Since the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, there have been new restrictions to Chapter 7 qualification. Some of these, such as the credit counseling requirement, are uniform nationwide. Others, such as the means test, are state-specific. To qualify for Chapter 7 bankruptcy in Wisconsin, a resident of the state must file in the appropriate bankruptcy court and demonstrate passage of the means test.
There are two prongs to the means test. First, a debtor must compare his annualized income to the state median income for his household size. To calculate income, the debtor should average his gross income for the previous three months and multiply by 12. If this amount is below the state median income, he automatically qualifies for Chapter 7. The official income data is published by the U.S. Census Bureau annually (see Additional Resources below). In 2009, the median income for a single wage earner in Wisconsin was $42,816. For a family of two it was $57,657; for three, $67,103; and for four, $77,760. For each additional member of the household, add $6,900.
A debtor who does not pass the means test by the primary method can still qualify if her monthly disposable income is insufficient to meet the requirements of a Chapter 13 repayment plan. To calculate disposable income, the same three-month average income figure is used, and from it various deductions are made for allowed expenses. The amount of the deductions is determined by state and local standards (see Additional Resources below). Debtors who qualify for a deduction can use the full amount of the deduction, regardless of their actual expenses. For example, if $200 is allowed for an automobile, the full deduction can be made for a debtor paying only $100 monthly on her auto, but no deduction is allowed for an individual without a car. If, after deductions, the remaining income multiplied by 60 is less than 25 percent of dischargeable unsecured debts, the debtor qualifies for Chapter 7.
Each state has at least one U.S. Bankruptcy Court. Wisconsin is divided into two bankruptcy districts. Debtors should file in the district office that serves their county. The Western District of Wisconsin has its main office in Madison and a divisional office in Eau Claire. Hearings also take place in Superior, Duluth, Wausau and LaCrosse. The Eastern District of Wisconsin has its sole office in Milwaukee. Each district maintains its own local rules, which should be consulted before filing a Chapter 7 bankruptcy. All the necessary forms are available online and can be filed electronically.
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