Indiana Chapter 13 Bankruptcy FAQ

Indiana Chapter 13 Bankruptcy FAQ

If you are considering filing for bankruptcy in Indiana, you will no doubt have many questions. Bankruptcy can be very confusing, and you may wonder if it is the right option for you. Although looking online is a great place to start searching for answers to your bankruptcy questions, there is no substitute to consulting with an attorney who can answer your specific questions that are applicable in your particular situation.

Indiana Attorney Answers Frequently Asked Bankruptcy Questions

Contact the law firm of Steven P. Taylor, P.C. at (317) 271-1111 for a consultation about the questions or concerns you have about bankruptcy. Attorney Steven P. Taylor is knowledgeable and experienced with Indiana’s bankruptcy laws, and will answer your questions and help you decide if filing for bankruptcy is right for you. Call Steven P. Taylor today if you have questions or concerns about bankruptcy throughout the areas of Central  Indiana.

Indiana Bankruptcy Frequently Asked Question Topics

• What are the requirements to qualify for Chapter 13 bankruptcy?
• What exactly does Chapter 13 bankruptcy do?
• When will my creditors stop calling me?
• Will I lose my job if I file for bankruptcy?
• Should both my spouse and I file for bankruptcy?
• Will I lose my home if I file for bankruptcy?
• What is the automatic stay?
• What does the bankruptcy trustee do?
• When is my first Trustee payment due?
• What happens if my Trustee payment is late?
• What is wage withholding order?
• How does the wage order work?
• Will I have to go to court?
• What is Confirmation?
• Should I transfer or sell my property?
• Can I buy and house or car while I am in bankruptcy?
• What debts are non-dischargeable?
• Will bankruptcy remove liens on property
• What happens if I fall behind on my house or car payments while in bankruptcy?
• Do I have to go through credit counseling?
• What effect will filing for bankruptcy have on my student loans?
• How will my credit be affected after filing for bankruptcy?
• How long does the bankruptcy process take?
• How many times can I file for bankruptcy?
• Bankruptcy Question Resources in Indiana

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What are the Requirements to Qualify for Bankruptcy?

According to the federal Bankruptcy Code (Title 11 of the United States Code), a person that resides in, is domiciled in, has a place of business, or has property in the United States can file for bankruptcy.   To qualify for Chapter 13, an individual must have regular income in order to make payments towards a Chapter 13 repayment plan AND below the debt limits set by the United States Government. It is important to speak with an experienced bankruptcy attorney who will help you identify which chapter of the Bankruptcy Code you should file under.

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What Exactly Does Bankruptcy Do?

Chapter 13 Bankruptcy allows debtors to pay back some or all of their debt in a manageable way.   Under Chapter 13 bankruptcy, the debtor creates a repayment plan to pay off some, or all of, their debts over a period of time. After the repayment plan has been completed, the debtor will receive a discharge, and any remaining debts will be eliminated, except debts that are not dischargeable.

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When Will My Creditors Stop Calling Me?

Immediately after filing for bankruptcy, an automatic stay goes into effect. The automatic stay prohibits the debtor’s creditors from contacting the debtor through any means or taking any action to attempt to collect outstanding debts.  The bankruptcy court notifies creditors by mail of your bankruptcy filing but within 7 -14 days, your creditors should have put your account into bankruptcy status.

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Will I Lose My Job if I File for Bankruptcy?

Section 525 of the Bankruptcy Code prohibits private and government employers from discriminating against or terminating an employee solely for the reason of filing bankruptcy.  Keep in mind that a bankruptcy filing is a public record. Future employers will also be able to run a credit check and see if you have filed for bankruptcy before hiring you.

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Should Both My Spouse and I File for Bankruptcy?

This depends on whether the debts are in the names of both spouses or primarily in one spouse’s name. If the debts are in both names and one spouse files for bankruptcy, the other spouse will still be liable for the outstanding debts. However, if significantly more debt is in one spouse’s name, it may be advisable for only that spouse to file for bankruptcy. Additionally, whether one spouse has a majority of the assets in their name, or both spouses jointly own the assets, will determine whether one or both spouses should file. It is important to speak to an experienced attorney who can help you determine the best decision for you and your spouse.

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Will I Lose My Home if I File for Chapter 13 Bankruptcy?

Not generally.  As long as you can make your required payments to the Chapter 13 Trustee, you are not in danger of losing any of your assets. Your required payments include the amount needed to go to unsecured debts (the value of your non-exempt assets, including the non-exempt equity in your home).  You would therefore need sufficient income to make the required payments.

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What is the Automatic Stay?

The automatic stay prevents creditors from pursuing debt collection actions against debtors once they have filed for bankruptcy. The prohibited actions include phone calls, collection letters, lawsuits, wage garnishments and bank account restraining notices. If a creditor still desires to pursue collection efforts against a debtor, they must file a motion in bankruptcy court to have the automatic stay lifted.  The automatic stay goes into effect immediately upon filing of the bankruptcy. This means the debtor does not have to take any steps to have the stay put in place. However, there are certain exceptions to the automatic stay and therefore, not all actions against a debtor are stayed.

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What does the Bankruptcy Trustee Do?

Once a debtor has filed for bankruptcy, the court appoints a trustee to oversee the bankruptcy proceedings. The trustees are bankruptcy attorneys who are assigned cases on a rotating basis. The primary function of the trustee in a Chapter 13 case is verify the debtor’s income and verify that the proposed plan meets the statutory requirements for confirmation. After filing for bankruptcy, the debtor is required to attend a Meeting of Creditors, where the trustee will ask the debtor questions about the debtor’s assets, financial obligations, credit card use, property transfers, income and expenses.

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When is my first Trustee payment due?

Your first Trustee payment in a Chapter 13 is due 30 days from the date your case is filed. Filing your case sets your payment date in stone and it cannot be changed. Make sure that you get your first Trustee payment paid in full and on time.

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What happens if my Trustee payment is late?

Your first Trustee payment cannot be late.  After your first payment you need to do the best to get your payment in on time. There can be some rare occasions that would allow your case to be dismissed without any notice.

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What is a wage withholding order?

A wage withholding order is a court order that directs your employer to take your bankruptcy payment directly from your paycheck and send it to the Trustee.  Your attorney will prepare the wage order and submit that to the Court and the Court will issue an Order to your employer to withhold the funds from your check. You do not need to provide a copy of the wage order to your employer.   Generally, and especially if the Trustee is making your mortgage payments, a wage withholding order is mandatory.

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How does the wage order work?

The wage order pulls your Trustee payment directly from your paycheck. You need to remember that payment due date is not adjusted due to a wage order. Under a wage order, if you see that payments are not coming out of your paycheck, you must mail them in yourself. If the Trustee withholds part of your payment prior to the payment due date, it is your responsibility to mail in the other part of the payment. Remember, under a wage order you are always paying early, never late. By the due date, the Trustee should have withheld enough to make the full payment. If enough has not been withheld, it is your responsibility to send in the difference. It is also your responsibility to make sure that your employer is making the payments even while you are under the wage order.

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Will I Have to Go to Court Hearings?

The general answer to this question is no. Most bankruptcy cases do not go to court, and most debtors will not have to appear in front of a judge. However, you will have to attend a Meeting of Creditors approximately three to five weeks after you file for bankruptcy. This meeting is not in front of a judge, and most of the time creditors do not even attend. You, your attorney and the bankruptcy trustee will usually be the only people at the Meeting of Creditors. Generally, you will not be required to do anything after the meeting, unless a creditor or the bankruptcy trustee files a motion or adversary proceeding against you. In that case, you or your attorney will be required to appear in court.

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What is Confirmation?

Confirmation is a hearing held approximately 45 days after your 341 Meeting of Creditors. It is not always necessary for the Debtor to attend this hearing. Please check to see if your attendance is required.  At this hearing, the Trustee reviews your proposed repayment plan and makes sure that you are able to make your payments and that it meets the best interest of your creditors. The Trustee and creditors are allowed to object to your confirmation if they foresee a problem. These objections are commonly worked out prior to the hearing and a mutual agreement is reached. You do need to be able to show the Trustee that your budget provides adequate income to pay both your bankruptcy payments and your regular living expenses.

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Should I Transfer or Sell My Property?

No. If you are considering filing for bankruptcy, do not transfer money, vehicles or any other property to anyone. Such transfers can be considered fraudulent transfers and may be recovered by a bankruptcy trustee. However, a bankruptcy attorney can advise you regarding legitimate pre-bankruptcy asset planning that may include selling property for fair value.

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Can I buy a house or a car while I=m in bankruptcy?

It is possible to purchase a house or a car while you are in bankruptcy. If you plan on financing the property, you will need to get court permission. Permission can be obtained several ways depending on the type of bankruptcy you are in and where you stand in the bankruptcy process.  If your case is not yet confirmed, you will need to have our office file a Motion to Incur Debt. You will need to consult with your attorney or paralegal to determine if there are any additional attorney fees involved. In order to have the motion filed, you must provide all finance documents, which we will provide to the court.  If your case is confirmed, you can request permission from the Trustee. You will need to go through our office to do so. Once we receive the requested documents, we will forward them to the Trustee. The Trustee will then review your request and provide you with their response in writing. In this method there are typically no attorney fees involved.

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What Debts are Not-Dischargeable?

Certain debts are not dischargeable in bankruptcy. Under Chapter 13, most taxes, educational loans and domestic support obligations (child support or spousal support) are not dischargeable. Read more about non-dischargeable debts in bankruptcy.

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Will Bankruptcy Remove Liens on Property?

By itself, the answer is no.   Your attorney will be required to file a Motion to Avoid in the bankruptcy court.  Certain liens can be avoided in bankruptcy, including judgment liens, some junior mortgage liens, and certain non purchase money security interests, provided that all requirements are met.  Otherwise, liens generally survive a debtor’s bankruptcy. That is, the debtor’s personal obligation to pay the debt is discharged, while the lien continues to attach to the debtor’s property.

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What happens if I fall behind on my house or car payments while I=m in bankruptcy?

If you fall behind on your payments to a secured creditor while in a bankruptcy, the creditor will file a Motion to Lift Stay. This is a motion requesting that the bankruptcy protection be lifted so they can begin or continue foreclosure or repossession proceedings. If you want to keep the property, typically, we can work out an agreement with the creditor to allow you to keep the property.  After an agreement is reached, you are required to make all future payments to the creditor in full and on time, make all Trustee payments in full and on time, and keep full coverage insurance on the property.

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Do I have to Go Through Credit Counseling?

Yes. Any debtor who files for bankruptcy is required to complete a federally approved credit counseling course prior to filing for bankruptcy. These courses can be completed over the internet or on the telephone.

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What Effect Will Filing for Bankruptcy Have on My Student Loans?

Student loans are usually not dischargeable in bankruptcy unless repayment of the student loans would create an undue burden on the debtor or the debtor’s dependents. The court will typically not discharge student loans in bankruptcy proceedings.

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How Will My Credit be Affected After Filing for Bankruptcy?

While a Chapter 13 bankruptcy can remain on a debtor’s credit report for a period of seven years from the filing date, filing for bankruptcy may actually be beneficial to rebuilding your credit. This is because bankruptcy will usually eliminate all or most debts. Your debt to income ratio will improve. This in turn will permit creditors to extend credit to you and allow you to rebuild your credit over time.   Keep in mind that any credit obtained shortly after a bankruptcy will not be at favorable interest rates. However, if you wisely obtain credit that you can afford to repay, your credit score will improve over time.

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How Long Does the Bankruptcy Process Take?

A Chapter 13 bankruptcy usually takes between three to five years, depending on the length of the repayment plan. However, during this time, debtors are under the protection of the Bankruptcy Court, and creditors cannot take any action without first obtaining permission from a bankruptcy judge.

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How Many Times Can I File for Bankruptcy?

There are statutory limits on the period of time between bankruptcy filings. A person cannot file for bankruptcy if they have been a debtor in a pending bankruptcy case at any time in the preceding 180 days, and the case was dismissed by the court for willful failure of the debtor to abide by orders of the court, or to appear before the court in proper prosecution of the case; or the debtor voluntarily dismissed the bankruptcy proceeding following a request by a creditor for relief from the automatic stay.

There are also limitations on the ability of a debtor to receive a discharge in a subsequent bankruptcy filing. If a debtor was granted a Chapter 7 discharge, they must wait four years before filing for Chapter 13. If a debtor was granted a Chapter 13 discharge, they must wait two years before filing for Chapter 13 again, or six years before they can receive a discharge under Chapter 7 (although there are certain exceptions to this rule). The time starts to run from the date of filing of the prior bankruptcy case.

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Frequently Asked Question Resources in Indiana

American Bankruptcy Institute – This organization provides general information about bankruptcy to the public and is focused on continued research and education about bankruptcy. This site contains various bankruptcy resources, current news about bankruptcy issues, and bankruptcy meeting and event information.

Annual Credit Report – Consumers are permitted access to one free credit report every twelve months. This site provides free credit reports to consumers from the three nationwide consumer credit reporting agencies - Equifax, Experian and TransUnion.

Federal Trade Commission – The Federal Trade Commission, also known as the FTC, is a governmental agency that protects the nation's consumers from unfair, predatory or unlawful business practices, and regulates businesses to make sure that they comply with the federal rules. The FTC also develops consumer and business policies, creates educational programs, and continues research on various trade practices.

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Steven P. Taylor, P.C. | Indiana Bankruptcy Attorney

Contact the law firm of Steven P. Taylor, P.C. today for a free consultation about your specific bankruptcy questions in Central Indiana. Call (317) 271-1111 for a consultation about your bankruptcy questions in Indiana.