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Bankruptcy in Indiana, Part 1

First in a five-part series about filing for bankruptcy protection in the Hoosier State


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The good news is bankruptcies in Indiana are down from a year ago.

The bad news is why.

Even though down, bankruptcy filings are still numerous


Of course, if you find yourself needing the powerful protection afforded by the U.S. bankruptcy code, it won't matter to you that the number of Indiana filings are down a little bit from fiscal year 2010. In fact, if the Recession-ravaged economy has caught up with you, rest assured the numbers are still so high that your case certainly won't attract undue attention--neither from the court nor from your similarly distressed friends and neighbors.

According to a Nov. 11 article in the Indiana Business Journal, "Indiana saw fewer bankruptcies for the fiscal year ending Sept. 30 than it did the year before, with the state improving its national ranking based on case filings.

"A report released this week  by the Administrative Office of the U.S. Courts showed an 8-percent decrease in the number of bankruptcy filings throughout the country between Oct. 1, 2010, and Sept. 30, 2011.

Chapter 7 filings drop 10%, Chapter 13 4%


"Nationally, courts saw 1,467,221 cases in the latest year compared to the 1,596,355 million filed the year before. Filings dropped during the fiscal fourth quarter, with 15 percent fewer than in the same three-month period in 2010. Overall for the year, Chapter 7 filings were down 10 percent, Chapter 13 filings dropped 4 percent, and Chapter 11 filings decreased 16 percent ."

More than 40,000 filings in-state during fiscal year


The Journal also reports actual numbers--and reasons for the drop in filings:
In Indiana during the 12-month period, 41,199 bankruptcies were filed, including 775 business filings. That was down from 48,438 bankruptcies, including 983 business filings, the previous year.

Business bankruptcies are down because banks are more willing to work with companies to give them more time to stage a turnaround rather than liquidating or reorganizing, said Jeff Hokanson, a bankruptcy attorney at the Indianapolis office of Frost Brown Todd LLC.

Banks are choosing forbearance agreements instead of bankruptcy because, quite frankly, there's little value in the businesses or property to liquidate, he said.

"Equity is gone and bankrutpcy is about preserving value or what value is left for creditors, and there just isn't any," Hokanson said.

To an extent, the same holds true for consumers, local bankruptcy attorney Mark Zuckerberg said.

'No reason' to take anything away from folks who have nothing left to take, attorney says


"If people aren’t working, you can’t garnish unemployment," he said. "[Bankruptcy is] to help protect assets. There’s no reason to file if there’s nothing to take from them."

The 7th Circuit Court of Appeals, which includes Indiana, Illinois and Wisconsin, saw a 10-percent drop in bankruptcy filings overall, the figures show. A total 161,182 were filed lthe previous year compared to 145,018 in the most recent one.

Asset protection only one aspect of bankruptcy


Mr. Zuckerberg is correct. Bankruptcy certainly can protect certain assets (which we'll address more specifically when we discuss "state versus federal exemptions"). However, asset protection is merely a benefit of the crucially important chief purpose of bankruptcy--it provides honest, hardworking citizens an opportunity to "hit the reset button" and start over, to reorganize one's financial life and emerge with as nearly a clean slate as possible while remaining a productive, tax-paying member of the local community and the overall economy.

Next, in Bankruptcy in Indiana, Part 2: A brief history of U.S. bankruptcy, the power of "the code," and an intro to bankruptcy court in Indiana.

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