What Are Excused Exemptions for a Bankruptcy in Wisconsin?

by Tom Streissguth

Before you file for bankruptcy in Wisconsin, you should be aware of the state's laws regarding exempt property — property that cannot be seized by the bankruptcy trustee to repay your debts. Wisconsin has its own schedule of exemptions, which include a house, a vehicle, personal belongings, and any claims in a personal injury lawsuit. An important consideration is the value of the exemption; state law limits the amount you can exempt in each item up to a specific dollar amount.

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What is Bankruptcy?

Bankruptcy is a legal process of dealing with unmanageable debt and expenses. By filing a petition for bankruptcy, you are requesting that a federal court issue an automatic stay, which temporarily prevents any further collections or legal action against you. If you file a Chapter 7 bankruptcy, you allow a court-appointed trustee to seize and sell your property to repay your creditors. Individuals, married couples and businesses may file for Chapter 7 bankruptcy. In a Chapter 13 bankruptcy, you set up a repayment schedule under a trustee's supervision, and avoid seizure of your assets. A Chapter 11 bankruptcy allows you to reorganize a business while under the control of the bankruptcy court. At the end of the bankruptcy process, the court discharges (cancels) all debts that can legally be discharged, allowing you a financial "fresh start."

What is Exempt Property?

Bankruptcy law recognizes that taking everything from a debtor — even a home and personal effects — will work against the law's intent to return the debtor to a productive and stable financial condition. Thus the law allows debtors to "exempt" assets and property when going through a Chapter 7 or Chapter 11 liquidation of assets. The state of Wisconsin has its own laws regarding exempt property, which do not match those found in the federal bankruptcy code. Debtors who file for bankruptcy in Wisconsin may choose either federal or state exemption schemes.

Homestead

The most important item of exempt property is the debtor's personal residence (known in legal terminology as a homestead). In Wisconsin, the law allows an individual an exemption of up to $75,000 of value in a homestead; a couple would together have an exemption of $150,000. A home with greater value would be subject to a partial lien by a mortgage company that has extended a loan secured by the property.

Personal Property and Vehicles

Wisconsin also exempts up to $12,000 of consumer goods, such as furniture, appliances, electronics, clothing and other household items. In addition, the debtor may exempt a vehicle with a fair market value of up to $4,000. If the vehicle is worth more, then it is subject to seizure by the trustee.

Insurance and Claims

State bankruptcy exemptions in Wisconsin also include life insurance proceeds due to the debtor. This exemption is subject to the bankruptcy court's approval and may only be taken to the extent that the debtor needs the proceeds for support. Any life insurance policies held by the debtor with less than $4,000 in cash value are also exempt. If the debtor is a party in a personal injury claim, up to $50,000 of proceeds from such a claim is exempt. Wisconsin also exempts fire and casualty insurance claims paid on exempt property.

Miscellaneous Exemptions

Wisconsin law also exempts child support or alimony payments due the debtor, as well as 75 percent of the debtor's net income. Federal benefit payments, such as Social Security disability, Supplemental Security Income, and veteran's disability benefits are exempt. A business that files for bankruptcy may exempt equipment used in that business, such as computers, office equipment, inventory, books and machinery, up to a total value of $15,000. Finally, the law exempts cemetery plots, burial facilities, coffins and tombstones intended for use by the debtor or his family.