Choosing Chapter 128 Reorganization or Bankruptcy?

Unlike a bankruptcy filing, this Wisconsin statute gets you out of debt without a courtroom

By Super Lawyers staff | Reviewed by Canaan Suitt, J.D. | Last updated on May 3, 2023 Featuring practical insights from contributing attorney Shannon E. Wynn

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Chapter 128 of the Wisconsin Statutes was enacted in 1937 and allows qualifying individuals to avoid filing for bankruptcy by paying off debts through a deliberate and scheduled repayment plan that is administered by a court-appointed trustee.

“You have to be a Wisconsin resident, and you have to have a steady source of income; those are the qualifications,” says Shannon E. Wynn, of Wynn at Law in Lake Geneva. “Occasionally I’ll get a call from somebody whose residency is in Illinois, and obviously, they don’t qualify. Social security counts as a steady source of income, or an employer would count—the vast majority of people meet the requirement.”

In most cases, creditors are required to accept remittance through monthly payments over a period of time, often extending to up to three years. This is true even when a creditor and a debtor have a contract that specifically dictates other terms.

For these, and other reasons, many Wisconsin residents who are in financial straits are encouraged to consider filing for Chapter 128 relief, although all who are considering this course of action should first speak with an experienced bankruptcy attorney who can explain their legal options.

The Benefits of Chapter 128 Relief

There are a number of benefits to filing for Chapter 128 relief that are not available to those who file for bankruptcy. For example, while chapter 128 applicants are required to repay all of their debts, they do not need to disclose every debt that they owe in order to be approved, but can include or exclude debts as desired. Furthermore, Chapter 128 debtors are not required to physically attend hearings and meetings with their creditors, but can send a trustee on their behalf.

“In bankruptcy, you can only file every so many years and get a discharge. With a 128, one of the times I use it fairly frequency is for somebody who has field bankruptcy in the past and may not be eligible again,” Wynn says.

Those who file for and are approved for Chapter 128 relief also receive an automatic stay on the accrual of interest on any current debts. Once a person files a Chapter 128 action, listed creditors are also barred from attempting to attach a debtor’s property, garnish a debtor’s wages, or collect on debts, although they are permitted to litigate against the debtor in court.

[Chapter 128] is kind of an odd duck. So many people don’t know it exists. And it’s not a hard concept to understand. But because we are one of the few states that offer something like this, I just don’t think people even know to look for it. It really is a good fit for a lot of people.

Shannon E. Wynn

Fortunately, even if a judgement is obtained against a debtor, the creditor in question will not be allowed to collect on the judgment or to negotiate a settlement with the debtor directly. Instead, the creditor must report the judgment to the assigned trustee, who will adjust the amount of monthly debt owed to the creditor.

Filing for Chapter 128 relief is also much simpler, less invasive, and less expensive than filing for bankruptcy, as all a person is required to do is complete and submit a simple petition and an affidavit of debts with the court. In comparison, those who file for bankruptcy relief must submit schedules of property or personal finances, undergo mandatory counseling, submit proof of tax returns, satisfy a means test, and calculate a number of exemptions.

“The filing fees are much lower for a 128. We’re talking 50 to 60 bucks, versus hundreds of dollars with a bankruptcy filing. Even if you’re looking at a Chapter 7, it would still be one-third to one-half of what you’d be spending,” Wynn adds. “In bankruptcy, though, you’re getting rid of all the debt. With a 128, you’re paying it back. There’s a bigger cost over the life of it for most people.”


Not all Wisconsin residents are eligible for Chapter 128 Reorganization relief and so may be required to file for bankruptcy. Fortunately, there are only a few exclusions of which residents should remain aware.

For instance, only those who receive a steady income or are currently employed are eligible to file for Chapter 128 relief in Wisconsin. Furthermore, those who file for Chapter 128 are not permitted to include costs, such as federal taxes when listing their debts. They are, however, allowed to include most types of unsecured debt, including utility bills, rent payments, medical and dental bills, and speeding ticket fines, as well as secured debts, such as house and car payments.

“It’s kind of an odd duck,” Wynn says. “So many people don’t know it exists. And it’s not a hard concept to understand. But because we are one of the few states that offer something like this, I just don’t think people even know to look for it. It really is a good fit for a lot of people.”

For general information on bankruptcy law, filing bankruptcy, bankruptcy alternatives, Chapter 13 bankruptcy, Chapter 7 bankruptcy, bankruptcy court, bankruptcy cases and more, see our bankruptcy overview.

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