Section 128 vs Chapter 13 Bankruptcy
When it comes to dealing with debt, many options are available here in Wisconsin, including debt consolidation. Two of the most popular forms of consolidation are Chapter 13 Bankruptcy and a unique Wisconsin Statue called Section 128. While both options allow many to repay obligations over time and get debt-free, there are notable differences between the two.
Understanding Section 128
Section 128 is a right arising under state law. It allows Wisconsin residents who are working to avoid the stigma of bankruptcy and re-pay their debts without interest over a term of 3 years.
It can be used to pay off most unsecured debts, such as:
- Payday loans
- Medical bills
- Unsecured signature loans
- Credit cards
- And it also prevents these creditors from garnishing wages
If you are behind on a secured loan such as a car loan or mortgage, Section 128 will not prevent the secured creditor from repossessing their collateral or from foreclosing on their lien. One who files 128 is not required to include all their debt in the repayment plan and can exclude the debt from the plan, such as a credit card, and continue credit card privileges with the excluded creditor.
Understanding Chapter 13
Chapter 13 bankruptcy is a consolidation governed by federal law. Many find their monthly payment under Chapter 13 is lower than under Section 128.
This is because Chapter 13 gives you more time (up to 5 years) to re-pay your debt and, in many cases, allows you to discharge a portion of the debt you owe. Whether you stand to discharge all, some, or none of your debt typically depends on your income and assets.
Chapter 13 also stops secured creditors from repossessing their collateral and foreclosing on their lien. In the case of a delinquent mortgage, you can give yourself 3-5 years to re-pay the arrears you owe.
In the case of other secured loans, like a car loan, you can pay what you owe over time and on terms that are more favorable for you. Federal law requires you to disclose all your creditors when you file Chapter 13.
Contact a Milwaukee Bankruptcy Lawyer to Help You
If you are having debt problems, seek the advice of an experienced Milwaukee bankruptcy Attorney. At Sapinski Law Office, S.C. we will help you review all your options, including Section 128 and Chapter 13.