The past two years have seen sudden economic turmoil, including job losses, business failures and recession. Whether it has been due to crushing medical debt, a layoff, or unfavorable financing options, many Indiana residents are still struggling to see the light of day so they can get on with their lives.
The thought of bankruptcy can have negative connotations for many, but it is important to realize that this government resource actually offers protections to citizens in need by providing debt-relief options that allow them to move forward. Finding out more about personal bankruptcy eligibility or terms is an important first step.
Bankruptcy in Indiana
The two main bankruptcy options for individuals fall under Chapter 7 and Chapter 13 of the Federal Bankruptcy Code. Although bankruptcy is a proceeding that takes place in federal court, the states may establish the terms, property exemptions and eligibility requirements.
Chapter 7, also called straight or liquidation bankruptcy, is a proceeding in which the filer agrees to turn over most of their property for sale to pay off debt. The court-appointed trustee will arrange for the sale of non-exempt property and negotiate with lenders on repayment options, after which the court will discharge any remaining debt. The filer must pass a means test for this proceeding.
In Chapter 13 is a reorganization proceeding in which the filer may hold on to most property and pay down debt over three to five years with the aid of a court-approved repayment plan. The filer must show that they have income and means to accomplish this goal.
Both proceedings immediately halt creditor harassment and eliminate the threat of wage garnishment or a bad credit rating. The court may also force creditors to accept the terms of repayment or nonpayment of certain debt.
Requirements in Indiana
There are eligibility requirements for both proceedings in Indiana. For the Chapter 7 filing, the individual must show through a means test that their income is either too low when factoring in their household size, which was below $77,161 for a three-person household in 2020, or alternatively, that their monthly expenses exceed the disposable income necessary to pay off debt.
To file under Chapter 13, the individual must show that they have steady income to pay off the installments of the repayment plan. In Indiana, the eligible filer must have less than $419,275 in unsecured debt and less than $126 million in secured debt.
In Indiana, the filer may keep some property with such exemptions for homestead, wages, personal property, pension and retirement, as well as a wildcard exemption for any property outside of real estate.