Chapter 13

Indianapolis Chapter 13 Bankruptcy

Chapter 13 bankruptcy is a very useful tool in dealing with debts. There are several reasons why we may advise you to file under Chapter 13 bankruptcy. These are some of the factors we look at in determining if Chapter 13 is right for you:

  • Income - If your income is too high to qualify for Chapter 7 bankruptcy, you likely have options under Chapter 13 bankruptcy. Chapter 13 allows you to pay a portion of your debts, depending on how much you can afford.
  • Mortgage arrears - If you are behind on your mortgage payments, Chapter 13 bankruptcy can stop foreclosure. Chapter 13 bankruptcy forces your mortgage company to give you up to five years to catch up on your mortgage payments.
  • Eliminating Second Mortgages - In some situations, it is possible to eliminate a second mortgage or Home Equity Line of Credit (HELOC) through Chapter 13 bankruptcy. The key to doing this is that you must owe more on your first mortgage than the value of your home
  • Assets - If you own more assets than can be protected in Chapter 7 bankruptcy (not common), we can file under Chapter 13 bankruptcy and pay back some of your debt rather than having assets sold. This can be a great solution for someone with large amounts of home equity.
  • Restructuring Secured Loans -  Car loans, RV loans, and other secured debts can be restructured through Chapter 13 bankruptcy.  We can usually reduce the interest rate on high rate loans to 4 or 5%. In some cases we can reduce your balance to the value of the item rather than the amount currently owed.
  • Taxes and Student Loans - Although most taxes and student loans cannot be eliminated in bankruptcy, we can deal with these debts in Chapter 13 bankruptcy by restructuring the payments. Talk to our bankruptcy attorneys about the options given your specific circumstances. To serve our Indiana clients more effectively, we have an Indy bankruptcy law office as well as a Lafayette bankruptcy law office.

Steps to File Chapter 13 in Indianapolis

If after speaking to one of the bankruptcy attorneys at Perez & Perez we jointly determine that it is in your best interests to file a Chapter 13, we will get you started with the process to file.

The first step is to retain our firm to represent you in the case. We can advise you on how to deal with creditor calls and collection actions starting on day one. We then set you up on a payment plan for the attorney fees and costs associated with filing your case.

Once that's complete, we gather some basic documents from you (like pay stubs, tax returns, etc.) and prepare a rough draft of your petition. We'll then set up a "signing appointment" where we can review those together and update them for filing with the court. The signing appointment is conducted by one of our licensed bankruptcy attorneys, and you will have every opportunity to ask questions. We want you to be completely comfortable that you understand everything about the filing. After the appointment, we file the case.

Automatic Stay

Filing the bankruptcy case
with the court gives us an immediate court order stopping all collection actions against you. This is known as the “automatic stay.” As soon as your case is filed, any remaining collection calls, lawsuits, garnishments, or other form of collection against you must stop immediately!

Plan Payments

Within a couple of weeks of filing you begin making your payments to the Trustee that is assigned to your case. You will know the amount of these payments before the case is filed.

341 Meeting

About 30 days after filing we'll have a meeting with the Trustee. This meeting is also known as the "341" or "Meeting of Creditors". This is very quick and usually fairly informal. In most cases, it is the closest you'll ever get to appearing in court, and creditors rarely appear. One of our bankruptcy attorneys will be there with you to help you through it and answer your questions.

If there are any adjustments needed to your plan based on information obtained from creditors or any other matters, your bankruptcy attorneys will help you make the necessary adjustments so that your plan can be approved.

Confirmation

Within a few months, the Trustee will make a recommendation to the court, and the court will formally confirm your proposed plan.

Discharge

Once you’ve completed all your payments to the Trustee, they will notify us that the case is ready to move to discharge.

The Discharge is a court order permanently eliminating your obligation to pay certain debts. Whatever portion of your unsecured debts was not paid during the plan is eliminated. This includes debts such as credit card debt, store charge cards, medical bills, repossession balances, foreclosure balances, judgments, and debts to former landlords.

Certain debts are not dischargeable in Chapter 13 bankruptcy. Some examples include:

  • Child Support and Spousal Maintenance

  • Student Loans 

  • Certain tax debts 

  • Debts incurred through fraud, including running up credit cards prior to filing

  • Debt associated with intentional theft or intentional injury of another

  • Debt associated with injury to others due to a DUI car accident

Although these debts cannot be eliminated, they can be dealt with or paid in your Chapter 13 plan. If you have these types of debts, the experienced Indianapolis bankruptcy attorneys at Perez & Perez can guide you to make the best selection based on your particular situation.

Secured Debts in Chapter 13

Chapter 13 bankruptcy is a very powerful and versatile tool in addressing secured debts such as mortgages, car loans, boat loans, RV loans, and other loans where your property is held as collateral.

Mortgages in Chapter 13

If you are behind on your mortgage payments and want to keep your home, Chapter 13 bankruptcy gives you up to five years to catch up. We do this by resuming your regular monthly payments and making extra payments each month to catch up over time. As soon as your case is filed, any foreclosure or other collection actions against you are immediately stopped.

Depending on your circumstances, you can of course also choose to surrender real estate in Chapter 13. The Indianapolis bankruptcy attorneys at Perez & Perez will guide you to make the best decision given your specific situation.

Car Loans in Chapter 13

Chapter 13 bankruptcy can completely restructure car loans and other loans secured by personal property. In most cases, we are able to pay for your vehicle through the plan, and restructure the loan to a fresh 60 month term, at 4 to 5% interest. This can make your monthly payments significantly lower than under the normal contract, especially if you have a high interest loan.

Depending on how long you’ve had the car, we can even restructure the loan to be based on the fair market value of the car, rather than the balance of the loan. If you are “upside-down” on your car loan, this can make a huge difference in your payments and the overall cost of owning your car. The Indianapolis bankruptcy attorneys at Perez & Perez are experienced in addressing these debts and can advise you on the best options, and represent you in court if it becomes necessary to litigate the issue of your car’s value.

Unsecured Debts in Chapter 13

Unsecured debts
like credit cards and medical bills can be significantly reduced. In most Chapter 13 cases, you only pay the portion of these debts that you can afford to pay based on your income and your household expenses.

For example: If you earn $5,000 per month and need $4,800 for your reasonable and necessary expenses, you can afford $200 toward unsecured debts. You would pay that much for 60 months to the trustee, and then you are done. Although that only works out to $12,000 total, you are done after the five years, regardless of whether you started with $20,000, $50,000, or even $100,000 of unsecured debt. You pay what you can afford, and the rest is discharged (or eliminated) at the end of the plan. Even if you can afford to pay back all your unsecured debt, there is no interest paid to the creditors.

The best part about filing Chapter 13 is that it is flexible. During the 3-5 years you are in bankruptcy, life happens. You might have changes to your income, expenses, or household size. You might have a child, change jobs, or any number of things may affect how much you can pay your creditors. When these changes happen, we can adjust your plan payments and how much your unsecured creditors receive to match. No other method of dealing with debts is tied to your ability to pay. Chapter 13 is not about what your creditors want, its about what you can afford.

Tax Debts in Chapter 13

Many of our clients are surprised to learn that you can eliminate tax debts in bankruptcy. There are a number of criteria used to determine whether a tax debt can be eliminated, including the age of the debt, the type of tax,etc. If your tax debt cannot be discharged, Chapter 13 can provide an orderly plan for repaying these taxes. During Chapter 13, there are no penalties or interest accruing on tax debts. So, you can take up to 5 years to repay these without interest.

Student Loans in Chapter 13

Even though bankruptcy cannot eliminate student loan debts in most cases, Chapter 13 can limit your payments to the amount you can afford. During Chapter 13, student loans are treated exactly like other unsecured creditors. That means that we can pay them based on your ability to pay rather than the amount the creditors want. The bankruptcy attorneys at Perez & Perez have extensive experience dealing with student loans, and can guide you in selecting the best way to treat these loans in your case.

For more information on the costs associated with filing for bankruptcy, please see our bankruptcy costs.

For more information on how to pick the right bankruptcy attorney, please see our advice about how to find an Indianapolis bankruptcy attorney.

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