I have had many clients over the years inquire about alternatives to bankruptcy, specifically Wisconsin’s unique “Chapter 128”. Chapter 128s are cheaper, faster, simpler, and impose fewer requirements on the debtor, compared to federal bankruptcy. However, they also offer far fewer protections. Namely, all debts must be paid in full within 3 years. There is no chance of discharge. There is no stay against repossession or foreclosure.
So limited are the protections of Chapter 128, that I have found only three scenarios in which I would consider recommending them to my clients:
- When the client’s debt is so low, that the cost of a federal bankruptcy would outweigh the benefit.
- When the client is ineligible for a discharge, even under Chapter 13, due to a prior bankruptcy, and has no secured or priority debts worth curing in bankruptcy.
- The client is facing a utility shut-off and cannot afford the time or expense necessary to file bankruptcy.
That is, until now. Milwaukee County Circuit Court Judge, the Hon. William S. Pocan issued a declaratory judgment sought by WE Energies. The case is 11-CV-8212, In the matter of the Voluntary Amortization of Debts of Joyce S. Smith. The judge ruled that Wis. Stat. § 128.21 enumerates several collection actions that are prohibited when a petition is filed, and disconnection of utility services (or failure to reconnect) is not listed among them. Therefore, under the plain-meaning of the statute, Chapter 128 no longer prevents a utility disconnection, nor does it guarantee that disconnected utility services will be reconnected. And remember, this decision is not just for WE Energies. Expect Wisconsin Public Service (WPS), Alliant, and Wisconsin Power & Light (WP&L) to exercise their newly spelled-out rights pursuant to this judgment.
Debtors facing utility disconnect must either bring the account current or seek federal bankruptcy protection.