What Is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy, also known as "liquidation," is allowed for (a) businesses and (b) individual debtors whose debts are primarily business debts or whose gross family income is below a certain level. Chapter 7 bankruptcy allows a debtor to discharge most of the debtor's unsecured debts in exchange for giving up his or her nonexempt assets.

Due to the generous exemptions permitted by Indiana law, the vast majority of Chapter 7 cases are considered "no asset" cases and debtors do not lose any property. For "secured debts," which are debts for which the creditor has a lien on property, such as car loans and home mortgages, debtors may elect, but are not obligated, to "reaffirm" the debt with the creditor and keep their property after the bankruptcy so long as the debtor is current on payments.

What Is Chapter 13 Bankruptcy?

Chapter 13 bankruptcy, also known as "reorganization" is available to individuals only and requires the individual to have regular income to form a budget. This Chapter permits a debtor to pay back their creditors over the course of 3-5 years, many times at a reduced rate. Upon completion of the plan, debtors receive a discharge.

Many debtors who qualify for Chapter 7 elect to file a Chapter 13 because it allows them to catch-up on their past due mortgage or car payments. In addition, certain debts, such as debts owed to an ex-spouse from a divorce settlement which are not considered domestic support, may be discharged upon completion of a Chapter 13 plan whereas such debts are not discharged in Chapter 7.

Learn More In A Free Consultation With An Attorney

Trapp Law, LLC, will assist you in determining whether you need to take a last resort measure, such as bankruptcy, to reduce your debts. Call today for a free consultation with an Indianapolis lawyer at 800-225-4562 or contact us online.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.