If you do not qualify for Chapter 7 bankruptcy, you may feel uncertain about how to manage your debts. However, Chapter 13 bankruptcy may still give you another way to seek relief from overwhelming debt.
Understanding how Chapter 13 works can help you decide if it is the right choice for your situation.
How Chapter 13 bankruptcy can help you manage debt
Indiana has opted out of the federal bankruptcy exemption system, requiring most Indiana domiciliaries to use state-specific exemptions. To qualify for Chapter 13, you also need a regular source of income, since the process is built around making payments under a court-approved repayment plan. Typically, these plans last three to five years. Within that plan, Chapter 13 can address your debts in a few ways:
- Set up an organized repayment schedule: You may be able to pay off some or all of your debts in installments, structured around your income, expenses, debts and assets and approved by the court.
- Catch up on certain missed payments: In case you are behind in paying off your mortgages and secured debts, Chapter 13 filing can help you catch up gradually.
- Keep certain property: Chapter 13 may allow you to retain property that you might otherwise risk losing because of unpaid debts, depending on your circumstances.
These protections take effect as soon as you file. An automatic stay goes into effect immediately, ending most creditor collection actions while your case moves forward.
Preparing for a Chapter 13 filing
Because your repayment plan will be built around your specific income, property and debts, it helps to have a clear picture of your finances before you file. An experienced bankruptcy lawyer can help you apply Indiana’s exemption rules correctly and understand how the plan may affect what you keep and what you owe.
