What Happens After I File an Indiana Chapter 7 Bankruptcy?

Financial storms, like job loss and serious illness, are inevitable. Unfortunately, most Indiana families do not have the wherewithal to weather these storms. In fact, over a third of Americans do not have enough cash to cover a $400 emergency expense. If unpaid bills begin to mount, families basically have two choices. They can ignore them and hope things get better, or they can do something about them.

In many cases, a Chapter 7 bankruptcy helps families retake control over their finances. This federal debt relief program does more than protect important assets from creditor seizure. In only a few months, a judge usually discharges most unsecured debts. That move gives your family a fresh financial start.

Automatic Stay

Section 362 of the Bankruptcy Code usually kicks in as soon as debtors file their voluntary petitions in court. Debtors need not prove creditor malice, negligence, or anything else to stop things like:

• – Foreclosure,
• – Wage garnishment,
• – Repossession,
• – Collection lawsuits, and
• – Creditor harassment.

The Automatic Stay usually applies if the debtor took an online debt management course and has not recently filed bankruptcy before.

Additionally, debtors must qualify for Chapter 7. Their income must be below the average amount for similar households in that area. In 2017, that amount was a little less than $55,000 per year. Truthfully, if your income is substantially higher than that, you probably do not need to file Chapter 7. Other debt relief options might be available.

Asset Protection

Families do not get fresh starts if they lose their assets in bankruptcy. That’s why Indiana law protects most assets, such as:

• – Home equity,
• – Motor vehicles,
• – Retirement accounts, and
• – Personal property.

Generally, the law imposes financial limits on these exemptions. An attorney can show you how to maximize these exemptions. Home equity is a good example.

Legally, debtors can exempt up to $38,600 in home equity. Certain legal vehicles, like a tenancy of the entirety, can expand this exemption even further. Additionally, valuation matters. There’s usually a significant difference between fair market value and bankruptcy value. Based on a home investor’s offer, a home’s as-is cash value might only be a fraction of its fair market value. That difference stretches the home equity exemption even further.

Debt Discharge

Unsecured debt elimination is often the capstone of a Chapter 7. Frequently, unsecured debts began the family’s downward financial spiral. So, eliminating these debts is the best way, and sometimes the only way, to reverse this cycle. Unsecured debts usually include things like:

• – Credit cards,
• – Signature loans,
• – Medical bills, and
• – Payday loans.

Special rules apply to some government-guaranteed unsecured debts. For example, back taxes and student loans, which are technically unsecured debts, are only dischargeable in certain situations.

Chapter 7 eliminates the legal obligation to repay the debt. But it does not affect the collateral consequences of debt. Assume the debtor fell behind on income tax payments and the IRS filed a lien. If a judge discharges the tax debt, the lien remains. An attorney must deal with it separately. 

Contact Experienced Lawyers

Chapter 7 eliminates debts. For a free consultation with an experienced Chicago bankruptcy attorney, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.

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