A Chapter 128.21 is a unique Wisconsin statute that
allows a debtor to repay unsecured debts of their choosing, without
interest, over a 3 year / 36 month period. Debtors can even repay Wisconsin state income
taxes through a Chapter 128!
Filed in the state circuit court of the county you
live in, a Chapter 128 petition asks for the circuit court’s assistance in
repaying the debts of the debtor by appointing a Chapter 128 trustee to administer
the debtor’s case. Very similar to a
Chapter 13 bankruptcy trustee, a Chapter 128 trustee collects the debtor’s
voluntary payments and then distributes that money to the debtor’s creditors. The trustee payments can be made directly to
the trustee, or by a payroll deduction through the debtor’s employer.
**Note:If the debtor makes the payment directly to the trustee, the trustee’s commission
is limited to 10% of each distribution; but the trustee’s commission is limited
to 7% of each distribution if the debtor’s trustee payments are payroll
The benefit of a Chapter 128 is that once the debtor’ petition is approved by the court, the creditors included in the repayment plan cannot collect their debt from the debtor by any means other than through the Chapter 128 repayment plan. Therefore, the debtor can prevent wage garnishments and seizures of property.
A Chapter 128 is more flexible than bankruptcy in some respects; however, it does not offer debtors as many protections. The primary limitation of a Chapter 128 is that the “stay” or the legal protection that limits creditors’ collection efforts, only applies to the creditors included in the Chapter 128 repayment plan. In our example above, the eight creditors not included in the debtor’s repayment plan would be free to continue direct collection efforts against the debtor. Also, a Chapter 128 does not limit a creditor, even if included in the Chapter 128, from suing and docketing a judgment against the debtor (but that creditor would only be able to collect on the judgment through the Chapter 128). The debtor, of course, has the right to defend in the lawsuit.
Other limits are that a debtor cannot pay for a secured debt (i.e. your vehicle loan) through the Chapter 128 unless the secured creditor consents. You also cannot stop a foreclosure against your home by filing a Chapter 128. While debtors can pay for delinquent utilities through a Chapter 128, you cannot stop utility shutoffs with a Chapter 128.
You should consult with an attorney to determine if a Chapter 128 is in your best interest!
The only Chapter 128 trustee I work with is Sandie Miske and
her associate Meg Hemery at GAP Financial Services. GAP is a local company completely dedicated
to providing Chapter 128 trustee and financial management services.
If you have questions about filing a Chapter 128, please give me a call. Or, you can get a hold of Sandie and Meg toll-free at (866) 246-3552.