Frequently Asked Questions

Chapter 13 bankruptcy is designed for those with a regular source of income, regardless of whether they are working or receiving Social Security, disability, or retirement benefits. In a Chapter 13 bankruptcy, a portion of the debt is repaid over 36 to 60 months through a repayment plan. This plan is approved by the court and becomes binding on all creditors. Payments are then collected by a Chapter 13 bankruptcy trustee and distributed among the creditors. A benefit of a Chapter 13 bankruptcy is that it allows the ability to “cure” or make up past due mortgage and auto loan payments over 36 to 60 months while the filer can retain the home and car. It also allows for past-due student loan and tax payments to be spread out over this period and often on better terms than what would be offered by the government.

Chapter 13 bankruptcies can last upwards of 60 months. The actual plan period depends on a variety of factors: whether the filer is above or below the median income, their disposable monthly income, the amount of non-exempt property, and the amount of claims filed by creditors in the case. So, while a plan may initially propose payments from 36 to 60 months, it’s quite possible for a Chapter 13 bankruptcy to end much earlier.

There are limits on the amount of debt included in Chapter 13. Filers must owe less than $307,675 in unsecured debt (credit cards, medical bills, utility bills) and less than $922,975 in secured debt (mortgage, car loans, title loans). A discharge won’t be granted if the filer received a discharge in Chapter 7 bankruptcy within four years of filing or a discharge in a Chapter 13 bankruptcy two years before filing the new case.

Yes! That’s one of the benefits of a Chapter 13 bankruptcy. Since filers are proposing a plan to repay some or all of their debt using their disposable income, they are allowed to keep their property.

Yes. A Chapter 13 bankruptcy will stop a foreclosure or repossession provided that the arrearage is addressed and funded in a Chapter 13 plan. Not only can it halt a sheriff’s sale or force a lender to return a car, but Chapter 13 bankruptcy allows filers an opportunity to catch up on their past-due payments. These payments can be stretched out over 60 months.

Yes! As long as the car has not gone to auction, you can use Chapter 13 to help gain it back. Chapter 13 has the added benefit of allowing you to make up the past due payments.

Depending on whether you purchased the car over 910 days prior to filing bankruptcy, and certain other factors, it may be possible to “cram down” the car. This means that you propose to pay only the fair market value of the car and at an interest rate closer to 3-5% per year. In turn, the unsecured portion of the loan is paid pennies on the dollar like other unsecured debt. This helps lower your car payments over the life of your bankruptcy and reduce the amount owed to the real value of the car.

Another benefit of a Chapter 13 bankruptcy is that the co-signer is protected from contact from creditors – just like the party filing bankruptcy. This is called an extension of the “automatic stay.”

Absolutely! Regardless of whether it’s a Chapter 7 or Chapter 13 bankruptcy, you have the option of surrendering the car to the lender in return for complete relief from the debt. Bankruptcy is one of the very few times that you can get out from under a bad auto loan without liability. I’ve often encountered bankruptcy trustees who will actually encourage debtors to let their vehicles go in order to take advantage of this important benefit.

A discharge is entered upon the successful completion of the Chapter 13 plan. You are then relieved of any further liability for any unsecured debt (credit cards, medical bills, utility bills, etc.) left unpaid. You will be responsible for continuing payments on any secured debts, such as mortgages and car loans, assuming that you kept the property.

A Chapter 13 plan serves as notice to your creditors and the Chapter 13 trustee as to how you intend to repay all or a portion of your debt. Think of it as a set of instructions. The plan provides an overview as to the amount of your monthly payments, length, and total amount to be paid. It then breaks down the various types of creditors, such as administrative, secured, and unsecured. It also informs creditors of whether certain claims will be “crammed-down”, avoided, or paid outside of the plan directly to creditors.

The great thing about a Chapter 13 bankruptcy is that your plan isn’t carved into stone. The courts and trustees recognize that life happens. If there is an unexpected expense or a temporary change in income, we can request a modification to reflect the change in expenses or income. If you can no longer make the plan payments, we may be able to apply for a hardship discharge or otherwise convert your case to a Chapter 7 bankruptcy (provided that you qualify at that point).

As part of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), Congress decided that consumers filing bankruptcy must take a credit counseling course before being able to file their bankruptcy case, and a second credit counseling before they are able to receive their bankruptcy discharge. The pre-filing course covers factors leading to bankruptcy, alternatives to bankruptcy, and determining your current income and expenses. The post-filing course, called “Personal Financial Management,” discusses how to use credit responsibly, establish household budgets, and to avoid falling back into a bankruptcy situation.

The required consumer credit counseling courses can vary in price from provider to provider, but it generally costs no more than $40 for a household to complete. There are several providers serving the Southern District of Indiana. I typically suggest GreenPath and Debtorcc.org due to their customer service and promptness in emailing the certificates of completion.

The pre-filing counsel credit counseling course can take upwards of 90 minutes to complete. The post-filing debtor education course takes a minimum of 2 hours to complete. Both can be completed either online or over the phone.

Only in rare cases is court attendance required. Most bankruptcies are completed only with a short Zoom conference with the trustee assigned to the case.

Yes. However, whether the trustee takes your tax refund depends on a variety of circumstances. For instance, if the refund is fairly small, say $1,000 or less, the trustee may determine that it’s not cost-effective to intercept it. The trustee is also only entitled to a pro-rated portion based on when your case was filed. Finally, any portion of the tax refund coming from the Earned Income Credit is 100% exempt, meaning the trustee cannot use it to pay your creditors.

No. Medical care savings accounts and health savings accounts are 100% exempt. This means that the funds cannot be taken by the trustee and be used to pay your creditors.

No. Qualified retirement savings accounts such as 401(k), 403(b), IRA, PERF, pensions, etc. are 100% exempt. This means that the funds cannot be taken by the trustee and be used to pay your creditors.

No. Public utilities, such as gas, electric, and water, cannot disconnect you or refuse service because you filed for bankruptcy. They can, however, demand that you provide a deposit for future services and you do have to pay bills that arise after the bankruptcy is filed.

In Indiana, a person filing individually may exempt (protect from creditors) up to $400 in cash and other intangibles. For a married couple, it’s $800. Keep in mind that this is the total amount from all accounts – checking, savings, money market, CDs, tax refunds, rental deposits, and even the cash in your pocket. That said, proper bankruptcy planning can help reduce potential exposure and help protect your hard-earned money.

Many believe that you cannot deposit additional funds to your checking or savings accounts after you file bankruptcy. Not true. After filing, you can continue to deposit money into your accounts. However, a trustee will ask to see your bank statements for the three months prior to filing and for the month of filing. This is to verify that no large sums of cash were withdrawn prior to filing and then re-deposited. The trustee will also scrutinize the bank statements to ascertain whether any unusual transfers were made to others.

Back in the day, you had to visit sites like www.annualcreditreport.com, download, and print your credit reports from each of the three major credit bureaus. Now, as part of the bankruptcy package, I pull your credit reports electronically and import the information directly into your bankruptcy petition. That said, some debts, like medical bills and store cards, don’t get reported immediately or until they are sent to collections. If you have medical or other debt that you think may not be reported, then you’ll want to provide the most recent statements or contact those creditors for an updated balance and account number.

If you forgot to list a creditor in your bankruptcy case, all is not lost. If it is a chapter 7 “no asset” case, meaning that there are no non-exempt assets available to pay your creditors, then it’s a simple matter of sending the creditor a letter explaining that you filed bankruptcy, there were no assets available to pay the debt, a discharge was entered, and they should go away. If the creditor is still persisting, or there were assets available but they weren’t able to participate, then it’s possible to reopen the case, list the creditor, and then let the case close.

The three major credit bureaus (Experian, Equifax, and Transunion) offer a procedure to dispute inaccurate and/or incorrect information. This involves submitting to the bureaus a detailed written description of the inaccurate or incorrect information, evidence that the debt was listed in your bankruptcy and discharged, and a request the information be corrected or removed. As a reporting agency’s failure to correct inaccurate information can carry certain civil liability and penalties, it could be beneficial to enlist the aid of an attorney to dispute the entries.

After you receive a discharge in bankruptcy, your credit reports should list your debts as having a zero balance; meaning that you do not owe anything on the debt. You should always check your credit report three to six months after discharge as incorrectly listed debts could negatively impact your credit score.

A bankruptcy filing can stay on your credit report for 10 years. But, filing for bankruptcy could actually help your credit as it wipes out your old debt, frees up cash to pay bills, and creditors know that you cannot file bankruptcy again for a certain period of time. You’re now considered a decent credit risk in their eyes!

Yes! There’s no requirement that both spouses have to file bankruptcy together. But, if most of the debt is jointly owed, then it may make sense to file together as it saves on the filing fee and avoids duplication of work. A careful analysis should also be made to make sure that the combined household income doesn’t force the filing spouse into a Chapter 13 bankruptcy.

Generally, one spouse’s bankruptcy case should not affect the other spouse’s credit. However, if the bankruptcy includes a debt owed by both spouses, then the debt may be reported on the non-filing spouse’s credit report as in bankruptcy. On the plus side, if it’s a joint debt in a Chapter 13 case, then the automatic stay will extend to the other spouse even if they didn’t file for bankruptcy. This means that creditors cannot take action against the non-filing spouse without first going through the bankruptcy court.

Yes, absolutely! Many people believe that you cannot own anything after filing for bankruptcy. This is the furthest from the truth. You can continue to own your exempt property and property you acquire after the bankruptcy is filed. However, if you receive an inheritance, life insurance proceeds, or a property settlement within 6 months after filing for bankruptcy, that money may have to be paid to your creditors if the money or property is not exempt.

Basically, all other debt is dischargeable in a bankruptcy case; meaning that you won’t be personally responsible for the debt after your bankruptcy is complete. This includes mortgages and auto loans, judgments, credit cards, pay-day loans, medical bills, and the like. However, on secured debt like mortgages and auto loans, you will need to continue paying the debt if you want to keep the home or vehicle.

There are certain debts that are generally non-dischargeable in bankruptcy. This means that you remain personally responsible for them even if you complete your bankruptcy case and receive a discharge. These debts include student loans, most taxes, alimony, domestic and child support, criminal fines and restitution, and debts incurred as a result of wrongful conduct, fraud or larceny.

A trustee in bankruptcy is a person appointed by the United States Department of Justice under the U.S. Trustee Program or by the creditors in a bankruptcy case.

A bankruptcy trustee’s role varies on whether it is a Chapter 7 or Chapter 13 bankruptcy. In both cases, the bankruptcy trustee will review your petition for accuracy and completeness, look for fraud or abuse and try to recover the most money possible for unsecured creditors in the bankruptcy case (although most Chapter 7 bankruptcies are “no asset” cases, so there’s nothing for the trustee to take and sell). Chapter 13 trustees will review your Chapter 13 plan, income and expenses, and collect and distribute the Chapter 13 plan payments.