What is Bankruptcy?
Bankruptcy is federal law which allows a person in financial distress to get a fresh economic start. Bankruptcy provides both immediate protection from creditors, and long-term relief from debts.
Who may file bankruptcy?
An individual may file bankruptcy, and a married couple may file a single, “joint” bankruptcy. A married person may also file an individual bankruptcy, if his or her spouse elects not to file (or is ineligible to file).
What are the eligibility requirements?
You must have lived in your “District” for the larger part of the last 180 days. Usually, that means a minimum of 91 days. Indiana has two Districts, Northern and Southern.
You may not file a Chapter 7 (“traditional”) bankruptcy if you have completed another Chapter 7 case within the past six years.
In certain cases, you may not file bankruptcy if you have had a previous case dismissed within the past 180 days.
Where is the bankruptcy filed?
Bankruptcy is filed in the federal Bankruptcy Court. The location depends on what county you live in.
The Northern District of Indiana has courts located in Ft. Wayne, Gary, Lafayette, and South Bend. The Southern District of Indiana has courts located in Evansville, Indianapolis, New Albany and Terre Haute.
What type of relief is available?
The two types of bankruptcy which are generally available to individual debtors are Chapter 7 ("Traditional" bankruptcy, or “liquidation,”) and Chapter 13 ("debt-payment plan").
A Chapter 7 bankruptcy allows you to discharge debts, which means that you are no longer legally responsible for them.
A Chapter 13 case allows you to repay all or part of your debts under a 3 to 5 year plan in regular installments (usually monthly). In most cases, you will reduce your monthly debt payments.
Can I choose whether to file a Chapter 7 or a Chapter 13?
Yes, in some circumstances. However, the bankruptcy laws changed substantially beginning October 17, 2005. If your income is at or above a certain level, you could be forced to file a Chapter 13 instead of a Chapter 7.Other major changes in the bankruptcy law require consumer counseling:
- You will be required to receive credit counseling from an approved agency before you can file bankruptcy.
- You will have to have additional counseling on budgeting and debt management before your debts can be wiped out.
What happens when the bankruptcy is filed?
Once a bankruptcy case is filed, all creditor collection must stop. Creditors may not call, write, bill, visit, repossess, foreclose, file a lawsuit, or continue with a lawsuit already in progress. Any court-ordered wage garnishments will also be stopped.
After the case is filed, Creditors may resume collection only if granted permission by the Bankruptcy Court.
What debts may be discharged in Chapter 7?
In a Chapter 7 case, many debts can be discharged. Examples include:
- medical bills
- credit cards
- retail store accounts
- loans
- back-rent
- delinquent utility bills
- debts owed after repossession.
- some debts owed to government
- most auto accident debts
What debts may not be discharged?
In a Chapter 7 case, there are some debts which cannot be discharged. The most common “non-dischargeable” debts include:
- Child support
- Maintenance or alimony
- Most tax debts
- Most student loans
- Criminal fines and penalties
- Injury or death caused by driving while intoxicated
There are other debts which may not be dischargeable, depending on the facts of the case, such as some credit card debts or loans incurred just before bankruptcy, or cases in which the creditor proves fraud.
Finally, there are other debts (such as car payments or co-signed debts) in which it may be better to continue making payments. Your attorney will discuss your options with you.
Do I need a lawyer to file bankruptcy?
Although not required by law, a lawyer is strongly recommended. People who try to file bankruptcy without a lawyer may do themselves more harm than good. There are “document-preparers” who will prepare bankruptcy schedules, but keep in mind, these persons are not allowed to give you legal advice.
What does bankruptcy cost?
The court filing fee for a Chapter 7 case is presently $200 (and will be $299 as of April 9, 2006), and for a Chapter 13 is $185 (and will be $274 as of April 9, 2006). Note, these may be subject to change at any time. Under present law, you cannot waive these fees, but can get permission to pay them in installments.
If you retain a private attorney for a Chapter 7, attorneys fees vary and are set by the attorney. They may depend on how complicated your case is. Some attorneys may require fees in advance of filing, while others may allow payment later (such as in installments, or when you receive your tax refund). Many attorneys do not charge fees for the first consultation. Make sure, however, you understand the attorney’s fees and arrangements.
Last revised: 10-2005
LSC Code: 1010000
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