If you’re considering Chapter 7 bankruptcy in Wisconsin, understanding the process can make it feel more manageable. Here’s a clear overview of how Chapter 7 typically works:
1. What Chapter 7 means (liquidation)
Chapter 7 is known as a “liquidation” bankruptcy. This means that, in some cases, non-exempt assets can be sold by a trustee to pay creditors.
In many cases, however, people are able to keep most or all of their property depending on how Wisconsin bankruptcy exemptions apply.
2. Eligibility and the means test
Chapter 7 bankruptcy has income and eligibility requirements. The “means test” looks at your average household income over the last 6 months and compares it to Wisconsin median income levels:
• $71,168 (household of 1)
• $90,252 (household of 2)
• $108,516 (household of 3)
• $133,384 (household of 4)
For households larger than 4, add approximately $11,000 for each additional person.
If your income is below the median, you generally qualify. If it’s above, additional calculations are used. There are also other requirements, including limits based on prior bankruptcy filings, and you cannot file Chapter 7 bankruptcy if you’ve had a recent discharge within certain timeframes.
3. Credit counseling requirements
There are two required courses:
• A credit counseling course before you file
• A debtor education course after you file
Both must be completed through approved providers.
4. Filing the case
Your case begins when a bankruptcy petition is filed with the court. This includes detailed information about your income, debts, assets, and financial history. An experienced bankruptcy attorney in Wisconsin can help ensure everything is completed accurately. These filings are detailed, and mistakes can cause delays or complications.
5. Secured vs. unsecured debts
• Secured debts (like a car loan or mortgage) are tied to specific property
• Unsecured debts (like credit cards or medical bills) are not tied to collateral
Chapter 7 bankruptcy eliminates most unsecured debts. Secured loan agreements are also wiped out but are often reaffirmed through a voluntary agreement if you choose to keep the property.
6. Assets and exemptions
Not all property is treated the same in bankruptcy. Wisconsin bankruptcy exemptions protect certain assets from being used to pay creditors.
Having an experienced attorney matters. Maximizing exemptions can make a significant difference in what you are able to keep.
7. The 341 meeting (meeting of creditors)
About 1 month after filing, you’ll attend a brief hearing with the trustee. Creditors can attend, but often do not. You’ll answer questions under oath about your finances and the information in your petition.
8. Discharge
The court will issue a discharge order, typically within a few months, eliminating qualifying debts and providing a fresh financial start.
If you want to keep property that is not protected by exemptions, or if you do not meet the eligibility requirements for Chapter 7 bankruptcy, there are other options available, including Chapter 13 bankruptcy, that may be a better fit depending on your situation.
If you’re facing financial stress, you don’t have to navigate it alone. Freeman and Johnson Law Office is here to help guide you through the Chapter 7 bankruptcy process in Wisconsin every step of the way.
Serving Rock County and Jefferson County
