By way of using these Bankruptcy in Indiana articles to provide insights into the way the bankruptcy process works, I like to discuss real-life examples from bankruptcy cases in other states. One of my Columbus bankruptcy lawyer colleagues found this Illinois story in Consumer Bankruptcy News:
The debtors, Mr. and Mrs. S., had filed under Chapter 13 bankruptcy law. (Apparently they had wanted to help stop foreclosure on their home.) Some of their unsecured debt had been discharged (forgiven) by the court, and now the couple had begun their three year debt repayment plan, making monthly payments of $200 to their creditors through the bankruptcy court. As a 25-year veteran debt consolidation lawyer practicing Indiana bankruptcy law, I’ve helped thousands of people through this exact process. In this case, however, something fairly unusual happened – Mrs. S received an inheritance.
Now, at all four of the Zuckerberg bankruptcy law offices, we deal with Indiana debtors only. It’s obvious to me, however, that Mr. & Mrs. S. got good advice from their bankruptcy attorney, because they promptly reported the inheritance to the bankruptcy court.
The interesting thing about this case is that the inheritance was actually large enough to repay all the unsecured creditors in full. Normally, in a case of individual bankruptcy in Indiana, the court would have demanded that the money go to pay creditors. But not all of those unsecured creditors had filed claims with the bankruptcy court! Once the deadline had passed for filing claims, the trustee asked the court whether he could file claims for them.
Here’s the part I want to share with my readers: The court ruled that the trustee could not file on behalf of the creditors! The couple had done everything they were supposed to do – they had made payments on time. They had reported the inheritance. They had put the money into their debt repayment plan. In short, this couple had done everything that any good Indianapolis bankruptcy lawyer would have advised.
But ALL the players needed to do their part. The creditors who had not filed claims did not get any more money than was arranged for in the original Chapter 13 debt repayment plan. “The debtors are entitled to finality,” ruled the court.
Indiana bankruptcy Lesson #1 – Because the debtors worked under the guidance of their lawyer for bankruptcy and followed his advice, the dispute ended in their favor (they were able to keep the remaining inheritance).
Indiana bankruptcy Lesson #2 – In bankruptcy (in Indiana or elsewhere), debts are measured as of the day of filing. On the other hand, any change in your financial circumstances must be reported to the court.
As every good bankruptcy attorney in Indiana knows – the system is meant to treat all parties fairly. But the parties have to do their part fairly, as well!