Attorney at Debt Advisors Law Offices
Practice Areas: Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, Stop Foreclosure
When debt becomes unmanageable, many people start exploring bankruptcy as a way to regain financial control. While Chapter 7 is often the most recognized form of bankruptcy, not everyone qualifies. For individuals who earn a steady income but cannot pass the Chapter 7 means test, Chapter 13 bankruptcy may be an option.
This form of bankruptcy allows you to reorganize debts rather than eliminate them outright. In this guide, we’ll explain how Chapter 13 works, who it may benefit, and what to expect if you decide to pursue it.
Chapter 13 bankruptcy in Wisconsin is often referred to as “reorganization bankruptcy.” Unlike Chapter 7, which involves liquidating non-exempt property to pay creditors, Chapter 13 allows individuals to keep their property while committing to a repayment plan.
The repayment plan generally lasts between three and five years and is supervised by the bankruptcy court. The amount you pay depends on your income, household expenses, and the types of debts you owe. At the end of the repayment period, remaining eligible debts may be discharged.
“Chapter 13 bankruptcy enables individuals with regular income to develop a plan to repay all or part of their debts.” – U.S. Courts (source)
This structure makes Chapter 13 appealing to those who want to resolve their debts in an organized way without giving up essential property.
Chapter 13 bankruptcy is not for everyone, but certain financial situations make it a practical option. Below are some common scenarios where filing under this chapter may provide relief.
One of the most significant aspects of Chapter 13 is its ability to stop foreclosure through an automatic stay. Filing creates a legal pause on creditor actions, giving homeowners an opportunity to catch up on overdue mortgage payments.
While it is not a guaranteed solution, it provides time and a legal structure that Chapter 7 does not. In some cases, Chapter 13 may also allow the restructuring or even removal of a second mortgage, depending on the home’s value and court approval.
If you own property tied to secured loans, such as a vehicle, Chapter 13 may provide a way to keep it while restructuring payment obligations. Instead of losing the asset, you may continue making payments through the court-approved plan.
This can be a valuable tool for people who rely on their car for work or need to protect important personal property.
Another unique benefit of Chapter 13 is the potential protection it offers for co-signers on consumer debts. If a family member or friend has co-signed a loan, the repayment plan may shield them from collection efforts.
While not universal, this feature can reduce stress for those concerned about the financial impact on loved ones.
Understanding the differences between Chapter 7 and Chapter 13 is critical when evaluating which option might fit your circumstances.
|
Feature |
Chapter 7 Bankruptcy |
Chapter 13 Bankruptcy |
| Process | Liquidation of non-exempt assets | Reorganization with repayment plan |
| Duration | Typically 3–6 months | Usually 3–5 years |
| Property | Some assets may be sold | Property is generally retained |
| Income Requirement | Must pass means test | Available with steady income |
| Co-Signer Protection | Not available | Possible in consumer debt cases |
| Foreclosure | May not stop foreclosure | Can pause foreclosure proceedings |
Chapter 7 is often faster but more restrictive, while Chapter 13 is slower but allows for greater flexibility and asset retention. Because bankruptcy laws can be complex, speaking with a Wisconsin bankruptcy lawyer can help you understand whether Chapter 13 or another option fits your unique financial circumstances.
Bankruptcy impacts credit regardless of the chapter filed. Chapter 13 will remain on your credit report for up to seven years. During that time, lenders will see the bankruptcy filing when evaluating applications.
However, because Chapter 13 involves repayment of debt rather than full discharge, some lenders may view it more positively than Chapter 7. Individuals who consistently make payments during their repayment plan may find it easier to rebuild credit gradually. The Federal Trade Commission provides additional resources on how to approach credit repair after bankruptcy (FTC resource).
Chapter 13 has both advantages and drawbacks that should be considered carefully.
Most repayment plans last three to five years, depending on income and debt structure approved by the court.
Yes. Filing creates an automatic stay that halts foreclosure, though long-term results depend on consistent repayment under the court-approved plan.
Not all debts qualify. Child support, alimony, and certain student loans usually remain outside the repayment plan.
It negatively impacts credit at first, but repayment efforts may demonstrate responsibility, helping rebuild credit over time.
In some circumstances, lien stripping may eliminate a second mortgage, though approval depends on property value and the bankruptcy court’s decision.
Chapter 13 bankruptcy is not the right solution for everyone, but it can provide a lifeline for people with regular income who need time to reorganize their debts. It offers a chance to prevent foreclosure, retain valuable property, and reduce the pressure of unmanageable bills. While it does have limitations, Chapter 13 can create a structured path toward long-term financial stability.
If you are exploring whether Chapter 13 may be suitable for your situation, professional guidance is essential. Debt Advisors Law Offices has years of experience helping individuals understand their bankruptcy options and move toward a fresh financial start. Contact our team today to learn more about how Chapter 13 may apply to you.
Learn about bankruptcy protections, types of bankruptcy, how to get started, what to expect, and who to trust. Filing bankruptcy is the ONLY way to completely eliminate debt. If bankruptcy is right for you, it offers powerful protections that cannot be achieved through alternative solutions such as hardship relief, loans, or debt settlement.
