Most Chapter 7 bankruptcies end with Indianapolis residents receiving a discharge from most of their debt, including things like credit card debt and overdue medical bills.
A Chapter 7 can also discharge an individual from any business debt they may have taken on. Even for secured debts like auto loans and mortgages, Chapter 7 bankruptcies can offer limited relief.
Like anything in life, there are tradeoffs to filing a Chapter 7 bankruptcy that Indiana families should understand.
A Chapter 7 bankruptcy will appear on credit reports
Bankruptcies do appear on and remain on a person’s credit report for many years.
Because of this, a person may have to deal with the fallout of a lower credit score and, possibly, having to explain the bankruptcy to would-be lenders and business partners.
However, it is important for Hoosiers to remember that businesses and others ultimately make the decision whether or not to work with a would-be borrower. Many businesses will loan money or deal with people who have a bankruptcy on their record.
Often, it is well worth it for a family to take a blow to their credit score in order to get a fresh financial start.
Liquidation of some property
In a Chapter 7 bankruptcy, a debtor receives a discharge from debt. In exchange, they surrender all of their non-exempt property to an official called a trustee, who sees to it that creditors get their appropriate share of the proceeds from that property.
Like other states, Indiana allows debtors to keep some if not most or all of their property by claiming it as exempt. Exemptions cover many things, including some equity in one’s home, the value of a vehicle up to a certain amount and retirement plans.
However, if at the end of the day a person has non-exempt property, they will have to part with it. Looking at this on the positive side, it may, for example, be worth giving up a $3,000 tax refund in exchange for discharging $50,000 in debt.
Additional financial and other costs to bankruptcy
Like any other legal case, bankruptcy does cost money for court fees and for an attorney. There may be other out-of-pocket expenses.
There is also an emotional toll that comes with going through a bankruptcy and then living with the consequences.
However, many people go through the process and come out on much better financial and personal footing.