Legal Question in Bankruptcy in Indiana

Re: Home and Bankruptcy

Hi, there. I'm an attorney who practices here in Indiana.

You are allowed an exemption of $7,500 per person in equity in the home if you file a Chapter 7 bankruptcy (the kind that allows you to be free of your unsecured debts). What does that mean? If you want to file a Chapter 7, you would have to give your creditors the difference. Ouch.

From the description of your circumstances, your best bet is to file a Chapter 13. That will allow you to keep the equity in the home. The downside is that you would have to repay a portion of your debts over a three-year period.

The good news is that you have to pay back only the difference between your income and outgoing bills (or any extra $ you have per month). Your "priority" creditors get first dibs on the money you pay the trustee. Those creditors would be government entities, child support, student loans, etc.

Your unsecured creditors most likely would be out of luck after waiting in line behind the priority creditors.

It IS more of a hassle to file a 13, BUT you can keep more assets, and it does look better on your credit.

This is a pretty simplistic explanation, but I think it gives you an idea what some of your options might be.

Most important: If you are thinking about filing for bankruptcy protection, DO IT NOW. I don't know whether you've been reading the papers or not, but Congress has passed a bankruptcy "reform" bill that Bush is expected to sign. It is NOT consumer friendly at all. You definitely want to seek protection under the old laws rather than the new.

I hope this helps answer some of your questions.

If you wish to consult w/me further, please e-mail me at [email protected] or call me at (317) 486-4578.