How to Handle Secured and Unsecured Debts in Indiana Bankruptcy

When facing financial difficulties, understanding how to handle secured and unsecured debts during bankruptcy in Indiana is crucial for regaining financial stability. Each type of debt is treated differently under bankruptcy laws, and knowing these distinctions can guide you in making informed decisions.

Understanding Secured and Unsecured Debts

Secured debts are loans backed by collateral. Common examples include mortgages and car loans. If you fail to make payments on secured debts, creditors have the right to seize the collateral. On the other hand, unsecured debts are not tied to any specific asset. This category includes credit card debt, medical bills, and personal loans. In the event of bankruptcy, unsecured debts can often be discharged entirely.

Secured Debt in Indiana Bankruptcy

In Indiana, during bankruptcy proceedings, secured debts are typically handled in one of two ways: reaffirmation or redemption.

Reaffirmation: This process allows you to keep the secured asset while promising to continue making payments. It is essential to be cautious, as reaffirming a debt means you maintain legal responsibility for it even after bankruptcy.

Redemption: If the market value of the secured asset is significantly lower than the outstanding debt, you may choose redemption. This involves paying the creditor a lump sum equal to the asset’s current value, which can be beneficial for individuals looking to keep their assets without incurring further debt.

Unsecured Debt in Indiana Bankruptcy

Unsecured debts are generally discharged in bankruptcy, meaning you are no longer responsible for payment after the bankruptcy process concludes. This can provide significant relief for individuals struggling to manage overwhelming debt. In Indiana, there are two main types of bankruptcy filings that impact unsecured debts:

Chapter 7 Bankruptcy: This is often referred to as liquidation bankruptcy. It involves selling non-exempt assets to pay off creditors, but many individuals can keep their essential property, as Indiana has specific exemptions. Most unsecured debts can be discharged, allowing you a clean slate.

Chapter 13 Bankruptcy: This option allows individuals to restructure their debts into a manageable repayment plan over three to five years. While unsecured debts may still be discharged at the end of the plan, you are still responsible for making regular payments on your secured debts during this period.

Filing for Bankruptcy in Indiana

Before filing for bankruptcy, it is advisable to consult with a qualified bankruptcy attorney in Indiana. An attorney can provide guidance tailored to your situation, ensuring you understand the implications of filing for bankruptcy and help you navigate the complexities of debt management.

Consider attending financial counseling, which is often required in bankruptcy cases. This counseling can help you comprehend your financial situation better and explore alternatives to bankruptcy, if applicable.

Conclusion

Handling secured and unsecured debts during bankruptcy requires a thorough understanding of your options. In Indiana, secured debts can often be reaffirmed or redeemed, while unsecured debts can typically be discharged in bankruptcy proceedings. Consulting a qualified bankruptcy attorney can provide you with the support and expertise necessary to help you achieve a fresh financial start.