How to File Bankruptcy in Indiana
If you are unable to make payments on your credit cards, you may be considering filing bankruptcy. If you're an Indiana resident and you're looking to file bankruptcy, you'll need to be armed with information about how the bankruptcy process works in this state.
There are many reasons you may be considering filing for bankruptcy. If you've suffered a maybe you've had a major setback such as an illness or a divorce, are receiving phone calls from creditors and debt collectors, or are constantly thinking about the debt you owe, bankruptcy might be an option.
Luckily for Hoosiers, bankruptcy in Indiana is fairly lenient (and easier to complete) than in other states.
Should You File?
If you're just now thinking about bankruptcy, you may want to look into other options. You should do what you can to get your financial situation in order before you reach the point where bankruptcy is your only choice.
Bankruptcy is a huge step, so you'll want to make sure this is what you really want to do before filing. That said, bankruptcy is a process that was designed to give people like you a fresh financial start.
What's Not Covered by Bankruptcy?
There are a few things that aren't covered by bankruptcy. These things include alimony and child support, taxes, any government fines, debt from illegal or fraudulent activity, and any cash advances received or luxury items purchased within 90 days of filing.
Student loans are also not wiped out by bankruptcy, but you can get your payments knocked down to a significantly lower amount (although you'll still have to pay the whole thing.)
Chapter 7 or Chapter 13 Bankruptcy?
There are two major types of bankruptcy in the State of Indiana. Chapter 7 bankruptcy (aka straight bankruptcy) immediately wipes out all debt (except what's listed above.) There are some requirements that need to be met in order to qualify for Chapter 7 bankruptcy in Indiana.
Each county also has its own set of requirements. You can look up the requirements for your county and even take a 'means test', which is what determines whether or not you're eligible for Chapter 7.
The other type of bankruptcy is Chapter 13 bankruptcy (aka wage earner bankruptcy.) This type of bankruptcy does not wipe out your full debt, but it can wipe out some or most of it. Your remaining debt is put into a payment plan that allows you to pay back the debt over the course of several years.
Why You Need an Attorney
You can file bankruptcy without an attorney, but you shouldn't. Get an attorney solely based on the experience -- they know all the details involved (and can help you with sticky situations.) If you have a complicated situation, having a qualified bankruptcy attorney will make the process significantly easier than if you were to file on your own.
Bankruptcy lawyers do cost money, but since you're filing bankruptcy, you will no longer be paying monthly payments to creditors. Many bankruptcy lawyers urge their clients to stop making payments the minute the client steps into their office. With the extra money, you will be able to pay your attorney's fees and start putting your life back together.
When you get together with your attorney, he or she will give you the necessary paperwork to fill out. Your attorney or a paralegal will be willing to help you fill out the paperwork and explain any questions you have about the bankruptcy process.
You will need to supply information about your creditors including how much you owe each creditor, the account number, etc. You will also be required to supply your social security number and other information about yourself and your debt. Your attorney will want to make sure you've wrangled up all the creditors and debts you owe so that you can get rid of all the debt you can, so you will be asked to bring a copy of a credit report.
Don't be afraid to ask your attorney any questions you might have. Even if something seems like a dumb question, it's important to ask so that you can clear everything up about the bankruptcy process. The bankruptcy process in Indiana, while lenient, can still be confusing.
What About the Phone Calls?
After you start working with your attorney, if your creditors call, politely tell the person that you are filing bankruptcy. They will want the name of your attorney and the phone number. Supply this information, but remember to tell them that they can no longer call you. If a debt collector continues to call you, let your attorney know.
The Bankruptcy Process in Indiana
After filing your petition for bankruptcy, which your attorney will help you complete, your paperwork will be submitted along with the filing fee which is $299. Usually, your attorney includes the cost of the filing fee with his fees in the initial quote, but you'll want to be sure to ask so that it's not a surprise cost.
Approximately one month from when you file your petition, you will be required to go to a 341 hearing. At this hearing, the trustee will ask you questions about your debt. Your creditors may also attend the meeting and ask you questions, but this doesn't often happen.
After the 341 hearing, your creditors have 60 days to convince the courts that you should not be allowed to go through with the bankruptcy. During this period, the trustee may contact you with questions regarding your debts. He or she will also go over your paperwork in order to see if there is a possibility that you could pay some or all of your debt. After this process, if you've filed Chapter 7 bankruptcy, your bankruptcy will be completed.
If you've filed Chapter 13, you will have submitted a proposal for your payment plans along with your petition. The trustee will look over this proposal to see if this is a plan you can really meet and is sufficient for the creditors. The proposal will also be forwarded to each of your creditors who may object to the proposal if they feel it is unfit.
After the proposal is approved, your payment plan will be set up and you will be expected to stay current on your payments. If you are unable to make your payments because of a serious illness, job loss, or any other reasonable circumstance, you may apply for a hardship discharge. This is more likely to be approved if, before your illness or job loss, you have repaid your creditors an amount equal to what they would have received from the government had you filed a Chapter 7. If you stop making payments for other reasons, your creditors may ask the court to dissolve the Chapter 13. If this happens, you will be required to pay back ALL debt that has not yet been paid AND the creditors can start the collection process again.
What About My Assets?
Although many people consider Chapter 7 bankruptcy as the "better" one, when it comes to keeping your assets, Chapter 13 is much more lenient. This is because, with a Chapter 13 bankruptcy, you are allowed to keep your assets given that you are regular on your payment plan.
With a Chapter 7 bankruptcy, there are a few conditions that must be met in order to keep your assets. If you have no equity in your home, the trustee will allow you to keep your home given that you stay current on your house payments. If there is less than $15,000 in equity on your home, you will have to file for a homestead exemption. If approved, you can keep your home with the homestead exemption as long as you make regular house payments. If there is more than $15,000 in equity, there is a possibility that you could lose your house. If this is the case for you, you may want to consider talking to your attorney about the possibility of losing your home. If there is more than $15,000 equity in the home and you do not want to lose it, your attorney will most likely urge you to file for Chapter 13 bankruptcy instead.
If you have a car that you still owe money on, you will have to reaffirm your car loan within 45 days of the 341 hearing. This is part of the new bankruptcy law. Before the change in the law, you could just continue making payments without having to reaffirm. If you reaffirm the car, you must make regular payments on the car loan. If you default on the car loan, your car is subject to being repossessed. If you can afford the remainder of what is owed on the car, you can purchase the car outright within 45 days of the 341 hearing for what is owed.
© 2011 Melanie Palen