Chapter 7

Indiana Chapter 7 Bankruptcy

Chapter 7 bankruptcy is the most common form of bankruptcy for Indiana consumers. In most cases, Chapter 7 bankruptcy allows you to eliminate all of your unsecured debt (like credit card debt, medical bills, repossession balances, payday loans, etc.) without losing any of your belongings and without any payment plan.

In the majority of consumer Chapter 7 bankruptcy cases, there are no assets taken by the court! You can keep your financed home, cars, furniture, jewelry, and other belongings while eliminating your credit card debt, medical debts, and other unsecured debts.  We serve the north central Indiana region, including the Indy area and Lafayette areas. We are here to help. Read more below if you want to know the details about how Chapter 7 bankruptcy works.

Do You Qualify for Indiana Chapter 7 Bankruptcy?

There are three main issues to consider when we determine if you qualify for Chapter 7 Bankruptcy.

  1. Prior Bankruptcies: This one is easy. If you haven't filed for bankruptcy in the last 8 years, you are ok on this requirement. If you have filed previously, there's more to the analysis, as it will depend on the chapter you filed under the last time. Even if you filed a Chapter 7 recently, you likely still have options under Chapter 13. The attorneys at Perez & Perez have access to a national database of bankruptcy filings, so we can look up all the details about any prior cases for you to make sure you qualify if you have filed previously.

  2. Income: The income tests are more complex. The overall concept is that we have to show that you can't afford to pay any of your unsecured debts back in order to qualify for Chapter 7.

    So, to determine this, there are some calculations to complete, primarily the "Means Test". The attorneys at Perez & Perez are experienced and well versed in the body of case-law interpreting the means test and will work hard to ensure that you obtain the best possible result in your case.

    In general, if your household income is below the median income for a household of your size, then you will qualify for Chapter 7 with regard to income. Of course there are always exceptions, so you’ll need a full consultation to be sure. By way of a general idea, the current median incomes in Indiana by household size are as follows (in gross income):

    • Household of 1: $46,000
    • Household of 2: $57,000
    • Household of 3: $66,000
    • Household of 4: $71,000
    • Then it goes up by $8,400 for each additional person.

    Just because you are above the median does not mean you won't qualify for Chapter 7. Being above the median just means we have to look at your household expenses as well. In many cases, above median individuals and couples are still eligible for Chapter 7.

  3. Assets: Chapter 7 bankruptcy is liquidation. By filing a Chapter 7, you are asking the court to look at everything you own and see if any of it can be sold to pay your creditors. However, most people who file Chapter 7 with proper representation don’t lose any assets. This is because Indiana allows “exemptions” that our attorneys can claim for you. These exemption laws allow us to protect your belongings.
    In general, Indiana law allows us to protect your assets up to:

    • Home equity (value above and beyond what you owe on the mortgages):$19,300
    • Household items, equity in cars, jewelry, other tangible assets: $10,250
    • Cash, bank accounts, stocks, money owed to you, other intangible assets: $
    • Retirement accounts like 401(k), 403(b), IRA: 100% protected
    • Social Security benefits: 100% protected

    There are other exemptions available as well, these are just the most common ones. If you are a married couple that owns these things jointly, the exemption amounts are double. With most of our clients, we are able to exempt all their belongings, so the court doesn’t take any assets.

Steps to Filing for Bankruptcy

If after speaking to one of the attorneys at Perez & Perez we jointly determine that it is in your best interests to file a Chapter 7, 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 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!

341 Meeting

About 30 days later we'll have a meeting with the Trustee that is assigned to your case. 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 Indianapolis bankruptcy attorneys will be there with you to help you through it and answer your questions.

If the trustee finds any assets that can be used to pay your creditors, they will work on liquidating those assets and paying the creditors.

Discharge of Debts

About three months after filing, you receive the official discharge of your debts from the court, and your part of the case is usually complete.

The Discharge is a court order permanently eliminating your obligation to pay certain debts. Most unsecured debts such as credit cards, store charge cards, medical bills, repossession balances, foreclosure balances, judgments, debts to former landlords, and many others, are discharged in Chapter 7.

Certain debts are not dischargeable in Chapter 7 bankruptcy. Some examples include:

  • Child Support, Spousal Maintenance, and Divorce property settlement debts
  • 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

There are other less common types of debt that cannot be discharged, but our experienced bankruptcy attorneys can review your specific debt to give you a legal opinion and discuss your options. Some debts that cannot be eliminated in Chapter 7 can still be dealt with in Chapter 13. Chapter 13 can be a particularly great tool to deal with tax debts, student loans, and certain support debts.

Secured Debts in Chapter 7

The main goal of Chapter 7 is usually to eliminate your unsecured debts like credit cards, medical bills, repossession balances, and payday loans. But Chapter 7 will also have an effect on secured debts like mortgages and car loans.

Mortgage Debt

If you have a mortgage, the mortgage company will be listed as a creditor in your case. This does not mean that you will give up your home. All creditors have to be listed on your schedules.

Once your Chapter 7 is filed, you will have several options regarding your mortgage:

Surrender - You can always surrender the real estate if you don’t want to keep it. This gets you out of the entire debt so you will not owe anything to the lender. The lender will then have to go through the state court foreclosure process to get the property back, but you will not owe anything to them.

Reaffirm - Reaffirmation is an agreement between you and the lender. By signing the agreement, you bind yourself to pay the entire debt back, just like the bankruptcy never happened. The payment amount and other terms of the loan stay exactly the same as before. The downside is that if you sign one of these agreements, you can never use the bankruptcy to protect you from any collection by the mortgage company in the future.

Pay and Retain - You simply keep making your mortgage payments after the bankruptcy, but without any written reaffirmation agreement. You are not personally liable to make the payments, so you can always stop in the future and turn it into a “surrender” later. This is an option that many bankruptcy attorneys recommend because it is the best of both worlds. It gives you the flexibility to change your mind at a later date.

Mortgage Loan Modification - If you would like to keep your home but cannot afford your current payments, Chapter 7 can put you in a great bargaining position with the lender to modify the terms of your loan. Loan modification is voluntary, but because you have the right to walk away without owing anything, you may be able to leverage your bargaining power to obtain a reasonable modification. 

The experienced and knowledgeable bankruptcy attorneys at Perez & Perez will go over the specifics of these choices with you to help you select the best option for your individual situation.

Car Loan Debt

If you have one or more car loans, the lender will be listed as a creditor in your case. This does not mean that you will give up your car. All creditors have to be listed on your schedules.

Once your Chapter 7 is filed, you will have several options regarding your car:

Surrender - You can always surrender the car if you don’t want to keep it. This gets you out of the entire debt so you will not owe anything to the lender. The lender will then repossess the car, but you will not owe anything to them.

Reaffirm - Reaffirmation is an agreement between you and the lender. By signing the agreement, you bind yourself to pay the entire debt back, just like the bankruptcy never happened. If you sign one of these agreements, you can never use the bankruptcy to protect you from any collection by the car creditor in the future.

Pay and Retain - You simply keep making your car payments after the bankruptcy, but without any written reaffirmation agreement. You are not personally liable to make the payments, so you can always stop in the future and turn it into a “surrender” later. This is an option that many bankruptcy attorneys recommend because it is the best of both worlds. It gives you the flexibility to change your mind at a later date.

Redemption - During a Chapter 7 bankruptcy, you have a limited opportunity to “buy-out” the car title from the lender. If you give the lender a lump sum of money equal to the value of the car, they have to release the title. You can usually borrow the funds to do this from a new lender. The bankruptcy court has to establish the value of your car, so that often involves litigation, and that is where we come in. We can help you with the entire redemption process, from referring you to lenders that can finance the redemption to litigating the fair market value of your car.

The knowledgeable and experienced bankruptcy attorneys at Perez & Perez will go over the specifics of these choices with you to help guide you to the best option for your individual situation regarding each vehicle.

Bankruptcy Costs

You are probably curious as to the cost to file your bankruptcy case. Obviously, if you are facing debts and considering bankruptcy, you are not in a position to spend a lot of money on anything. However, ensuring that you have competent representation for your case is vital.

During court hearings we often see folks who are attempting to represent themselves in their bankruptcy. Often times, these cases end in easily avoided disaster because the person was not aware of the many variables that affect a seemingly “simple” Chapter 7 case. Some debtors end up losing assets that could have easily been protected if they had a competent attorney to represent them.

Bankruptcy is about much more than just filling out forms. We like to compare the idea of representing yourself in a bankruptcy to repairing your own car’s transmission. Are you allowed to do it yourself? Sure. But should you? Do you really have the necessary skills to make sure you do it correctly? Or are you just risking a much more expensive repair if you do something wrong?

We are committed to helping our clients by offering quality representation for fair fees and with very flexible payment plans.

Legal Fees and Costs to File for Bankruptcy

We can't give you an exact fee quote without fully evaluating your situation. Most cases are handled on a flat-fee basis, so you don't have to worry about unpredictable hourly charges. Each bankruptcy attorney sets their fee based on your situation and what it will cost to handle your case, so we don't give you a set price until we have fully evaluated your case. Beware of anyone that tries to sell you a "one-size-fits-all" bankruptcy....there is no such thing. What we can promise you is that we will tell you about all the costs up-front, before you decide to hire us. With our firm, there are no hidden fees.

There are three components to your bankruptcy costs. The Attorney Fee, the Due Diligence Costs, and the Court Filing Fee.

Attorney Fees for Chapter 7

Attorney fees vary by case, but for a Chapter 7you can expect the cost to range between $1300-$1900, depending on the specifics. Factors we take into consideration include: whether you are filing individually or with a spouse, whether you own real estate, how many secured debts you have, the types and amount of income you receive, and any other factors that can affect the time necessary for your case and complexity of your case. Most of our clients fall into the lower half of the range given here.

Attorney Fees for Chapter 13

In Chapter 13cases, a good portion of your fees can be incorporated into the trustee payment over the 3-5 years that you will be in the plan. At our firm, we determine how much of the fee to collect prior to filing and how much to build into your plan based on your specific circumstances and the facts of your case. This can range from at little as $250 up to the full amount of the Chapter 13 fee. Regardless of the amount required prior to filing, you can still pay our fee in installments leading up to the filing.

In the Indiana bankruptcy courts, the court or bankruptcy trustee have established guideline fees that most attorneys use as a standard total attorney fee for the entire Chapter 13 case. This ranges from $3000-$4000 depending on the district in which you reside. Keep in mind, we represent you for 3-5 years after filing, so this is intended to cover those services; and much of this will be paid over the life of the case, not up-front.

Due Diligence (Document) Costs

The other costs involved in filing bankruptcy are taking the credit counseling and debtor education courses (these are really simple and can be done online or by phone), and obtaining your credit reports. The service we use for these also provides some additional benefits, like the opportunity to review your credit reports again after the bankruptcy for accuracy. 

We get all of these items for you at a very reasonable cost (currently $150 total for an individual, $200 for a married couple) so you don't have to worry about tracking down all the information. The credit reports we use incorporate the information from all three major credit reporting agencies, and also searches court records and other sources for creditor information. It is much more thorough than the "free" credit reporting services out there. The cost for this is the same regardless of the chapter you filing under.

Bankruptcy Filing Fee

Finally, the last cost is the Court Filing Fee. For Chapter 7, this is currently $335; for Chapter 13 it is $310. This is paid to the bankruptcy court for accepting your case and helps the court cover costs such as postage (to notify all your creditors of your filing), staff at the court, etc.

Non-Basic Services

Our flat fees cover everything that comes up in the vast majority of cases. Of course, there are some issues that are so rare, that it would be unfair to charge everyone for them if they only come up in very specific circumstances. Examples include: removal of judgment liens, adversary proceedings, motions to redeem, amending schedules, etc. These services and their costs are fully disclosed in our contract so you will know ahead of time what they are, and they are always optional.

Payment Plans

At Perez & Perez, we offer convenient payment plans to cover your fees and costs. Most of our clients choose electronic payments, where we set up a payment plan that draws from your checking or savings account, or debit card. We can set up payments weekly, bi-weekly, monthly, or whatever is most convenient for you. The timeframe is also up to you.

Many of our clients use their tax refunds as an opportunity to pay the entire remaining balance of their fee at once and file sooner. Others have friends or family that assist with the costs. In those situations, we are even set up to take credit card payments, as long as they come from a third party. Obviously we can't accept credit card payments from your card, since you will be eliminating the credit card debt in the case.

Consumer Bankruptcy Concentration

Consumer bankruptcy is a complex field with many issues that require a competent attorney to be up to speed on all the latest issues. Bankruptcy attorneys can practice in any area of law and some try to do it all. They handle the occasional bankruptcy case but don’t do enough of it to stay current on all the issues. One of the key factors in selecting an attorney to handle your bankruptcy case is to make sure they handle primarily consumer bankruptcy cases. The attorneys at Perez & Perez limit their practice to consumer bankruptcy cases and areas very closely related to it.

Bankruptcy Law Experience

Ask your attorney how many consumer bankruptcy cases they have handled, not necessarily the number of years they have practiced. An attorney can practice for 50 years and only handle 30 bankruptcy cases in that time. Bankruptcy laws were completely revamped in 2005, so make sure your attorney has handled a lot of cases since the changes and is familiar with the issues those changes raised.

The Indianapolis bankruptcy attorneys at Perez & Perez have handled thousands of consumer bankruptcy cases since the 2005 amendments. For six years prior to starting their own practice, Jay and Cassandra worked for the nation’s largest consumer bankruptcy law firm. During that time they gained significant experience by handling a very large volume of cases.

Membership in Consumer Bankruptcy Organizations

One of the ways that the attorneys at Perez & Perez stay current on the latest developing issues in consumer bankruptcy is through membership in NACBA, the National Association of Consumer Bankruptcy Attorneys. This is the leading attorney organization in consumer bankruptcy, and membership is a valuable asset. NACBA provides continuing education, contacts with bankruptcy attorneys across the country, and access to excellent legal research resources for our office. By joining NACBA, an attorney indicates they are serious about consumer bankruptcy.

Personal Service

No matter how much collective experience a law firm can quote, you will only get the benefit of that experience if you get to discuss your case with an experienced attorney. Unfortunately, there are a number of firms known as “bankruptcy mills” that churn out bankruptcy cases without much consideration for the individual client. They market heavily, deal in huge volume, often offering cut-rate services. The problem is you rarely deal with an attorney, sometimes not meeting the attorney until you go to court. Even if you get to meet an attorney, these firms usually hire new attorneys with little experience to do the bulk of the work for low wages. Unfortunately this leads to a lot of employee turnover, so you might get shuffled around from one attorney to another several times during your case. All of these issues can result in errors or missed issues because your attorney doesn’t really know your case.

Comparing Bankruptcy Legal Fees

Cost is always a concern when comparing bankruptcy attorneys. After all, you are already in a difficult financial position. There are many factors that can affect fees charged by bankruptcy attorneys, such as the complexity of the case, the amount or type of debt you are looking to discharge, and other issues involved in your particular case. But one of the main factors is that there are differences between attorneys and the quality of services they offer.

The old adage “you get what you pay for” very much applies to bankruptcy attorneys. Do you really want to risk your entire case, everything you own, and whether or not you can eliminate thousands of dollars in debt over saving a couple hundred dollars?

Let’s compare this to a car repair. If your car is having problems, would you want the lowest-priced cut-rate mechanic who uses leftover used parts? That might be all you think you can afford right now. But that mechanic could damage your car even further, costing you thousands to fix his mistakes. You should instead look to a mechanic that offers a fair cost for the repair you need, or someone referred to you by others.

Choosing a bankruptcy lawyer is no different. Bankruptcy law is very complex and is even more so now after the by revamp in 2005. There are hundreds of potential problems that could arise in any case, so you need an experienced bankruptcy attorney that can anticipate, identify, and avoid those issues for you. If your attorney is not aware of the issues, or can’t anticipate them based on his or her experience, you could end up spending much more to fix a problem than it would have cost to prevent it. The attorneys at Perez & Perez promise to quote you a fair fee for your case. We can’t promise to be the lowest priced firm out there. It is unlikely that we will be the highest priced either. We provide quality service at reasonable fees and will work with you on a payment plan that you can afford.

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