How to File for Bankruptcy in Indiana

In this troubled economy, some states are faring worse than others in terms of bankruptcy filings are.  Indiana is one of those states, ranking fifth in the nation with over 7 bankruptcies for every 1,000 citizens.  Many are exploring this difficult step for them and their families.  There are new regulations limiting those who are eligible to file for bankruptcy, with a new “means” test detailing the amount of income eligible for bankruptcy, and requiring each filer to undergo financial counselling.  How can a debtor know if they are eligible and if bankruptcy is the right choice?

Finding a Bankruptcy Attorney

It is important to have both legal and financial advice when determining if and how one should file for bankruptcy.  A bankruptcy attorney can supply both types of information, and walk the filer through the process, helping them find the most appropriate exemptions and representing them before the bankruptcy trustee and the judge, if necessary.  It is important, however, to locate one with a good track record representing clients, especially in financial cases.

Bankruptcy Options

Before filing, the debtor and their attorney must determine which type of bankruptcy is best for their circumstances.

• For someone with few or no assets, Chapter 7 is usually the best choice.  Also known as liquidation bankruptcy, the trustee may need to sell some property to satisfy creditors before their debts are discharged.
• For those with property they do not want to lose, Chapter 13 may be the better choice, as it reorganizes the debtor’s finances and obligations, formulating a plan to pay off all debt in three to five years.

Indiana Exemptions

While 27% of Indiana filers generally choose Chapter 13, the remaining 73% file Chapter 7 bankruptcy.  In order to allow them to protect some amount of necessary property, both federal and state laws allow them to claim some types of exemptions.  Indiana law allows only state exemptions, although those are typically generous:

Filing the Petition

Once the type of bankruptcy and the possible exemptions are determined and all other requirements, such as credit counselling, are fulfilled, the filer and their attorney file a bankruptcy petition with the court.  The bankruptcy trustee takes charge of the process and sets up a 341 meeting with creditors to examine the plan and allow the creditors to ask any pertinent questions.  If the bankruptcy is approved, the Chapter 7 filer is free of debt and can start fresh, and the Chapter 13 filer is ready to begin regular payments on the new plan, aiming to be debt-free in five years or less.