Attorney at Debt Advisors Law Offices
Practice Areas: Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, Stop Foreclosure
Running a business isn’t easy, especially when money starts getting tight. Many Wisconsin business owners face tough choices when the bills keep coming, but income slows down. Understanding your legal options — including business bankruptcy in Wisconsin — can help you make thoughtful decisions instead of reacting under stress.
At Debt Advisors Law Offices, our attorneys have helped numerous Wisconsin business owners, from Milwaukee to Madison and beyond, understand how federal and state bankruptcy laws work. This guide breaks down when it might be time to think about business bankruptcy, the different paths available, and what the process really looks like.
Bankruptcy laws exist to provide struggling businesses with a chance to recover or close responsibly. Wisconsin business owners generally have two main options: federal bankruptcy and Wisconsin Chapter 128 (a state alternative).
Under federal law (Title 11 of the U.S. Code), there are three common routes for business entities:
Wisconsin also offers a state-level alternative called Chapter 128, which lets debtors repay what they owe over time under court supervision. Unlike federal bankruptcy, Chapter 128 doesn’t erase debt — it restructures it.
Eligibility Note (2024): The debt limit for Subchapter V small business cases dropped from $7,500,000 to $3,024,725 on June 21, 2024 (source: U.S. Courts).
Deciding when to file is often the hardest part. Most business owners hope things will bounce back, but some warning signs suggest the problem runs deeper. If your accounts payable are more than 20% past due for over 90 days, or your debt-service coverage ratio has stayed below 1.0 for multiple quarters, you may be approaching insolvency.
Other red flags include:
These issues often signal that temporary fixes won’t solve the problem. Spotting them early gives you time to look into small business bankruptcy options in Wisconsin before losing control of your business.
Automatic Stay Protection: When you file under federal bankruptcy law (11 U.S.C. § 362), creditors must pause lawsuits, foreclosures, and collection actions, giving you room to regroup.
When a Wisconsin business reaches a financial crossroads, federal bankruptcy laws offer structured paths toward relief. Each option fits a different situation, helping business owners either close out responsibly or rebuild for a fresh start.
Best for businesses that can’t realistically recover. The court appoints a trustee who sells the company assets and pays creditors. Once complete, the business closes permanently.
For viable businesses with steady income, Chapter 11, especially Subchapter V, allows debt restructuring without shutting down operations. Owners keep control, make payments under a plan, and stay open.
A typical Subchapter V timeline looks like this:
Subchapter V simplifies paperwork and reduces costs, making it an ideal option for Wisconsin small businesses that want to keep operating while managing debt.
Wisconsin is one of the few states offering a unique alternative through Chapter 128 of its statutes. It’s not bankruptcy under federal law but a state-supervised repayment process.
A business or individual files a petition in circuit court and proposes a payment plan lasting up to 36 months. Sometimes, a receiver is appointed to manage assets and pay creditors.
This process can pause garnishments or stop interest from building up, but it doesn’t wipe out debt or offer all the protections of federal bankruptcy. It’s faster, less formal, and can be a good choice for businesses facing temporary cash problems but expecting income to stabilize soon.
|
Feature |
Federal Bankruptcy (Ch. 7 / Subchapter V) |
Wisconsin Chapter 128 |
| Governing Law | U.S. Bankruptcy Code (Title 11) | Wisconsin Stat. § 128 |
| Outcome | Debt discharge or reorganization | Repayment plan or receivership |
| Automatic Stay | Yes, comprehensive | Limited protection |
| Typical Duration | 3–6 months (Ch. 7); ~90 days (Sub V) | 90–120 days |
| Eligibility | Based on debt limits and entity type | Wisconsin residents or businesses only |
| Control | Debtor remains in control (Sub V) | Receiver may oversee assets |
| Discharge | Available under federal law | Not available under state law |
Even if the business is incorporated, personal guarantees often make owners personally liable for business debts, such as loans, leases, and credit card bills.
SBA and EIDL loans typically include personal guarantees, meaning the owner remains responsible even if the business files for bankruptcy. In some cases, a parallel personal bankruptcy may be necessary to protect both business and personal assets.
Keep in mind that certain debts — like trust-fund taxes — can’t be discharged in bankruptcy. Addressing these early can help avoid penalties or enforcement actions.
Choosing whether to file for business bankruptcy in Wisconsin depends on your business’s long-term outlook, cash flow, and debt load.
Before deciding, it’s important to talk with a professional who can review your financials and goals. Every business is different.
At Debt Advisors Law Offices, we help Wisconsin business owners understand their options — from federal bankruptcy to Wisconsin’s Chapter 128 alternative — and find a realistic plan to move forward.
Chapter 7 ends business operations and liquidates assets, while Subchapter V allows a business to reorganize and stay open under court protection.
Yes. Chapter 128 allows repayment under state law, avoiding federal filing, but it doesn’t erase debt or offer the same level of protection.
Recurring losses, tax arrears, mounting lawsuits, or consistent inability to pay creditors for several months are strong indicators.
Owners remain liable for debts they personally guaranteed. Filing a personal bankruptcy may be necessary for complete relief.
Yes. Federal bankruptcy cases are available on PACER.gov, and Chapter 128 filings are recorded in Wisconsin circuit courts.
Filing for business bankruptcy in Wisconsin is a significant decision, but it can also be a responsible step toward stability and recovery. Whether you choose federal reorganization or Wisconsin’s Chapter 128, knowing your options helps you protect what you’ve built and plan your next chapter.
Debt Advisors Law Offices offers free, confidential consultations for business owners across Wisconsin, including Milwaukee, Madison, Kenosha, Sheboygan, Oshkosh, and Green Bay.
Our Wisconsin bankruptcy attorneys will review your finances, explain your options under both federal and state law, and help you choose the path that fits your goals.
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.
