As an Indiana bankruptcy lawyer, one of the most important ways I can be of help to clients is in the decision about which type of bankruptcy to file. Personal bankruptcies fall into two categories – Chapter 7 and Chapter 13.
Two main factors must be considered: your income and whether you are trying to save a home from foreclosure. Your income needs to be considered, because if it’s above a certain level, you must file a Chapter 13 bankruptcy. (The income level is determined by comparing your income with the median income in our state.) Your status as a homeowner needs to be considered, because while bankruptcy temporarily halts a foreclosure, you will still need to pay any missed mortgage payments if you want to keep your home.
Of the two types, Chapter 7 is quicker. Chapter 7 is also called “straight bankruptcy” and “liquidation bankruptcy”. Within six months, sometimes even sooner, many of your debts can be cancelled (exceptions include child support, student loans, and taxes owed for the most recent three years). Chapter 13 bankruptcy, by contrast, involves a debt repayment plan that extends over a three to five year period of time.
While the title “liquidation bankruptcy” gave rise to the myth that you lose all your possessions, most Chapter 7 filers don’t lose anything, and in fact find Chapter 7 to be the best plan for debt elimination.
As one of only ten Board-Certified Consumer* Bankruptcy Specialists in Indiana, I helped write the portion of Indiana bankruptcy law that deals with exemptions. Exempt property is property a debtor is allowed to keep. Most of our clients lose nothing, because, by the time they decide to file bankruptcy, they’ve used up most of the “equity” in their property.
In the state of Indiana, there are exemptions in most cases for houses, mobile homes, land, cars,trucks, household goods, furniture, and many other things. What’s more, life insurance cash value and retirement plan money are exempt.
And do you know what the very main thing that will be “exempt” is? YOU! Bankruptcy will, by law, halt all lawsuits, wage garnishees, and even telephone calls to you demanding payment. Bankruptcy “buys” breathing room, time to plan and reorganize, time to make a fresh financial start.