Chapter 13 Law Firm In Terre Haute Indiana

What Is The Difference Between Chapter 7 and Chapter 13 Bankruptcy?

In a Chapter 7 proceeding, you are asking the court to eliminate, or discharge the amount of debts allowed by Chapter 7 regulations.  You may in addition, lose some assets, depending on the particulars of you situation.  In Chapter 13, you will pay a portion of your debts while reorganizing others.  You decision will be determined by the types and amount of debt you owe, your income, and the value of your assets.  Rare is the situation in which you involuntarily lose assets under Chapter 13. Please consult with us prior to determining what is your best option.

Chapter 7 is referred to as “liquidation bankruptcy.”  In a Chapter 7 case, you will file several forms with the court.  These forms list income and expenses, assets, debts, and property transactions occurring in the past year.  A court-appointed bankruptcy trustee will be assigned to oversee your case.  Roughly one month after filing, you are required to attend the First Meeting of Creditors.  At the meeting, the trustee reviews your forms and will ask a series of questions.  If you have any non-exempt property, the trustee will as that you hand it over.  The meeting is typically not lengthy.  Absent challenges from any creditors, approximately three months later you will receive a discharge order, which is a notice from the court that “all debts that qualified for discharge were discharged.”  At this point your case is complete.

Chapter 13 is referred to as “reorganization bankruptcy.”  You are required to file many of the same forms that you would file in a Chapter 7 proceeding.  In addition, you will file a proposed repayment plan, in which you detail how you intend to repay your debts over the course of the next 3-5 years.  Some debts must be repaid in fill.  Other debts require a percentage to be paid.  Other debts are not required to be paid at all.  Some debts will require interest payments.  Some debts are paid at the beginning of your plan, whereas others are paid at the end of your plan.  The Court will assign a bankruptcy trustee to oversee your case and handle your payment plan.

After filing, you will be required to attend a First Meeting of Creditors (6-7 weeks after filing).  If the trustee approves your plan for payment, he or she will submit it to approval by the judge.  Approximately 5 months after this meeting, the judge will typically confirm your plan if no creditor has opposed it.

If for some reason a creditor or the trustee objects to your plan, the judge will likely hold a hearing at the Confirmation Hearing to determine the status of your plan and hear the objection.  If your plan is confirmed and you make all payments set forth within the plan, it will result in a discharge of any balance owed on all dischargeable debts at the end of your case.  Please consult with us when determining which type of bankruptcy is your best option.

What Is Chapter 13 And What Happens When I File?

Chapter 13 is referred to as “reorganization bankruptcy.” You are required to file many of the same forms that you would file in a Chapter 7 proceeding. In addition, you will file a proposed repayment plan, in which you detail how you intend to repay your debts over the course of the next 3-5 years. Some debts must be repaid in fill. Other debts require a percentage to be paid. Other debts are not required to be paid at all. Some debts will require interest payments. Some debts are paid at the beginning of your plan, whereas others are paid at the end of your plan. The Court will assign a bankruptcy trustee to oversee your case and handle your payment plan.

After filing, you will be required to attend a First Meeting of Creditors (6-7 weeks after filing). If the trustee approves your plan for payment, he or she will submit it to approval by the judge. Approximately 5 months after this meeting, the judge will typically confirm your plan if no creditor has opposed it.

If for some reason a creditor or the trustee objects to your plan, the judge will likely hold a hearing at the Confirmation Hearing to determine the status of your plan and hear the objection. If your plan is confirmed and you make all payments set forth within the plan, it will result in a discharge of any balance owed on all dischargeable debts at the end of your case. Please consult with us when determining which type of bankruptcy is your best option.

When Would I Begin Making Payments To The Chapter 13 Trustee?

You are required to begin making payments to the Chapter 13 trustee withing 30 days after your repayment plan is filed with the court. Your payments must be made regularly, typically on a weekly, biweekly, or monthly basis. The payments may be made directly by the debtor or by the debtor’s employer through a payroll deduction. In the state of Indiana, a Pay Order from an employer is generally required.

Why Would Chapter 13 Suit Me More Than Chapter 7?

The majority of all people who file for bankruptcy choose Chapter 7.  However, there are a number of reasons why you might elect to file under Chapter 13.  We recommend meeting with us prior to making any decision of this magnitude.  Some reasons a person might choose Chapter 13 over Chapter 7 include:

  • You are unable to file for Chapter 7 bankruptcy if you received a Chapter 7 or Chapter 13 discharge withing the previous eight years unless you paid off at least 70% of your unsecured debts in the Chapter 13 bankruptcy. In contrast, you can file for Chapter 13 bankruptcy at any time.
  • You have IRS debts that can be repaid over 5 years without interest and penalties if no tax lien is filed.
  • You have valuable non-exempt property which you do not wish to lose.
  • You are behind on a car loan or your mortgage. In Chapter 7, you have almost no protection from foreclosure or repossession of your property if you are behind on payments. With Chapter 13, you may repay house arrears through your plan, and keep your home by making the future payments that are required in your mortgage loan contract. For a vehicle, the loan can be restructured and paid through your Chapter 13 plan.
  • You have debts that cannot be discharged in Chapter 7.
  • You have co-debtors on personal loans. In Chapter 7, the creditors will go after your co-debtors for payment. With Chapter 13, the creditors may not seek payment from your co-debtors for the duration of your case if your Chapter 13 plan provides for full payment of cosigned debts.
  • You feel a obligation to repay at least a portion of your debts that you are able to.
  • Your income is sufficient to pay some of your debts and Chapter 7 might be considered unfair to your creditors. These debts may include tax debts, and the Chapter 13 will protect you from collections by tax agencies like the IRS.

What Is The Role Of My Attorney In A Chapter 7 Case

Your attorney is the person who will be advocating for you in your case. It is his or her responsibility to review with you all of your options and guide you through your case from filing to completion. Ultimately the decision is yours, however, your attorney is responsible for:

  • Reviewing and analyzing the amount and nature of your debts to determine the best remedy for your financial problems.
  • Assisting you in preparing a budget.
  • Examining liens and security interests of secured creditors to determine if they are valid or avoidable as well as how they should be valued.
  • Guiding you in drawing up your Chapter 13 plan to meet your needs while being acceptable to the court.
  • Preparation of pleading and Chapter 13 forms required by the court.
  • Filing the Chapter 13 forms and pleading with the court.
  • Attending the Meeting of Creditors, the confirmation hearing, and any subsequent hearings in your case.
  • Aid you in obtaining the court’s approval of your Chapter 13 plan.
  • Examining the claims filed in your case, filing objections to invalid claims, and attending any hearings resulting from said filings.
  • Modifying your plan, if required, to fit any changed circumstances.
  • Assisting you in obtaining a discharge upon the completion of the plan.

What Assets May I Keep If I File For Chapter 7 Bankruptcy

Chapter 13 bankruptcy is generally used by debtors who want to keep secured assets, such as a home or car, when they have more equity in the secured assets than they can protect with their Indiana bankruptcy exemptions. Chapter 13 bankruptcy is a reorganization whereas Chapter 7 bankruptcy is a liquidation.

A chapter 13 bankruptcy allows them to make up their overdue payments over time and to reinstate the original agreement. Where a debtor has valuable nonexempt property and wants to keep it, a chapter 13 may be a better option. However, for the vast majority of individuals who simply want to eliminate their heavy debt burden without paying any of it back, Chapter 7 provides the most attractive choice.

What Happens If I Have More Assets Than I Am Permitted To Retain?

If you have assets in value that is higher than you are permitted to retain by law, the Trustee can take some of them or sell them and use the money to pay your creditors. If you wish to retain your extra assets, you may do so by paying the extra value to the Trustee so that the Trustee may in turn pay your creditors. This may be done through the filing of a Chapter 13 bankruptcy.

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While this website provides general information, it does not constitute legal advice. The best way to get guidance on your specific legal issue is to contact a lawyer. To schedule a meeting with an attorney, please call or complete this contact form. We look forward to hearing from you.