Wisconsin Bankruptcy: Consider The Alternative

Wisconsin Bankruptcy: Consider The Alternative

As of 2021, Wisconsin’s total state debt was approximately $21.6 billion. This includes both general obligation debt and revenue-supported debt. The state’s general obligation debt was around $9.4 billion, while revenue-supported debt was approximately $12.2 billion. In terms of per capita debt, Wisconsin’s debt burden was $3,734 per person, which is lower than the national average of $4,328 per person. Wisconsin’s debt-to-GDP ratio, which measures the state’s debt in relation to its economic output, was around 4.4% in 2021. This is lower than the national average of 4.7%. In 2020, there were 10,582 bankruptcy filings in Wisconsin, according to data from the U.S. Courts. This represents a decrease of 8.7% compared to the previous year. Of the 10,582 bankruptcy filings in Wisconsin in 2020, 7,355 were Chapter 7 filings, which is the most common type of bankruptcy. Chapter 7 bankruptcy allows for the liquidation of assets to pay off debts. The remaining 3,227 filings were Chapter 13 bankruptcies, which involves a repayment plan over a period of several years. Compared to other states, Wisconsin had a relatively low bankruptcy rate in 2020. The state ranked 37th in the nation in terms of bankruptcy filings per capita, with a rate of 1.8 filings per 1,000 residents.

Bankruptcy Laws in Wisconsin

Bankruptcy laws in Wisconsin are governed by federal law, specifically the United States Bankruptcy Code, which is the same for all states. However, there are some state-specific rules and exemptions that can affect how bankruptcy cases are handled in Wisconsin. In Wisconsin, individuals and businesses can file for either Chapter 7 or Chapter 13 bankruptcy. Chapter 7 bankruptcy is a liquidation bankruptcy that allows for the discharge of most unsecured debts, such as credit card debt and medical bills. To qualify for Chapter 7 bankruptcy, an individual must pass a means test, which compares their income to the state median income to determine if they have enough disposable income to repay their debts. Chapter 13 bankruptcy, on the other hand, involves a repayment plan that allows individuals to keep their assets while paying off their debts over a period of three to five years. To be eligible for Chapter 13 bankruptcy, an individual must have a regular source of income and be able to make regular payments towards their debts. In Wisconsin, residents can also take advantage of certain state-specific bankruptcy exemptions, which allow them to protect certain assets from being seized by creditors. These exemptions include protections for homes, motor vehicles, retirement accounts, and other personal property.

Considering Business Bankruptcy? What You Should Know

If you are considering business bankruptcy in Wisconsin, there are several things to keep in mind. Here are a few key considerations:

  • Understand your options: There are different types of bankruptcy filings available to businesses, including Chapter 7 and Chapter 11. It’s important to understand the pros and cons of each option and choose the one that best fits your situation. Bankruptcy Chapters 7, 13 and 11 – What You Need to Know 
  • Seek professional advice: Filing for bankruptcy can be a complex process, so it’s important to seek advice from a qualified bankruptcy attorney. They can help you navigate the legal requirements and ensure that you are making the best decisions for your business.
  • Review your finances: Before filing for bankruptcy, it’s important to review your business finances and assess your debts and assets. This will help you understand the scope of your financial difficulties and determine the best course of action.
  • Consider the impact on your employees: If your business has employees, filing for bankruptcy can have significant consequences for them. It’s important to consider how a bankruptcy filing will affect their jobs and livelihoods and communicate with them openly and honestly.
  • Understand the consequences: Filing for bankruptcy can have long-term consequences for your business and your personal finances, including damage to your credit score and difficulty obtaining credit in the future. It’s important to understand the potential consequences before making the decision to file.

Are All Debts Discharged in Bankruptcy?

While bankruptcy can discharge many types of debts, there are certain debts that cannot be discharged. Here are some examples:

  • Certain taxes: Some types of taxes, including income taxes that are less than three years old, property taxes, and payroll taxes, cannot be discharged in bankruptcy.
  • Student loans: Most student loans cannot be discharged in bankruptcy, although there are some limited circumstances under which they may be discharged.
  • Child support and alimony: Debts related to child support and alimony obligations cannot be discharged in bankruptcy.
  • Court-ordered fines and penalties: Fines and penalties imposed by a court, such as traffic tickets and criminal fines, cannot be discharged in bankruptcy.
  • Debts incurred through fraud or illegal activity: Debts that were incurred through fraud, embezzlement, or other illegal activities cannot be discharged in bankruptcy.
  • Debts incurred after filing for bankruptcy: Any debts incurred after filing for bankruptcy cannot be discharged.

How Bankruptcy in Wisconsin Affects Your Credit Score and Future Ability to Get a Loan

Filing for bankruptcy in Wisconsin can have a significant impact on your credit score and your ability to get a loan in the future. Your credit score will likely take a significant hit after filing for bankruptcy, as bankruptcy will remain on your credit report for up to 10 years. This can make it difficult to obtain credit in the future, as lenders may view you as a high-risk borrower. In addition to the impact on your credit score, bankruptcy can also limit your ability to obtain certain types of loans in the future. For example, if you file for Chapter 7 bankruptcy, you may be required to wait several years before being eligible for a conventional mortgage loan.

How Does Bankruptcy in Wisconsin Affect Tax Debt?

Bankruptcy in Wisconsin can have an impact on tax debts, but the specifics will depend on the type of bankruptcy you file, the nature of the tax debts, and other factors. Here are some general guidelines:

  • Chapter 7 bankruptcy: In a Chapter 7 bankruptcy, most of your unsecured debts, including some tax debts, can be discharged. However, certain tax debts are not dischargeable in bankruptcy, including recent income tax debts (within the last three years), payroll tax debts, and tax debts that resulted from fraud or willful evasion. These non-dischargeable tax debts will still need to be paid after the bankruptcy is complete.
  • Chapter 13 bankruptcy: In a Chapter 13 bankruptcy, you will create a repayment plan that lasts three to five years. During this time, you will pay back a portion of your debts, including tax debts. The specific amount you will need to pay will depend on the amount you owe, your income, and other factors. At the end of the repayment plan, any remaining eligible tax debts that were not paid off will generally be discharged.
  • Automatic stay: Regardless of the type of bankruptcy you file, when you file for bankruptcy, an automatic stay goes into effect. This means that creditors, including the IRS or state tax authorities, must stop all collection efforts while the bankruptcy is pending. This can give you some breathing room and allow you to focus on your bankruptcy case.
  • Tax liens: Bankruptcy may not eliminate tax liens that have already been filed against your property. However, in some cases, you may be able to have these liens removed or reduced through the bankruptcy process.

Will You Lose Your Assets in Bankruptcy in Wisconsin?

In bankruptcy, whether or not you will lose your assets will depend on the type of bankruptcy you file, the value of your assets, and the specific laws of Wisconsin. In a Chapter 7 bankruptcy, also known as liquidation bankruptcy, your non-exempt assets may be sold to pay off your debts. However, Wisconsin law allows you to keep certain assets through exemptions, which are determined by state law and can protect certain types and amounts of property. Examples of exempt assets under Wisconsin law include your primary residence, certain retirement accounts, personal property, and tools of your trade. If you have significant equity in a non-exempt asset, such as a second home or expensive vehicle, it may be at risk of being sold to pay off your debts. In a Chapter 13 bankruptcy, you will create a repayment plan that lasts three to five years, and you may be able to keep your assets while making payments towards your debts. Your assets are not typically sold off in a Chapter 13 bankruptcy. 

Statute of Limitations for Collections in Wisconsin 

In Wisconsin, the statute of limitations for collections on debts depends on the type of debt. Here are some common examples:

  • Written contracts: The statute of limitations for written contracts in Wisconsin is 6 years. This includes credit card debt and personal loans that were based on a written agreement.
  • Oral contracts: The statute of limitations for oral contracts in Wisconsin is 6 years. This includes debts that were agreed upon verbally, such as a promise to pay back money borrowed from a friend or family member.
  • Promissory notes: The statute of limitations for promissory notes in Wisconsin is 6 years. This includes debts that were created through a written agreement, such as a loan that was secured with a promissory note.
  • Open accounts: The statute of limitations for open accounts in Wisconsin is 6 years. This includes debts that were created through a revolving credit account, such as a credit card.

It’s important to note that the statute of limitations can be paused or reset in certain situations, such as if you make a payment on the debt or if the creditor obtains a judgment against you. It’s also possible for the statute of limitations to be extended if the creditor obtains a court order.

Cons of Bankruptcy in Wisconsin

While bankruptcy can provide relief from overwhelming debt, there are some potential downsides to consider before filing for bankruptcy in Wisconsin:

  • Impact on credit score: Filing for bankruptcy can have a significant negative impact on your credit score. A bankruptcy filing can remain on your credit report for up to 10 years, which can make it more difficult to obtain credit, rent an apartment, or secure employment in the future.
  • Loss of assets: In a Chapter 7 bankruptcy, non-exempt assets may be sold to pay off your debts. This could result in the loss of valuable property, such as a second home or expensive vehicle.
  • Public record: Bankruptcy filings are public record, which means that anyone can access information about your bankruptcy case, including creditors and potential employers.
  • Limitations on future credit: Even after your bankruptcy is complete, you may still face limitations on future credit. Some lenders may be hesitant to extend credit to individuals who have filed for bankruptcy in the past.
  • Costs: There are costs associated with filing for bankruptcy, including filing fees and attorney fees. While these costs can vary, they can be a significant expense for those already struggling with debt.

Compare the Pros and Cons of Bankruptcy: Pros and Cons of Filing Bankruptcy

Why People Regret Filing bankruptcy

People may regret filing for bankruptcy for a variety of reasons, including:

  • Stigma: There is a social stigma associated with bankruptcy that can make people feel ashamed or embarrassed. They may worry about what others will think of them and how it will affect their reputation.
  • Financial consequences: Filing for bankruptcy can have significant financial consequences, such as damage to credit scores, difficulty getting loans or credit in the future, and loss of assets or property. This can make it challenging to rebuild financially after the bankruptcy is discharged.
  • Emotional toll: Filing for bankruptcy can be emotionally draining, as it may involve facing the reality of one’s financial situation and acknowledging that they are unable to pay their debts. This can lead to feelings of stress, anxiety, and depression.
  • Loss of control: Filing for bankruptcy means that a court will take control of the individual’s financial affairs, which can make some people feel helpless or powerless.
  • Legal fees: Filing for bankruptcy can be expensive, and legal fees can add up quickly, which can make it difficult for some people to afford.

Don’t Qualify For Bankruptcy? Don’t Panic

If you do not qualify for bankruptcy in Wisconsin, it may mean that you do not meet the eligibility criteria for filing under Chapter 7 or Chapter 13 bankruptcy. In this case, you may need to explore other options for managing your debt, such as debt settlement. Debt settlement involves negotiating with creditors to settle your debts for less than the full amount owed. 

Learn more: What Are Your Options When You Don’t Qualify for Bankruptcy

Debt Settlement May Be A Better Option For A Number Of Reasons

  • Avoiding bankruptcy stigma: Debt settlement does not carry the same stigma as bankruptcy, which can be important if you are concerned about the long-term impact on your reputation.
  • Avoiding legal fees: Debt settlement may be less expensive than bankruptcy, as you may be able to negotiate directly with creditors and avoid hiring an attorney.
  • Maintaining some control: With debt settlement, you may have more control over the process and the outcome compared to bankruptcy, as you can negotiate directly with creditors and potentially preserve some of your assets.

Bankruptcy vs. Debt Relief: What’s Right For You and How We May Be Able To Help

CuraDebt Is At Your Service

CuraDebt, a professional debt settlement firm, is a great alternative to bankruptcy. We have a team of debt professionals who are ready to help you better understand and potentially eliminate your debts. Contact us today for your free consultation. 1-877-850-3328

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