Bankruptcy Indiana

One of the questions I hear a lot from readers of my Indiana Bankruptcy Blog is "How much does it cost to file Chapter 13 bankruptcy in Indiana?" I thought I'd devote today's blog post to answering that question.

By way of background, a Chapter 13 bankruptcy is designed for debtors who have regular income. While some of their debts might be completely discharged by the bankruptcy court, they will be put on a court-supervised three-to-five year debt repayment plan for the rest of what they owe.

The basic Chapter 13 fee is set by the court, and, as of now, that fee is $3,500 in Indiana. There is an additional filing fee, currently $274, and a credit counseling fee, usually $50.  The total cost, therefore, is approximately $3,824.

While the fee is set by the court, attorneys differ in the way they are willing to receive their fees, with some requiring all the money to be paid up front, others requiring no "down payment" at all.  To the extent the attorney has not been paid in full, the bankruptcy court trustee pays the lawyer out of the client's monthly payments.

The month following the filing of a Chapter 13 bankruptcy, the first regular monthly repayment amount is due.  Payments then continue for the duration of the plan, typically 60 months.

When the court is considering approving a Chapter 13 bankruptcy plan, the judge will consider the income the debtor has coming in each month, what the expenses are, and then how much is left over to make the monthly debt repayment.  Upon receiving the payment, the trustee will first pay the attorney  a proportion of the unpaid fee, then pay secured creditors, then priority claims, and finally (to the extent there is money left to do this), pay unsecured creditors. (Most people believe they have toi pay all their creditors in full; in most cases, this is not true.)

By contrast, a Chapter 7 bankruptcy is typically over within three to six months.  Because there is much less involvement by the court and the attorney, the filing fee is much lower (currently $299, plus the $50 for credit counseling).

Since Chapter 7 costs so much less, why would anyone select Chapter 13?  First, not everyone qualifies to file Chapter 7.  Second, if the debtor is trying to save a home from foreclosure, Chapter 13 is the preferred type of bankruptcy to accomplish that.