Navigating Bankruptcy in Indiana: Chapter 7 vs. Chapter 13

As of September 2023, it was estimated that the United States saw a 13% increase in bankruptcy filings. While bankruptcy is daunting and complex, it is an essential lifeline for many families in financial distress. For those families struggling with overwhelming debts in Indiana, Chapter 7 and Chapter 13 bankruptcy stand as two primary avenues for relief. Each chapter serves distinct purposes, offering unique advantages and considerations tailored to different financial circumstances.

Chapter 7 Bankruptcy: Liquidation for Fresh Start

Chapter 7 bankruptcy, often termed “liquidation” bankruptcy, involves the gathering and sale of nonexempt assets, which are paid to discharge debts. The length of this process will depend on the facts of the case. Still, it can take several months to provide a swift resolution for those burdened by unmanageable debts.

One key advantage of Chapter 7 bankruptcy is the discharge of most unsecured debts, such as credit card balances, medical bills, and personal loans. However, certain obligations, such as student loans, some tax debts, and child support payments, generally remain unaffected.

Some individuals may be subject to a means test to qualify for Chapter 7 bankruptcy in Indiana. This examination usually applies to high-income filers; thus, households with an income below the Indiana median will be exempt from the test. This test ensures that those with genuine financial needs can access relief without abusing the system. Additionally, Indiana offers specific exemptions for assets such as real property, vehicles, and personal belongings, safeguarding essential possessions from liquidation.

Chapter 13 Bankruptcy: Repayment Plans

Chapter 13 bankruptcy differs significantly from Chapter 7 because it facilitates a structured repayment plan. Instead of liquidating assets, individuals with a steady income can create a court-approved repayment schedule that typically spans three to five years. This enables debtors to retain their assets while gradually settling debts with creditors.

One of the primary advantages of Chapter 13 bankruptcy is its ability to halt (or stay) foreclosure proceedings and allow homeowners to catch up on missed mortgage payments or other debts. By consolidating debts into a manageable repayment plan, individuals can prevent the loss of their homes and other valuable assets. Moreover, Chapter 13 offers greater flexibility in addressing certain debts, such as tax liabilities and past-due child support, which can be incorporated into the repayment plan.

In Indiana, debtors must demonstrate their ability to adhere to the proposed repayment plan, ensuring feasibility and sustainability over the repayment period. By adhering to the plan’s terms, debtors can emerge from Chapter 13 bankruptcy free from overwhelming debt.

Conclusion: Choosing the Right Path

Navigating the complexities of bankruptcy in Indiana depends on various considerations concerning the individual’s circumstances, debts, and financial goals. While Chapter 7 offers a swift discharge of debts through asset liquidation, Chapter 13 provides a structured pathway for debt repayment while retaining valuable assets.

Whether to choose Chapter 7 or Chapter 13 bankruptcy can be a daunting and confusing decision. However, do not fret. Consulting with McNeelyLaw’s knowledgeable bankruptcy attorneys can provide invaluable guidance in determining which course of actions works best for you and your family!

Contact McNeelyLaw LLP today at 317.825.5110 or through our webpage McNeelyLaw.com to discuss how we can assist you and your family through these trying time.

This McNeelyLaw LLP publication should not be construed as legal advice or legal opinion of any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation.