Attorney at Debt Advisors Law Offices
Practice Areas: Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, Stop Foreclosure
Data from U.S. Courts indicate over 380,000 non-business bankruptcies were filed in the United States in 2023 alone. Thousands of those came from Wisconsin. For individuals facing mounting debts, bankruptcy can offer a structured, legal path to financial relief. However, understanding which type of bankruptcy is right for you—Chapter 7 or Chapter 13—can be challenging without clear guidance.
Each type serves a different purpose. Chapter 7 allows eligible individuals to discharge unsecured debt quickly. Chapter 13 involves a more extended repayment plan that can help protect assets like your home or car.
In this guide, we’ll break down the differences between Chapter 7 and Chapter 13 bankruptcy under Wisconsin law, explain how each one works, and help you decide which may be the better fit for your financial situation.
Bankruptcy is a legal process that helps individuals or couples eliminate or repay their debts. It’s not a quick fix. Instead, it can offer a turning point toward financial stability. In Wisconsin, bankruptcy is filed under federal law but includes some state-specific rules and exemptions that protect specific property.
There are two main types of personal bankruptcy: Chapter 7 and Chapter 13. Each serves a different purpose, depending on your income, assets, and types of debt.
Chapter 7 is often referred to as liquidation bankruptcy. It’s designed for people who can’t afford to pay back their debts and need a fresh start. Chapter 13, however, is a reorganization plan that lets you pay back some or all of your debts over time.
Under the U.S. Bankruptcy Code, Chapter 7 allows debtors to eliminate unsecured debts like credit cards and medical bills, while Chapter 13 involves a court-approved repayment plan over three to five years.
These are not one-size-fits-all solutions. Each has its process, benefits, and drawbacks. Understanding how Wisconsin law applies to bankruptcy cases can help you better determine which option is right for your situation.
Chapter 7 bankruptcy is the most common form of bankruptcy. It’s meant for individuals with low income and little to no ability to repay their debts.
You must pass the means test to qualify for Chapter 7. This test compares your income to the state median. You may be eligible to file if your income is below the threshold. Even if you earn more, certain expenses might still allow you to qualify.
In a Chapter 7 case, most unsecured debts—like medical bills, credit card balances, and personal loans—can be discharged. That means you’re no longer legally obligated to pay them.
However, some debts, such as student loans, recent taxes, and child support, typically cannot be discharged.
The bankruptcy means test determines eligibility for Chapter 7 based on household income relative to the state median.
You may need to give up some property to pay back a portion of what you owe. However, Wisconsin has exemptions that help protect certain assets. Wisconsin law protects certain assets through exemptions, including a homestead exemption of up to $75,000 for individuals. Chapter 7 generally takes about three to six months to complete.
Chapter 13 bankruptcy is structured differently. It doesn’t erase debts right away. Instead, with this form of bankruptcy, you commit to a repayment plan over three to five years. It’s designed for people with regular incomes who want to keep assets like their homes or cars.
You work with your attorney to propose a plan that repays part or all of your debt based on what you can afford. Once the court approves the plan, you make monthly payments to a bankruptcy trustee, who distributes the money to your creditors.
This option can stop foreclosure, repossession, and collection efforts while giving you time to catch up on missed payments.
Chapter 13 helps debtors keep their homes, catch up on mortgage arrears, and repay a portion of their debt while avoiding asset liquidation.
Chapter 13 can be a good option if you’re behind on mortgage payments, owe back taxes, or have non-dischargeable debts that Chapter 7 can’t handle.
The decision between Chapter 7 and Chapter 13 depends on several key factors. Here’s a side-by-side look at how they compare:
|
Criteria |
Chapter 7 |
Chapter 13 |
| Type of Bankruptcy | Liquidation | Reorganization |
| Time to Completion | 3 to 6 months | 3 to 5 years |
| Asset Protection | May lose non-exempt property | Keep all property with payment plan |
| Foreclosure Defense | Temporary | Can stop and repay arrears |
| Income Requirement | Must pass means test | Must have regular income |
| Payment Plan | No | Yes |
| Credit Report Impact | Up to 10 years | Up to 7 years |
This table shows how your income, assets, and financial goals can determine the right fit.
Choosing between Chapter 7 and Chapter 13 isn’t just about your income. It’s also about what you want to protect, what kind of debt you have, your goals.
Chapter 7 may be the better option if your income is low and you have mostly unsecured debt. On the other hand, if you’re trying to avoid foreclosure or catch up on loan payments, Chapter 13 might offer the flexibility you need.
Assets also play a significant role in this decision. Do you own valuable property that would be at risk in a Chapter 7 case? A Chapter 13 repayment plan could help you keep it.
Your future goals matter, too. If you’re focused on long-term credit rebuilding, Chapter 13 may provide a slightly softer landing regarding credit report impact since you’re paying back part of what you owe.
No matter which chapter you choose, the bankruptcy process in Wisconsin follows a similar path:
You’ll begin with a credit counseling session. Participating in this session is required before filing. Then, your attorney files a petition with the bankruptcy court.
From there, the court assigns a bankruptcy trustee to oversee your case. You’ll need to attend a meeting of creditors, also known as a 341 meeting, where you answer questions about your financial situation under oath.
In Wisconsin, bankruptcy cases are filed in either the Eastern District or Western District Court, depending on your location.
You’ll also complete a debtor education course before receiving your discharge (in Chapter 7) or before completing your plan (in Chapter 13).
Throughout the process, automatic stay protection prevents creditors from calling, suing, or garnishing your wages.
It’s technically possible to file for bankruptcy on your own. However, it’s not always a good idea—especially if your case involves complex issues like divorce, tax debt, or valuable assets.
A local attorney can walk you through the laws that apply specifically in Wisconsin. They can help you make the right decisions and avoid costly errors.
Bankruptcy has long-term consequences. Getting trusted advice can make all the difference.
Chapter 7 eliminates most unsecured debt quickly but may require selling some assets. Chapter 13 lets you repay debts over time and keep your property.
You must pass the means test, which compares your income to the Wisconsin median. You may not be eligible if your income is too high.
Yes. Wisconsin exemptions may protect your home. Chapter 13 also helps you catch up on mortgage payments if you’re behind.
Yes. Once you file, an automatic stay goes into effect, stopping most collection efforts, including wage garnishments and foreclosures.
Chapter 7 remains for 10 years, while Chapter 13 stays for 7 years (CFPB source). You can begin rebuilding credit soon after discharge.
You’re not required to have one, but a qualified bankruptcy attorney can help you avoid errors and protect your assets.
Bankruptcy isn’t something anyone hopes to go through. However, if you’re facing overwhelming debt, it may offer the best path to relief. Understanding the difference between Chapter 7 and Chapter 13 is essential to making the right decision.
Chapter 7 may offer a faster discharge if your income is low and you have few assets. Chapter 13 provides a structured plan to keep your property and manage payments over time. Either way, both options exist to give you a fresh financial start.
If you’re ready to explore your options or are still unsure which chapter fits your situation, Debt Advisors Law Offices is here to help. With experience guiding Wisconsin residents through complex bankruptcy cases, our team is ready to provide the clarity and support you need.
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.
