The Statute - Wisconsin Chapter 128.21

Summary

Chapter 128 Summary

This Wisconsin Chapter 128 statute is Wisconsin’s affordable alternative to bankruptcy.  The statute allows Wisconsin residents to enter into a debt consolidation plan with the aid of a Trustee and protection of a Circuit Court.  Under a consolidation plan,  creditors are paid the amount that is due as of the date the case is filed over three years with no further interest or late payment fees.  While the plan is in effect, creditors communicate with the trustee, and generally do not take any further action to collect, except to file a claim for the balance due at filing.  When the amount due is paid, the court enters an Order that deems the debts paid in full.  An Order deeming the debts paid in full looks great on a credit report, compared to bankruptcy.

Who Is Eligible?

Who is Eligible?

Anyone who lives in Wisconsin is eligible to use the Wisconsin Chapter 128 if they have regular income, cannot keep up with payments on credit cards, medical bills, utilities, etc., but can afford to pay the debts in full without interest, fees or penalties over no more than three years.

Allowable Debt

Chapter 128 Allowable Debt

A big advantage of Chapter 128 debt consolidation plans is that a debtor does not have to include all debt.  The debtor can choose which debts to include in the consolidation plan.  Unsecured debts are best.  The following is a list of examples:

  • Credit Cards
  • Payday Loans
  • Medical Debts
  • Debts placed at Collection Agencies
  • Deficiency Balances (after repossession)
  • Past Due Utility Bills
  • Wisconsin Income Tax
  • Auto Title Loans
  • Private Student Loans

Most secured debts, such as conventional car loans and mortgages, are not suitable, nor are obligations owed to the federal government, such as certain student loans and federal income taxes.

Advantages

Advantages of Chapter 128 Debt Consolidation Plans

There are many benefits in choosing a Chapter 128 voluntary debt consolidation to deal with too much debt. Cases are easy and inexpensive to file, an attorney is not required, there are no court appearances. Here are few more advantages:

  • Creditors cease collection efforts once they receive notice. No more phone calls, letters or threats of other collection action. Garnishments stop. Creditors may initiate or continue a lawsuit to obtain a judgment, but may not take any further action. Creditors rarely do this.
  • The court appoints a trustee who assists creditors with filing claims and otherwise ceasing collection efforts.
  • It’s easy: no more paying individual bills. You make payments to the trustee, and the trustee pays the individual creditors.
  • Payments can be made to the Trustee by either a voluntary monthly payment or a court ordered payroll deduction.
  • They save you money, and creditors get 100% of what is owed as of the day you file your case. No interest, fees or penalties are charged after the case is filed.

The Statute

Wisconsin Chapter 128.21

TRADE REGULATIONS

CHAPTER 128. CREDITORS' ACTIONS

Current through 2005 Act 2, published 3/11/05

128.21. Voluntary proceedings by wage earners for amortization of debts

Any person whose principal source of income consists of wages or salary may file a verified petition with the circuit court in the county of his or her residence stating that the person is unable to meet current debts as they mature, but is able to make regular future payments on account sufficient to amortize the debts over a period of not more than 3 years, and that he or she desires the aid of the court to effectuate the amortization. The petition shall also set forth the names and addresses of any creditors who have levied any executions, attachments or garnishments, and of any garnishees, and the court shall forthwith, by order, require that proceedings for the enforcement of the executions, attachments or garnishments be stayed during the pendency of proceedings under this section. The petition shall be accompanied by the fee prescribed in s. 814.62(2).

After the filing of a petition under this section and until the dismissal of the proceedings, no execution, attachment or garnishment may be levied or enforced by any creditor seeking the collection of any claim which arose prior to the proceedings, unless such claim is not included by the debtor in the claims to be amortized pursuant to sub. (3r). With respect to the claims to be amortized the time between the filing of the petition and the dismissal of the proceedings shall not be counted as a part of the period of any statute of limitation.

(3) On the filing of the petition the court shall appoint a disinterested trustee. The trustee shall forthwith meet with the debtor; make a list of the debtor's creditors, with their addresses and the amounts owing to each, which the debtor shall sign and verify; and send notices to each of the amount claimed to be due that creditor, and of a meeting to be held in the trustee's office not less than 5 nor more than 10 days thereafter, for the purpose of considering an amortization plan and of determining the claims to be covered by the plan. Upon conclusion of the meeting the trustee shall do either of the following:

(a) Report to the court that no equitable plan of amortization is feasible or needed in which case the court may forthwith dismiss the proceedings.

(b) Recommend to the court a plan of amortization calculated by weekly or monthly payments, to discharge in full the claims of the creditors listed in the plan within a period of not exceeding 3 years.

(3g) The trustee shall attach to a plan recommended under sub. (3)(b) the written consents and objections, if any, of the creditors present or represented at the meeting, and an analysis, with the trustee's recommendations regarding the disposition, of any claim whose amount is in dispute or appears to be uncertain.

(3r) The court shall forthwith enter an order approving the plan recommended under sub. (3)(b) and determining, for the purposes of the plan, the amounts of the claims, unless in any such written objection included under sub. (3g) a creditor asks for a hearing respecting the plan or the amount of the creditor's claim, or the person to be trustee, in which case the court shall set a date for a hearing as soon as may be, on notice of the debtor, the trustee and creditors. At the hearing the court shall enter an order either approving the plan, if satisfied that it is feasible and equitable, and determining, for the purposes of the plan, the amounts of the claims, or dismissing the proceedings, or modifying and approving the plan as the court considers just; and the court may appoint a different trustee if the one appointed is objected to.

(4) If the plan recommended under sub. (3)(b) or a modification of the plan is approved under sub. (3r), the debtor shall make the periodic payments provided for in the plan to the trustee, and may make additional payments from time to time to the trustee, and the trustee shall distribute the payments proportionally among the creditors listed in the plan, less all of the following:

(a) A deduction for the trustee's compensation to be fixed by the court at the time of approving the plan in an amount not exceeding 7% of each distribution, if the payments are made through an assignment to the trustee of a portion of the debtor's wages or salary, and not exceeding 10% if no such assignment is made.

(b) A deduction equal to the amount of the postage necessary for the mailing of payments and of the notices of the meeting provided for in sub. (3), and of any correspondence with creditors.

(4m) If any payment under sub. (4) is so small as to make its immediate distribution impractical or needlessly expensive, the trustee shall deposit it in a special trustee account, and may make additional deposits until the amount is large enough for distribution, but no payments shall remain undistributed for longer than 90 days.

(5) If the debtor defaults in any payment provided for under the plan for a period of more than 30 days the trustee shall, and before the end of the 30-day period may, report the matter to the court with the trustee's recommendations. The court shall either dismiss the proceedings or, if satisfied from the trustee's report that the debtor is in good faith and should be able to make good the default, extend the period of grace for not to exceed 30 days. At the end of the grace period, the trustee shall again report to the court and if all defaults have not then been cured the court shall immediately dismiss the proceedings. If the debtor makes preferential payments to creditors during the pendency of the proceedings, or appears for any reason to be abusing the privileges of this section, the trustee shall promptly report the matter to the court and the court may dismiss the proceedings. If the claims of all creditors as listed in the plan are satisfied in full, the trustee shall, upon completion of the final distribution, report to the court and the court shall dismiss the proceedings.

(7) Neither the determination of the amount of any claim for the purposes of the plan, nor the acceptance of payments under the plan, shall affect the right of any creditor to litigate the creditor's claim and obtain judgment on the claim, or the right of the debtor to dispute the claim. The amount of any judgment shall be substituted by the trustee for the amount fixed in the plan.

(8) Any secured creditor who wishes to realize on his or her security shall give the trustee at least 5 days' notice in writing of the time, place and manner of the proposed realization, and shall notify the trustee of the amount realized, by which amount the creditor's claim as listed under the plan shall be reduced.

(10) The supreme court may from time to time promulgate rules and forms, not inconsistent with this section, to carry out the intent of this section and to promote its effectiveness, and may cause forms of petitions to be printed and distributed to the clerks of the circuit courts who shall, upon request, and without charge, assist debtors in the preparation of their petitions.