Bankruptcy allows a person to have some or all debts discharged, meaning that they do not have to be repaid. It is a legal procedure with federal and state laws that must be followed. Once a bankruptcy has been filed, a person has protection from creditors and puts a stop to collection efforts.
To file bankruptcy in Indiana, you must have lived in Indiana for the two years or 730 days prior to filing. If you have not lived in Indiana for the past two years, you follow the laws of the state lived in during the 180-day period prior to the two-year period.
If the residency requirements of the states involved leave you ineligible to file under either state's laws, then you may be able to file under federal law.
Generally, in Indiana, all or a portion of your property is protected from seizure by creditors in a Chapter 7 bankruptcy. In a Chapter 13 bankruptcy in Indiana, the person filing typically gets to retain all their assets and property.
Indiana is not a community-property state, meaning that a person filing for bankruptcy will not be liable for a spouse's debts unless he or she voluntarily assumed those debts, such as by co-signing a loan.
In Indiana, real estate exemptions, or property that may not be seized, include $15,000 in personal property, a farm, or a condominium. Also exempted is up to $300 in intangible personal property, all prescribed health aids, and $8,000 in tangible personal property or other real estate. Intangible personal property can include things like stocks, bonds, trademarks, and copyrights. Cars are not specifically exempted in Indiana.
Regardless of the state, there are two basic methods for filing bankruptcy either under Chapter 7 or Chapter 13.
In Chapter 7, an individual who files for bankruptcy will not have a repayment plan for those debts that are discharged. Chapter 7 is not as lengthy a process as Chapter 13, as most Chapter 7 bankruptcies only take about 4 to 6 months to complete. Although rare, in Chapter 7, a bankruptcy court can liquidate a person's assets to pay the debts. However, individual states have specific exemptions such as those listed above for Indiana.
In Chapter 13, there is a court-ordered repayment plan for the person filing for bankruptcy. Typically, the full debt is not repaid, but rather, a portion.
Chapter 13 bankruptcy is more involved and therefore takes longer to complete, on average about 3 to 5 years. Chapter 13 is not a liquidation bankruptcy, so all a person's assets are protected, even those not covered under the exemptions.