Bankruptcy Options

Though many of us would never wish to be in a position to consider filing for bankruptcy, it can happen to any of us. Without several months or more of savings, many of us are one significant incident away from having to consider bankruptcy as an option.

Divorce, loss of a job, a death in the family, and more can lead to financial distress that you aren't able to overcome. Filing for bankruptcy can provide the fresh start that you need to get out of some debt or manage it differently and move forward.

Common Options for Bankruptcy

The two most common types of bankruptcy individuals typically file for are Chapter 7 or Chapter 13. Both have appealing characteristics, depending on your situation. Chapter 7 allows for some or most of your debt to be forgiven, including credit card debt or other loans, for those who qualify.

Filing for Chapter 7 may mean that you will have to liquidate some or all of your assets, such as your home, vehicles, or other assets. However, it's important to note that some assets may be exempt; therefore, you wouldn't have to sell those to pay off debts owed.

Chapter 13 is the other common option for individuals and typically requires those who qualify to create a payback plan over three to five years. This option is appealing to those who know they have a debt to pay, but their future financial situation will allow them to do so in a timely manner. As with filing for Chapter 7, some exemptions may apply.

What Debt Can't Be Forgiven By Filing for Bankruptcy?

A common misconception about filing for bankruptcy is that all debts may be forgiven. This myth can mislead those into thinking it's the answer to get rid of significant tax debt, child support, school loan debts, and more.

The reality is that some debts are not forgiven and will need to be paid back regardless of filing for bankruptcy. However, it's important to keep in mind that by pursuing bankruptcy, some of your debt is likely forgiven or more manageable, allowing you more breathing room to pay off the debts that can't be forgiven.

For example, most state and federal tax debt can't be forgiven through filing for bankruptcy. Similarly, suppose you owe back child support, spousal support, student loans, unpaid fines, or restitution. In that case, these typically aren't forgiven and will require you to continue paying part or all of them even after filing for bankruptcy.

Common Asset Exemptions

If you are in a position that requires you to liquidate assets to pay off debts, some assets are safe or exempt from being sold.

For example, in Indiana, you typically are allowed an exemption of $17,600 in equity in a home, condo, or mobile home used as a residence. If a couple owns any of the above properties together, this may qualify for an over $34,000 exemption on those items.

Retirement or pension plan assets, items such as clothing, professional or school books, tools necessary for a trade, and more are typically exempt.

A wildcard exemption also applies in Indiana, which can allow for an additional $4,000 of a stackable exemption on tangible personal property. This option can mean that you can add the wildcard exemption to another personal property's value, increasing the exemption on that item to allow it to be safe from liquidation.

The generous wildcard exemption is exceptionally appealing to many, as it allows protection of otherwise non-exempt assets, such as cash, vehicle equity, and more.

Disadvantages of Filing for Bankruptcy

While bankruptcy has several advantages for those looking to find some debt relief, it also has its disadvantages. For example, those who file for bankruptcy can expect to see that bankruptcy on their credit report for several years. Bankruptcy can appear for seven to ten years, inhibiting you from securing a mortgage, personal loans, and more.

Many types of debt cannot be discharged, which may mean the financial relief you thought you might achieve is unattainable without liquidating other assets.

Qualifying for credit even long after bankruptcy can be more challenging. It's essential to keep in mind, however, that though your credit report can be affected for several years, you can use this time to rebuild your credit position. Ensuring you aren't late on any payments and cleaning up other debts through bankruptcy can allow you time to rebuild your credit score and come out in a better financial position several years later.

How Can a Bankruptcy Attorney Help Me?

Although you can pursue bankruptcy without the help of legal professionals, working with an experienced bankruptcy attorney can ensure that you comply with strict bankruptcy laws and timelines, have included all information required, and have a winning strategy in place.

It's never easy to conclude that bankruptcy is necessary. There may be other ways to protect some of your assets and overcome significant debt. By working with a bankruptcy attorney, you can get a clear picture of your options and create a realistic strategy that allows you to come out on the other side of this chapter of your life in a better financial position and ready to move forward.

Contact our office today at (317) 623-4546 to schedule a time to discuss your options with our team. With a history of specializing in bankruptcy in Indiana, we are confident in our ability to help clients navigate the complex terrain of filing for bankruptcy, providing peace of mind and a realistic plan to work towards.