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Looking at bankruptcy alternatives, P.2

Last time, we began looking at several alternatives to bankruptcy, including debt consolidation loans, debt settlement and credit/debt counseling. Another bankruptcy alternative for Wisconsin debtors is commonly known as a Chapter 128 proceeding. In such an action, a debtor establishes a personal receivership in which he or she may gradually reduce burdensome debts through a repayment plan.

Under the statute establishing the process, a trustee may be appointed to administer the debtor's estate and a protective order may be issued to require creditors to accept payments under a monthly repayment plan over a period of time up to three years, regardless of the terms of the contract. In addition, the law prevents interest from accruing, which is no small thing for those struggling with debts having high interest rates. 

A Chapter 128 proceeding puts into place an automatic stay against creditors under Wisconsin jurisdiction. This means creditors must cease attempting to collect debtors, placing liens against property, and garnishing wages. Creditors may still file a lawsuit against the debtor and obtain a judgement, but they may not attempt to collect it during a Chapter 128 action. In addition, statutes of limitation continue to toll during proceedings, giving a debtor additional relief.

Not all types of debt may be included in a Chapter 128 action, and there are certain prerequisites for filing. Debtors must also be cautious to follow the rules of the process and to avoid abuse and associated penalties. Working with experienced legal counsel helps ensure a debtor has clear guidance and strong advocacy through the process.

Sources:

Wisconsin Statutes: Section 128.21

Wisconsin Lawyer, "Chapter 128: Wisconsin's Bankruptcy Alternative," Jeffrey L. Murrell, May 2008, Volume 81, Number 5.

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