Filing bankruptcy in Indiana can be a stressful and confusing process to go through. To help simplify the process, qualifications, cost, and cons, we put together this article.
- First, you need to determine if you qualify for Chapter 7 bankruptcy and how much it will cost you to file in Indiana
- Next, it's worth exploring alternatives to Chapter 7 bankruptcy. It's always good to weigh your options before making a decision.
- Lastly, you'll want to know all the specifics of Chapter 7 bankruptcy.
Chapter 7 bankruptcy is the most common type in the United States. I wouldn't be surprised if most of the 15,719 bankruptcy filings in Indiana between July 1, 2020, and June 30, 2021, were Chapter 7 cases.
Feel free to check out the Indiana Chapter 7 Calculator below; it'll estimate whether you qualify and how much it may cost.
Let's dive into why Chapter 7 bankruptcy is widespread in Indiana.
1) How Chapter 7 Bankruptcy Works
There are two primary questions to keep in mind when looking into a Chapter 7 bankruptcy:
- How quickly will it discharge the debt?
- How much is it going to cost?
When comparing different ways to get out of debt, Chapter 7 bankruptcy is usually the cheapest and fastest option compared to Chapter 13 bankruptcy, debt negotiation, debt management, and debt payoff planning.
What Is The Time Frame Of A Chapter 7 Bankruptcy in Indiana
In Indiana, you can usually get a Chapter 7 bankruptcy discharge in as little as 120 days or four months.
When filing a Chapter 7, you may hear the term "no-asset" in the Chapter 7 case. This means you may not have a house or any other valuable assets exceeding Indiana's bankruptcy exemptions. So, if you don't own anything, this can be beneficial in Chapter 7, making it less complex. Remember that every case is unique, so you'll want to consult with an attorney if you are considering filing.
How Much Does It Cost To File?
The cost of Chapter 7 bankruptcy usually falls within the range of $500 to $3000 nationwide. However, it's important to note that Indiana's Chapter 7 bankruptcy cost differs from the national average.
The cost of Chapter 7 bankruptcy can even vary depending on the specific location within Indiana. For instance, if you are filing in Evansville, you might have to pay an attorney fee of $1,090, whereas in Indianapolis, the fee could be $1,000.
There are situations where the cost of filing bankruptcy can be reduced through a filing fee waiver. If interested in this option, you should explore the information on the Indiana filing fee waiver website.
How Do I Qualify For Chapter 7?
Chapter 7 bankruptcy is designed for those who cannot repay some debts. However, before you can file, you must go through an income evaluation to see if you qualify for a Chapter 7 bankruptcy.
Unsecured debts are debts that don't have any collateral attached to them. So, if you file a Chapter 7 bankruptcy, you can discharge medical bills, personal loans, particular old income tax debts, ancient utility bills, credit card debts, and most personal judgments. A Chapter 7 bankruptcy is, essentially, a fresh start.
What Happens to Secured Debts?
If you're looking to wipe out secured debts, like car loans and mortgages, Chapter 7 might be the way to go. However, you'll have to give the asset back to the creditor. Once you try to return it, the creditor must accept the asset as full payment for what you owe.
Now, let's dive into what it takes to qualify for Chapter 7 bankruptcy.
IMPORTANT: Indiana Means Test
The Bankruptcy Means Test will calculate your average monthly and annual income and then compare it with the median income of other households in Indiana.
If your average annual income or median income is lower than the Indiana median income, you might qualify for a Chapter 7 bankruptcy. To get a free and quick Indiana Chapter 7 Bankruptcy Means Test Calculator below.
What if my Income Exceeds The Chapter 7 Means Test?
If you're making more money than the average person in your state, you might have to go through part 2 of the means test or explore other options.
The means test isn't a straightforward pass or fail. If you do not qualify in the first part, you still have a chance to be eligible in the second part. Make sure to consult with an attorney to see if you qualify for a Chapter 7 bankruptcy.
Chapter 7 Bankruptcy Indiana Income Limits
The Chapter 7 Bankruptcy Indiana Median Income Limit figures for the Means Test are adjusted from time to time based on the IRS and Census Bureau data. That said, if you are filing for bankruptcy on or after May 15, 2025, here's what you need to know about Indiana's median income.
Keep in mind, for each additional member, after that, you may be able to add $9,000 to the threshold.
Remember that these figures can change, so check the U.S. Trustees website for the most up-to-date numbers when calculating the Means Test.
Will I lose my belongings if I file Chapter 7 bankruptcy?
Bankruptcy exemptions protect a certain amount of equity so that you can keep your high-valued assets. However, if these exemptions don't cover your property, it may be sold in a Chapter 7 liquidation case. In a Chapter 13 case, any non-exempt equity in your property can increase the amount you have to pay in your bankruptcy plan.
The homestead exemption is the amount of home equity that can be protected if you file for bankruptcy; however, the exemption amount varies depending on your age and marital status.
- Single and under or over 65, you can protect up to $19,300 of your home's equity.
- Married under or over 65, you can protect up to $38,600.
The homestead exemption is covered under Ind. Code Ann. § 34-55-10-2(b)(1). It states that you can protect up to $19,300 equity of real or personal property used as a residence. If you and your spouse own the property as tenants, it may be exempt from debts incurred by only one of you.
If you're curious about the federal bankruptcy exemptions, they're all laid out in the 11 U.S. Code §522 but keep in mind that Indiana doesn't let you use these federal exemptions, only the state ones. When you look at the bankruptcy exemptions, ensure you have the most current information.
Chapter 7 Bankruptcy Indiana Pros and Cons
Chapter 7 can be a great option to get out of debt, but it is essential to understand all the pros and cons before you file.
Pros
- Affordable debt relief solution
- You can receive a discharge in about 120 days.
- Fresh start that allows you to discharge the debt.
- You may be able to keep your home and belongings due to exemptions.
- It can put a stop to debt collection lawsuits. No more constant phone calls, threatening letters, or fear of legal action.
- No more deficiency. This is when you owe more on a loan than what your collateral is worth, and the difference is called a deficiency, but a Chapter 7 can wipe it away.
- Provides relief for unaffordable, unsecured debts.
With the proper guidance and support, you can file a Chapter 7 and feel financially free.
Cons
- Income requirements for qualification: To qualify for Chapter 7 bankruptcy, you must meet specific income requirements.
- Potentially lose your home and other belongings: If your assets exceed the exemption limit, you might have to sell them.
- Negative credit report impact for ten years
- Negative credit score impact (in some situations)
- Non-dischargeable debt: Not all debts can be eliminated with Chapter 7 bankruptcy. Some debts, like student loans and taxes, may not be able to be included.
- Difficult to prevent foreclosure
2) Alternatives to Chapter 7 Bankruptcy in Indiana
If you feel like Chapter 7 is not the best for you, don't qualify for Chapter 7, or have many assets, there are some alternatives you can explore instead.
a) Chapter 13 Bankruptcy in Indiana
Even if you don't qualify for Chapter 7 bankruptcy due to your income, you can file for Chapter 13 bankruptcy. Chapter 13 can help restructure your debts into a more manageable monthly plan. By doing this, most people can keep their homes and vehicles. It can also stop foreclosures, repossessions, and wage garnishments. With Chapter 13, you can pay back your mortgage payments, catch up on past-due car payments, and handle your tax debt over three to five years through a bankruptcy plan. A Chapter 13 might allow you to reduce unpaid child support and alimony. However, you must keep making regular domestic support payments to stay in Chapter 13. If you meet specific requirements, you may be able to lower your car loan payments and even get rid of second mortgages through a Chapter 13 plan.
Can you afford Chapter 13 bankruptcy?
The cost of a Chapter 13 bankruptcy is something you would want to ask an attorney about because they will tell you what the attorney fees are as well as how expensive the possible repayment plan would be.
b) Debt Relief
In a debt relief program, the company you're working with negotiates with your creditors to lower the total amount you owe.
There are a few things you need to keep in mind. First off, there's the impact on your credit score. It's essential to understand how this process can affect your financial reputation.
There are many pros and cons to a debt relief program, such as:
Pros: Lower overall amount you pay back. Not on your public record.
Cons: No legal protection. High risk, no guarantees. Firm fees.
Lastly, you'll want to do a lot of research before you sign up so you can avoid sketchy Debt Settlement companies.
c)Debt Management
Debt management companies focus on negotiating lower interest rates, and the program lasts about 3 to 5 years. Debt management is generally a more expensive option compared to the others. Some creditors, like those personal loan lenders, may not even want to work with a debt management company, and there is a potential impact on your credit score. Debt management is a good option for folks with a lot of high-interest credit card debt, so the firm will work to lower those so you can pay the principal significantly.
d)Debt Payoff Planning
Debt payoff planning works to decrease expenses and increase cash flow to pay off debts while avoiding more interest. Check out the Savvy debt payoff planner if you want a guide on debt payoff planning. It will help you prioritize which debts to tackle first. On average, our app saves users around $2,000 in interest, so it may be a valuable tool to check out.
3) Specific Indiana Chapter 7 Bankruptcy Information:
Here are some key things to remember if you're considering filing for Chapter 7 bankruptcy in Indiana.
Indiana Chapter 7 Bankruptcy Credit Counseling and Debtor Education Courses
When you're going through the process of filing for bankruptcy relief under Chapter 7, you need to complete a couple of courses to get a bankruptcy discharge. First, you must take a credit counseling course before filing your bankruptcy case. This course helps you understand your financial situation better and explore alternatives to bankruptcy. Once you've filed your bankruptcy case, it's time for step two: the debtor education course. This course is designed to give you some valuable knowledge and skills to help you manage your finances more effectively in the future. You'll learn about budgeting, saving, and avoiding falling into the same financial pitfalls again. It's all about setting yourself up for success.
The United States Trustee's office has given a list of specific companies in Indiana that offer these bankruptcy courses. You can find a list of these companies on the UST website; these courses are available online. Just keep in mind that there's usually a small fee involved.
Indiana Chapter 7 Bankruptcy Court Locations
There are 341 meetings of creditors that you will need to complete when you file bankruptcy. If you're in Indiana and have to do this meeting in person, ensure you know where the courthouse is. It all depends on the bankruptcy district you're in. Below, we've listed the court locations in each district.
Northern District
The United States District Court for the Northern District of Indiana operates in multiple locations. Here are the addresses for each of these locations:
1. Fort Wayne Location:
1300 S. Harrison St.
Fort Wayne, IN 46802
2. Hammond Location:
5400 Federal Plaza
Suite 2300
Hammond, IN 46320
3. Lafayette Location:
Charles A. Halleck Federal Building
230 North Fourth St., Room 105
Lafayette, IN 47901-1322
4. South Bend Location:
102 Federal Building
204 S Main St
South Bend, IN 46601
These locations serve as venues for legal proceedings and provide access to justice for individuals residing in different parts of the Northern District of Indiana.
Southern
- Birch Bayh Federal Building & U.S. Courthouse:
46 East Ohio Street in Indianapolis
zip code 46204 - U.S. Courthouse in Terre Haute:
921 Ohio Street
zip code 47807 - Winfield K. Denton Federal Building & U.S. Courthouse:
101 Northwest Martin Luther King Boulevard in Evansville
zip code 47708
- Lee H. Hamilton Federal Building & U.S. Courthouse:
121 West Spring Street in New Albany
zip code 47150
Chapter 7 Bankruptcy Trustees Indiana
Below is a breakdown of the Chapter 7 bankruptcy trustees in Indiana, organized by bankruptcy district. If you prefer, you can also check out the list right here.
Here's a table that lists the trustees' names and contact info:
Remember, before you file for bankruptcy, it's a good idea to review the local bankruptcy rules in Indiana. Some of these rules may differ a bit from the Federal Bankruptcy Rules.
Conclusion
If you're curious about whether you qualify and how much it might cost you, you can take the Chapter 7 bankruptcy means test calculator below. It'll give you an estimate of your eligibility and expenses.
Most folks usually work with an attorney when filing a Chapter 7 or Chapter 13 bankruptcy. However, there's also the option to file without an attorney. If you're curious about how to go about it, you can learn more about filing for bankruptcy without an attorney.