Legal Question in Bankruptcy in Wisconsin

Income for Self Employed-Chapter 7

You are wrong in assuming that salaried debtors in chapter 7 are always allowed to keep their income. There is a WI state exemption for 75% of income earned but not yet paid on the date of filing, and federal exemptions allow a "wildcard" exemption claimable in any asset not otherwise exempt up to certain dollar maximums including income, depending upon the amount of equity in the debtor's homestead. As for future income, salaried debtors and self employed debtors are treated the same. Both are only allowed to keep their future income so long as their filing is not deemed "abusive" under section 707 (b). Local practice in the Eastern District of WI defines this term as having little or no monthly disposable income after deduction of reasonable expenses (including business expenses for the self employed). If the debtor does have disposable monthly income remaining, the judge will generally order the case dismissed as an abusive filing. Prior to dismissal, however, the debtor has the option to convert to a chapter 13 case, where all disposable income is seized via a garnishment of wages for a three to five year period and distributed by the trustee to creditors.