The Process of Discharging Debts Through Bankruptcy in Indiana

Bankruptcy is a legal process that can provide individuals and businesses in Indiana relief from overwhelming debt. Understanding how to discharge debts through bankruptcy can be crucial for those facing financial difficulties. Below is an in-depth look at this process in Indiana.

In Indiana, there are primarily two types of personal bankruptcy filings: Chapter 7 and Chapter 13. Each type has different requirements and outcomes, making it essential to choose the one that best fits your financial situation.

Chapter 7 Bankruptcy is often referred to as “liquidation bankruptcy.” This type allows individuals to eliminate most unsecured debts, such as credit card debt, medical bills, and personal loans. To qualify for Chapter 7, individuals must pass a means test, which evaluates their income against the median income in Indiana. If they meet the criteria, they can proceed with the filing.

The process begins with the completion of a bankruptcy petition and schedules that detail the debtor's assets, liabilities, income, and expenses. This is followed by filing with the U.S. Bankruptcy Court for the Southern District of Indiana. Once the petition is filed, an automatic stay is issued, preventing creditors from pursuing collection actions.

After filing, a bankruptcy trustee is appointed to oversee the case. This trustee will review the debtor's financial situation, sell non-exempt assets, and distribute the proceeds to creditors. Most unsecured debts will be discharged, giving the debtor a fresh financial start.

Chapter 13 Bankruptcy is known as a “reorganization bankruptcy.” This option is ideal for individuals who have a steady income and wish to keep their assets while repaying debts over a three to five-year period. It is particularly useful for those facing foreclosure or wanting to catch up on delinquent payments without losing their property.