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Bankruptcy in Indiana, Part 5

Some debt can not be discharged


Points to keep in mind

As we wind down the series about Bankruptcy in Indiana, keep these major points in mind:

  • Even if you drove your own private, financial wagon off the cliff, it’s part and parcel of the USA code of conduct that, having realized your mistakes, you get a chance to start over.

  • That being said, if you’re really a schemer and a scammer, the trustee is empowered by the Bankruptcy Court and the Bankruptcy Code to bring you to justice.

  • However, most people are neither schemers nor scammers. That’s why we have the very powerful protection of The Constitution, which gives Congress the authority to regulate bankruptcy.

That being said, following is more some stuff to know.

Some debt can not be discharged

Some debt simply can not be discharged, regardless of the chapter of the code under which the petition is filed. That being said, Chapter 13 is less restrictive than other chapters available to individuals. The good news is the debt does not have to be addressed until after the discharge; however, this happens quickly in a Chapter 7 case, comparatively speaking–within a few months after the original petition is filed. Compared to Chapter 13, often referred to as the “wage earner’s plan,” the few months’ wait fairly flies by–Chapter 13 cases are set up on either a three-year or five-year schedule.

According to the U.S. Court’s page on discharges, “There are 19 categories of debt excepted from discharge under chapters 7, 11, and 12. A more limited list of exceptions applies to cases under chapter 13.” The court also explains that “A slightly broader discharge of debts is available to a debtor in a chapter 13 case than in a chapter 7 case. Debts dischargable in a chapter 13, but not in chapter 7, include debts for willful and malicious injury to property, debts incurred to pay non-dischargable tax obligations, and debts arising from property settlements in divorce or separation proceedings. Although a chapter 13 debtor generally receives a discharge only after completing all payments required by the court-approved (i.e., “confirmed”) repayment plan, there are some limited circumstances under which the debtor may request the court to grant a “hardship discharge” even though the debtor has failed to complete plan payments. Such a discharge is available only to a debtor whose failure to complete plan payments is due to circumstances beyond the debtor’s control.”

Advantages of Chapter 13 over Chapter 7

As I’ve written before (these criteria don’t vary from state to state, generally speaking):

In addition to the benefits of Chapter 7, you can:

  • keep property that is secured by a contract by paying for it through the Chapter 13 plan. This can save a home from foreclosure, or stop repossession of a car;

  • stop evictions, if filed before the 5 day notice or other lease termination expires and if you can pay the back rent owed through the Chapter 13 plan. If you cannot repay all of your debts, but have made the best effort to pay that you can, you can get a discharge of the balance left on your debts, although you cannot remove a lien unless you have paid it off through the plan;

  • discharge all debts, except alimony, child support, criminal fines and restitution, damages to individuals caused by drunk driving or intentional torts, money owed due to fraud, theft or embezzlement, most taxes and long term debts, such as mortgages. Student loans are not discharged unless denying a discharge would cause an undue hardship to the debtor.

Special rules for Chapter 13

If you fall behind on your payments, the payments can be deducted directly from your paycheck. While you are in Chapter 13 you cannot get new credit without the trustee’s approval.

There are also limits the the amount of debt you can have and still be eligible for Chapter 13.  A debtor cannot have secured debts over $1,081,400 or unsecured debts over $360,475. However, Chapter 11 is available for debtors who exceed these limits–Chapter 11 is not restricted to business bankruptcies. If you need Chapter 11 protection, you really, really need a good bankruptcy attorney.

Consider free case evaluation

We can help: If you’re interested in learning more about the power of bankruptcy protection, please, browse our site for more information; if you need help filing for bankruptcy protection for yourself, consider signing up for a free case evaluation.

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