There are a number of alternatives to provide debt relief for persons suffering from financial difficulties. Filing a bankruptcy petition helps to guarantee people a “fresh start” to get their finances back on track. A bankruptcy filing can immediately stop garnishments, lawsuits, foreclosures, repossessions, tax levies, and harassing telephone calls. In some cases, a bankruptcy filing can even allow a person to have his or her driving privileges reinstated. Most individuals file for bankruptcy under Chapter 7 or Chapter 13.
Chapter 13 bankruptcy allows individuals up to 5 years to make monthly payments on their debts under a Court-supervised plan. The size of those payments depends in part on disposable income and the types of debts a person has. In Chapter 13, it is possible to reduce the interest rate on high-interest car loans, as well as to get caught up on delinquent taxes, mortgage payments, or car payments. These payments are made to a Court-appointed Trustee, who in turn sends those payments directly to creditors. At the end of the case, remaining debts (with some exceptions) are discharged and eliminated. In some cases, a Chapter 13 bankruptcy can even reduce the principal balance on an automobile’s loan to the vehicle’s current value, reduce monthly car payments, and strip off underwater second mortgages and some unsecured liens.
Chapter 128 is state-court proceeding and an alternative to bankruptcy available to Wisconsin residents. A Chapter 128 case is a court-supervised debt repayment plan available to individuals with steady income that pays off selected debts over a period of up to three years. Upon filing a Chapter 128, creditors are prohibited from garnishing wages, attaching or executing property. Chapter 128 can be an attractive alternative for individuals who do not want to, or cannot file for bankruptcy.