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Chapter 7 Bankruptcy

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What Is Chapter 7 Bankruptcy in Indiana?

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Chapter 7 bankruptcy is more common in Indiana than many realize. It is an option for individuals, partnerships, or corporations looking to resolve debt, especially those with primarily consumer debts who fall below the median income level.

If you have business income, rental income, or other qualifying assets, they may be sold to pay off creditors. A court-appointed Trustee will assess your assets to determine if liquidation is necessary. While Chapter 7 involves asset liquidation, it is often termed a “no asset” bankruptcy. This is because most applicants do not have assets that qualify for liquidation, yet some of their debts are still discharged, providing a fresh start.

Indiana bankruptcy exemptions and federal exemptions may protect certain assets from being liquidated.

If you fall below the median income level, Chapter 7 Personal Bankruptcy may:

  • Provide automatic court protection from creditors.
  • Stop harassing calls and letters.
  • Stop lawsuits and wage garnishments.
  • Give you a permanent discharge of most debts.
  • Let you keep your car and house.

Contact Sawin & Shea at 317-759-1483 for more information about Indiana filing for Chapter 7 bankruptcy.

Eligibility for Chapter 7  Bankruptcy (Indiana)

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A debtor can be an individual, a partnership, or a corporation that qualifies for Chapter 7 bankruptcy. According to 11 U.S.C. §§ 101(41), 109(b), eligibility for Chapter 7 is not dependent on the amount of debt or the debtor’s solvency.

An Indiana bankruptcy means test calculation will evaluate household expenses, assets, secured and unsecured debts, and debt relief options.

However, individuals cannot file under Chapter 7 if a previous bankruptcy case was dismissed in the last 180 days due to the debtor’s willful failure to comply with court orders or if the debtor voluntarily dismissed the last case after creditors sought to recover the property.

Additionally, an individual must receive financial counseling from an approved agency within 180 days before filing for bankruptcy. This requirement includes exceptions for emergencies or if there are insufficient approved agencies. If a debt management plan is created when working with an approved credit counseling agency, it must be filed with the court.

The main goal of bankruptcy is to discharge certain debts, allowing the debtor a fresh start with no liability for discharged debts. However, in Chapter 7 cases, only individual debtors, not partnerships or corporations, are eligible for discharge as per 11 U.S.C. § 727(a)(1). While most individual Chapter 7 cases result in debt discharge, some debts may not be discharged, and bankruptcy does not extinguish liens on property.

Contact Sawin & Shea at 317-759-1483 for a free consultation. Together, we will take the first steps towards debt relief.

What Is the Indiana Bankruptcy Means Test Calculation Used For?

The means test determines whether you’re eligible to file Chapter 7 bankruptcy based on household income, household expenses, and money owed.

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Here’s a simplified breakdown of the means test:

  • Means Test Median Income Comparison evaluates Indiana’s median income for your household size. If your income is below the median, you likely qualify for Chapter 7.
  • Current Monthly Income (CMI): Calculate your average monthly income over the six months before filing by including all nonexempt sources of income.
  • Calculate The Means Test Allowed Expenses by subtracting allowable household expenses (like housing, food, and healthcare) from your CMI using IRS standards.
  • Disposable Income is the remaining amount after subtracting expenses, and if it is low enough, you may qualify for Chapter 7.
  • Means Test Disposable Income under $8,175 over five years typically qualifies you for Chapter 7.
  • Income between $8,175 and $13,650 requires further evaluation.
  • Income above $13,650 may necessitate filing for Chapter 13 instead.

Your bankruptcy lawyer will help you navigate the means test and advise whether you should file a Chapter 7 or a Chapter 13.

Who Should File for Chapter 7 Bankruptcy in Indiana?

Individuals or businesses in Indiana should consider filing for Chapter 7 bankruptcy if they are facing overwhelming debt and cannot find a way to repay it. Ideal candidates for filing Chapter 7 typically include those who:

  • Have significant unsecured debts, such as credit card debt, judgements, or medical bills.
  • Do not have substantial assets that can be liquidated.
  • Have a low or irregular monthly income.
  • Have completed financial counseling from an approved agency within the last 180 days.
  • Have not filed for Chapter 7 bankruptcy in the past eight years.

Are There Any Reasons I Shouldn’t File Chapter 7?

On the other hand, you may not want to file for bankruptcy in Indiana if:

  • You are not presently working and have no assets a creditor can seize or garnish.
  • You receive protected household income, like Aged, Blind, or Disabled (ABD) benefits, Child support, Temporary Assistance for Needy Families (TANF), and Unemployment benefits.
  • You have non-exempt equity in real estate or other assets..
  • You do not want to hurt your credit score.
  • You can pay off your debts within the next five years.

What Documents Do I Need to File for Bankruptcy in Indiana?

Before filing for bankruptcy, you need to gather several financial documents. meet the standard of proof according to bankruptcy laws,

To meet the standard of evidence according to bankruptcy laws, you’ll need:

  • Pay stubs or a business profit and loss statement.
  • Tax returns for the last 3 or 4 years.
  • Bank statements.
  • Information regarding your assets and their value.
  • Divorce decrees and orders related to debt and support obligations.
  • Mortgages and real estate appraisals, if any, in the last four years.
  • Lawsuits, judgments, or liens, including tax liens.
  • Credit history report from Equifax, Experian, and TransUnion.
  • Higher-income filers with investments and property must disclose investments and high-value possessions like art.

In your bankruptcy papers, you must list the names, addresses, and amounts owed to all your secure and unsecured creditors, including:

  • Secured debts: Mortgages and car loans.
  • Unsecured debts: Credit cards, medical bills, student loans, and personal/family loans.
  • Priority unsecured debts: Alimony, child support, and tax debts. Although priority unsecured debts usually aren’t discharged in bankruptcy, they must still be listed on your forms.

To ensure it’s accurate, request a copy of your credit report and verify all your debts. Not all debts are reported to credit agencies, so use this report as supplementary information. You can obtain a free copy from each reporting agency every 12 months.

Can I Get My Student Loans Discharged Through Chapter 7 Bankruptcy?

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There’s a misconception that student loans cannot be discharged in bankruptcy. While this has been true in the past, it is possible to have student loan debt canceled today. Discharging student loans does require that a separate lawsuit called an adversary proceeding be filed in the Bankruptcy Court. It also requires proving that you cannot now or for the foreseeable future afford to make meaningful payments on the student loan debt.

The process for discharging government student loans became somewhat easier in late 2022, but it is still not an easy path. Discharging private student loans can be more complex, but it is still possible through Chapter 7 Bankruptcy.

Steps To Filing Bankruptcy Chapter 7

  1. Meet with an Attorney: Consult with an attorney to guide you through the process, ensure all paperwork is correctly completed, and help you understand your rights and obligations.
  2. Credit and Debt Counseling: Complete a credit counseling course from an approved agency within 180 days before filing. They will help you assess your gross income and average monthly income after certain taxes and build a budget based on household size. When done, you will receive a certificate of completion that you need to file with your bankruptcy paperwork.
  3. Gather Financial Documents: Collect your financial documents, including the last two years of tax returns, pay stubs from the previous 60 days, bank statements, creditor statements, and other relevant financial records.
  4. Complete Bankruptcy Forms: Fill out the required bankruptcy forms, which include schedules listing your assets, liabilities, household income, household expenses, and a statement of financial affairs. These forms are available on the U.S. Courts website or from your attorney.
  5. File the Petition: File your completed bankruptcy forms and the counseling certificate with the Indiana bankruptcy court. Pay the filing fee or request a waiver if you cannot afford it.
  6. Automatic Stay: Once you file, an automatic stay goes into effect, stopping most collection actions against you.
  7. Trustee Appointment: A trustee who will review your documents, identify any non-exempt assets for liquidation, and verify the information in your filing is appointed.
  8. Creditors Meeting: Attend the 341 creditors meeting. The trustee and any creditors who attend will ask you questions about your finances and bankruptcy forms. This meeting usually takes place about a month after filing.
  9. Financial Management Course: Complete a debtor education course after filing but before receiving your discharge. This course provides financial management tools to help you avoid future financial problems.
  10. Discharge: If no objections are raised, you will receive a discharge of your eligible debts. This typically occurs about three to six months after the initial filing.
  11. Post-discharge actions: If applicable, ensure any non-exempt property is surrendered to the trustee for liquidation. Review your report to confirm that discharged debts are recorded accurately.

How Much Does It Cost To File for Chapter 7 Bankruptcy in Indiana?

The cost of filing for Chapter 7 Bankruptcy in Indiana varies based on whether you file independently or hire a bankruptcy attorney.

Filing fees, set by the U.S. Bankruptcy Court, include:

  • Filing Fee: The filing fee is a mandatory payment required by the U.S. Bankruptcy Court to process your bankruptcy petition. It is currently around $338 and must be paid upfront or in installments if the court approves.

Additional Expenses to Consider

When filing for Chapter 7 bankruptcy, there are other expenses to consider beyond the filing and attorney fees:

  • Debt Education Courses: Required courses before and after filing typically cost around $15 each. Completing these courses is mandatory for your bankruptcy case to proceed.
  • Court Costs and Fees: Additional fees for obtaining document copies or amending your filing may apply.
  • Credit Report: Obtaining a credit report that accurately lists all debts might cost a small fee, though free reports are available annually from each major credit bureau.
  • Attorney fees: You will get a quote at your initial consultation.

Some Indiana filers may qualify for a fee waiver if their current monthly income falls well below the average household income.

How Long Does It Take To File Chapter 7 Bankruptcy In Indiana?

The duration of bankruptcy proceedings in Indiana can vary. Several factors can influence the timeline, such as court workload and potential objections from creditors.

Adversary Proceedings: Occasionally, a creditor may file an adversary proceeding to challenge the discharge of a debt. This is similar to a separate lawsuit where the creditor argues against the discharge, and you and your attorney must defend against it. Adversary proceedings are rare in straightforward Chapter 7 cases but can be more common in other bankruptcies, especially business-related ones.

Chapter 7 Bankruptcy: This typically takes four to six months to complete. The timeline depends on how quickly you complete required tasks, such as financial counseling, and how quickly you can provide your attorney with the necessary information to file your petition and schedules. Once you file, an initial notice is sent to all listed creditors, informing them of the automatic stay on collection activities.

Keep in mind that these estimates are only for Chapter 7. Chapter 13 typically takes about 36 to 60 months from the filing date because it involves paying back some debts under a payment plan. 

Chapter 7 Bankruptcy FAQ

What Can I Keep in a Chapter 7 Bankruptcy?

You may have heard that Chapter 7 bankruptcy is called a “liquidation,” but in most cases, people keep everything they have.

Can I Keep Our Home or Car?

In a Chapter 7 bankruptcy, you can ” reaffirm” some debts like houses or cars. Signing a reaffirmation agreement for debt makes you responsible for the house or car payments again.

House/Car creditors often allow reaffirmation agreements if you’re currently on your payment plan.

What is Indiana’s Wildcard Exemption In Bankruptcy?

The wildcard exemption in bankruptcy allows individuals to protect up to $12,100 in non-residential real estate or tangible property.

Can Service Members on Active Duty File?

Yes, active-duty military personnel can file for bankruptcy. They may have benefits unavailable to non-military debtors.

Do Both Spouses Have To File?

When a spouse files without involving their spouse, the non-filing spouse may still be responsible for some debts, such as joint or marital debts.

What About Credit Cards?

Credit cards are primarily consumer debts and are usually dischargeable in Chapter 7 bankruptcy if the filer passes the means test.

What Is Credit Counseling?

Credit counseling is a required course that provides financial education, budgeting assistance, and strategies for managing debt to individuals facing financial difficulties and bankruptcy. 

Who Do I Give My Paperwork To??

Where you file bankruptcy depends on your legal address. Your attorney will advise if you must file in Indiana’s Southern or Northern District Court.

How Does Bankruptcy Impact Cosigners?

When you file for Chapter 7 Bankruptcy and have debt with a cosigner, the amnesty a debtor may receive from the court will not be given to a cosigner. Ask your attorney about Chapter 7 options to protect a cosigner.

What is an Indiana Bankruptcy Means Test Calculation?

The means test determines if you can file bankruptcy based on your income, expenses, household size, and median income.

How Long Does Chapter 7 Bankruptcy Take?

A Chapter 7 bankruptcy usually takes three to four months from filing to discharge. Much of this time is due to the mandatory waiting periods the law requires.

What Happens After Bankruptcy Discharge?

Once your foreclosures have been stopped, your debts have been discharged, and your finances seem to be straightening out, jumping on every “credit repair” bandwagon is tempting.

Don’t get stuck believing all the “quick fix” tips. Instead, learn how to make smart credit decisions post-bankruptcy process.

Is a Chapter 7 Bankruptcy Right for Me?

We’re offering a free, no-obligation consultation with an attorney to listen to the details of your situation, give you an estimate of the means test, total monthly income, and median income for your household size, and explain your rights.

Sawin & Shea Law Firm can provide:

  • Bankruptcy solutions tailored to YOUR needs.
  • Personalized, non-judgmental service.
  • Fast response to emergencies.
  • Clear explanations.
  • Free consultation with an attorney.
  • Evening and weekend appointments.
  • Low fees and flexible payment plans.

Contact Sawin & Shea Chapter 7 Bankruptcy Lawyers

We understand that hiring an attorney to help you file bankruptcy can be scary. Our attorneys have helped thousands of people like you get the fresh start they deserve. We are here to help.

Call Sawin & Shea today at 317-759-1483 to discuss your debt relief options with one of our experienced attorneys.

 

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$0 Down Attorney Fees

No upfront attorney fees in qualifying cases. Pay only court filing fee, credit reporting fee, and pre-bankruptcy credit counseling session fee to get a case on file to stop garnishments, repossessions, and certain court actions. Restrictions may apply. Please call to discuss your situation and learn how we can help.