Bankruptcy Indiana

Several blog readers have asked how much time it's necessary to wait between one bankruptcy and another.  The answer is: It depends! To understand why, let me remind you that almost all personal bankruptcies filed in Indiana are either Chapter 7 bankruptcy or Chapter 13 bankruptcy.

A quick review: A Chapter 7 is sometimes called a "liquidation bankruptcy".  All or at least part of the unsecured debt is discharged by the court.  (Don't be discouraged by the word "liquidation", because it's very, very rare for clients to lose any assets and have the court sell any of their property to satisfy creditors.) The entire Chapter 7 process lasts 60-90 days.

A Chapter 13 bankruptcy, by contrast, is a court-supervised debt repayment plan that runs three to five years.  Some debts may be discharged in a Chapter 13 bankruptcy, but the remaining debt is repaid in monthly installments over the bankruptcy period of time.

Now, going back to the question about space between bankruptcies:


Julie filed a Chapter 7 bankruptcy.  She needed a lot of payday loan debt help, and only bankruptcy was able to halt creditors from harassing her.  But, due to several severe setbacks in her life, Julie is beginning to experience financial troubles once again.

Julie would need to wait eight years before she can file another Chapter 7.  However, if Julie is going to file a Chapter 13 for her second bankruptcy, and she wants to ask the court to discharge some of her debt, she needs to wait only four years from her Chapter 7.  If Julie does not plan to ask for any debt to be discharged, but wants to begin a Chapter 13 debt repayment plan, she may do that now.

Jack filed a Chapter 13 plan the first time.  If he wants to file a Chapter 7 the second time, he needs to wait six years.  If Jack is going to file a second Chapter 13, only two years need to pass from when he completes the first repayment plan. If the first Chapter 13 "failed", meaning the repayment was never completed, Jack can file a new Chapter 13 at any time. 

As a debt consolidation lawyer who's been offering Indiana bankruptcy information for more than twenty years, sometimes I'm asked to explain why, if bankruptcy is supposed to offer debtors a fresh financial start, people sometimes need to file bankruptcy more than once. 

The answer is - life happens!  Job layoffs, family troubles, divorce, student loan problems, and illness. When several of these factors are present at the same time , it makes it difficult to keep the bills paid.  And sometimes, when that happens, the bankruptcy"safety net" needs to go into service more than once! 

Here's a quick chart showing "bankruptcy space arithmetic":

• Chapter 7 ----------------- Eight years to new Chapter 7
• Chapter 7 ----------------- Four years to new Chapter 13 (if discharge wanted)
• Chapter 13 ----------------Six years to new Chapter 7 
• Chapter 13 ----------------Two years to new Chapter 13 (if discharge wanted)