Individuals with limited income and significant unsecured debts often find Chapter 7 to be the quickest route to relief. Those looking to protect their homes or other assets while catching up on overdue payments might prefer Chapter 13.

Businesses or high-debt individuals seeking reorganization may benefit from Chapter 11, while family farmers and fishermen should consider the tailored provisions of Chapter 12.

Each bankruptcy chapter has its own filing requirements, procedures, and outcomes. Wisconsin’s bankruptcy courts apply both federal and state laws, which influence exemptions and other critical aspects of the process. Experienced legal professionals can provide clarity and assistance with these options.

It’s also essential to consider the long-term impact of bankruptcy on your credit score and financial future. While bankruptcy offers a path forward, understanding its consequences can help you make informed decisions.

How Our Firm Can Help With Your Bankruptcy Journey

At Lewis & Van Sickle, LLC, our seasoned attorney has over 20 years of experience guiding Wisconsin residents through the bankruptcy process. We understand that financial struggles can affect every aspect of your life, and we’re here to provide compassionate and effective assistance. 

Don’t wait for the problem to balloon out of control and don’t bother with wasting time trying to break down legal jargon. By working together, we can help you determine which bankruptcy chapter aligns with your circumstances.

From the initial consultation to court appearances, our focus is on making the process as smooth as possible. Whether you’re seeking to discharge debts, create a repayment plan, or restructure your business finances, we’re committed to protecting your rights and helping you achieve a fresh start.

Our firm also provides personalized strategies to address unique financial challenges. We’ll work with you to assess your options and craft a tailored approach that meets your needs. Bankruptcy is a significant decision that requires careful consideration and professional guidance.

Contact Us Today to Get Started

Remember, bankruptcy in Wisconsin isn’t the end — it can be a fresh new beginning. Based in Green Bay, Wisconsin, and serving Oconto, Shawano, Kewaunee, and Sturgeon Bay, Lewis & Van Sickle, LLC can be your trusted partner through the bankruptcy process.

Contact us today to schedule a consultation and learn how we can help you take the first step toward financial recovery.