As an Indiana bankruptcy lawyer, one question we are frequently asked is: Which chapter of bankruptcy should I file under? The answer is by no means intuitive, and there are several questions that must be answered before we can successfully advise our clients. In this article, the Indiana bankruptcy attorney, Chris Arrington, will discuss the two chapters of personal bankruptcy and which chapter is most likely to help you.
When should I file under Chapter 7?
You should file under Chapter 7 if you have a lot of unsecured debt. That includes things like credit cards, personal loans, and medical debt. The debt is considered unsecured because it isn’t backed by anything. Secured debts include car loans and mortgages.
Chapter 7 bankruptcy also requires that you make less than the state median or that you can pass a means test. If you make less than the state median, then you automatically qualify for Chapter 7 protection. If you make more than the state median, you will need to prove that you cannot reasonably repay your debts. If you fail the means test, you will need to file under Chapter 13 as opposed to Chapter 7.
Chapter 7 is considered liquidation bankruptcy. In Chapter 7, your valuable assets would be liquidated to repay creditors. However, there are ways to exempt property, and most people who file under Chapter 7 don’t have significant assets worth the effort of liquidating.
When should I file under Chapter 13?
You should file under Chapter 13 for two reasons:
- You are trying to save your home from foreclosure; or
- You do not qualify under Chapter 7.
In Chapter 13, you engage in a repayment plan executed over a three or five-year period. You will make monthly payments to the bankruptcy trustee, who will use those funds to repay your creditors. You will need to make payments on unsecured debt, but they likely will not be for the full amount that you owe.
Chapter 13 is also a good option for those seeking to save their home from foreclosure. Chapter 13 can stop a foreclosure in its tracks and allow you to make payments on your home if you can afford to. You will need to be able to make these payments in order to stop the foreclosure.
Which chapter of bankruptcy is right for me?
When you hire a bankruptcy attorney, we take a look at your income and your debts and help you come up with a plan that reduces your financial obligation to your creditors. Our job is to come up with the best plan for your individual situation. In some cases, this will mean discharging your unsecured debts under Chapter 7. In other cases, this will mean repaying some of your debts in Chapter 13.
Talk to an Indiana Bankruptcy Attorney Today
Chris Arrington represents the interests of Indiana residents who are filing under Chapter 7 or Chapter 13. Call our office today to schedule an appointment, and we can begin discussing which chapter is right for you.