Tom Scott Law Indy

Bankruptcy Attorneys in Indianapolis Since 1980

Archives for July 2013

What is bankruptcy?

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Bankruptcy is a court supervised proceeding which is intended to give debtors a break from creditors’ collection activities while the court tries to determine if there is any way possible to try and get some money to creditors in exchange for debts being discharged (“going away”).
You see, the goal under any chapter of bankruptcy (at least as far as Congress is concerned) is to try and generate funds to give to the creditors and in exchange for that attempt the debtor’s debts will be discharged [except for several exceptions including but not limited to certain taxes, student loans, domestic support obligations, criminal fines and restitution, and personal injury automobile accidents involving drugs or alcohol].
In most cases, creditors do not get anything at all, and that is really why you would need legal advice to help make such a determination. The two chapters of the bankruptcy code that deal with consumer debts are Chapters 7 and 13. The biggest difference between a Chapter 7 and a Chapter 13 is how the court looks for money to give to creditors.

Chapter 7 Bankruptcy

A Chapter 7 can be thought of as a “liquidation” bankruptcy. The court will value the debtor’s property and determine whether property may be liquidated and funds given to the unsecured creditors. Each state allows debtors to keep property necessary for the “fresh start.” The property that may be kept (which is exempt from liquidation) is called an exemption.
In Indiana, the major exemptions are as follows:

  1. Retirement (in a qualified retirement account) is fully exempt;
  2. Real or personal property constituting the debtor’s primary residence is exempt up to $17,600.00 in equity ($35,200.00 for a married couple);
  3. Personal property valued up to $9,350.00 is exempt ($18,700.00 for a married couple); and
  4. Intangible assets up $350.00 are exempt ($700.00 for a married couple).

While the majority of cases are “no asset” cases (meaning there is nothing to give creditors), debtors must honestly and fairly list all assets and cooperate with the court in liquidation of assets in order to receive a Chapter 7 bankruptcy discharge.
The entire Chapter 7 bankruptcy takes approximately 120 days from start to finish and is a fairly simply way to obtain a fresh start.

Chapter 13 Bankruptcy

There are many reasons to file a Chapter 13, but only two reasons why a debtor would have to file Chapter 13. The first is that a debtor must file a Chapter 13 if the debtor has filed a Chapter 7 and received a discharge in the prior eight (8) years.
Secondly, a debtor must file a Chapter 13 id the debtor earns too much money and would have some “disposable income” available to pay to the court each month. In a Chapter 13 a debtor is basically saying, “I do not earn enough money to pay off all these debts, but I am working and making a good living, so I might be able to pay off some of the debt over a period of time.”
An attorney would be needed to determine whether you must be in a Chapter 13 and how much the court will require that you pay back to creditors.

Are there different types of bankruptcy?

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There are several chapters of bankruptcy including Chapter 7, Chapter 9, Chapter 11, Chapter 12, and Chapter 13. The majority of consumer cases are either Chapter 7 or Chapter 13.
A few of our business clients must file Chapter 11 (which is a business reorganization) or Chapter 12 (which is exclusively for farmers). Chapter 9 is for governments, and you may have heard that Detroit, Michigan recently filed for Chapter 9 bankruptcy protection.
Learn more: Chapter 7 vs. Chapter 13

What is the process to file bankruptcy?

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All you need to do is contact our office and set a free consultation with one of our experienced bankruptcy attorneys. Each of our lawyers has focused almost exclusively on the bankruptcy law for at least 15 years, and we feel confident that we will be able to answer your questions and reduce your stress.
If you decide that bankruptcy will help reduce your stress and make your life happier, then we will discuss the fees (which will depend on the complexity of your case) and go over the information that we will need to put together the bankruptcy petition that will be filed with the Federal Bankruptcy Court. We will be with you every step of the way.

How long does the bankruptcy process take?

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In a Chapter 7 case, once the case is filed we will attend a meeting with the court approximately 30-45 days after the case is filed and the debts will be discharged approximately 60 days later. Therefore, we can expect a total period of approximately four (4) months from filing date to discharge date.
In a Chapter 13 bankruptcy, Congress requires that a plan payment continue anywhere from 36-60 months. Once the plan payments are complete, the court discharges debts approximately 60 days later. However, while you are in bankruptcy you will be protected by the stay (which prohibits creditors from collecting any debts).

Is bankruptcy right for me?

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While we will be able to assist you with the entire bankruptcy process and will answer all of your questions to make sure you understand the pro’s and con’s of filing, whether to file remains a personal choice.
In our opinion, however, if you feel like the burden of your debt is starting to create problems in your life (such as martial issues, high blood pressure or other medical issues, unbearable stress, or a decrease in job performance) then it may be a good option for you.

How much does it cost to file bankruptcy?

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There are two components to figuring the cost for filing bankruptcy. The first, and easiest cost to calculate is the court’s filing fee, which is the amount the court charges to accept a bankruptcy filing.
As of June 1, 2014, the court charges and collects $310.00 for a Chapter 13 filing and $335.00 for a Chapter 7 filing. The second component are the attorney fees, and that amount is going to depend on the complexity of your case.
For simple Chapter 7 cases, our fees start at $665.00, plus costs, and can move upward for more complex cases (dealing with parcels of real estate, businesses, tax issues, judgments, etc.)
Chapter 13 fees are set by the court, but the majority of fees are paid through a bankruptcy reorganization. The upfront fees to file a Chapter 13 may be as low as $500.00.
Our firm is committed to providing the best possible service along with low fees and will consider any specific circumstances you may have in determining price.

Do I need a lawyer to file for bankruptcy?

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No, the court does not require that you use an attorney and you may be able to go through the process without an attorney. However, we would not recommend it.
An experienced bankruptcy lawyer will be able to help you determine the value of your assets, advise you on what the law allows you to keep, make the necessary calculations under the means test to determine which chapter to file.
In many cases debtors may cost themselves a lot more by not seeking the advice of an experienced attorney.

Do both spouses have to file for bankruptcy?

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No, there is no requirement in the Bankruptcy Code that a married couple must file bankruptcy jointly. In fact, in many cases our office will not recommend a joint filing. For example, if a couple is newly married and one spouse has brought significant debt to the marriage, then it may be best that only one spouse file.
However, there are circumstances where a creditor might be able to sue spouses even if one spouse did not sign a contract for the debt. You should seek advice from an attorney regarding the applicability of the “Doctrine of Necessaries” to your fact pattern.
The Indiana Supreme Court has held that “each spouse is primarily liable for his or her independent debts.” Typically, a creditor may look to a non-contracting spouse for satisfaction of the debts of the other only if the non-contracting spouse has otherwise agreed to contractual liability or can be said to have authorized the debt by implication under the laws of agency.
When, however, there is a shortfall between a dependent spouse’s necessary expenses and separate funds, the law will impose limited secondary liability upon the financially superior spouse by means of the doctrine of necessaries.” See In Bartrom v. Adjustment Bureau, Inc., 618 N.E.2d 1, 8 (Ind. 1993).