Instead of selling property, Chapter 13 reorganizes your debt into one monthly payment to a trustee, who distributes it to creditors under a plan the court approves. The plan lasts three years if your income is below the Indiana median and five years if it is above. Secured arrears, such as missed mortgage payments, are spread across the plan while you resume the regular monthly payment. Priority debts such as recent taxes and support arrears are paid in full. Unsecured creditors, such as credit cards and medical bills, receive whatever your disposable income allows, which is often a small fraction of what they are owed, and the balance is discharged when the plan is completed.
The automatic stay applies the moment the case is filed. A foreclosure sale scheduled for next week cannot go forward. A car that was repossessed last week but not yet sold can usually be ordered returned.
Catch up a mortgage. The arrears go into the plan, the foreclosure stops, and as long as the plan payments and the regular mortgage payments are made, the lender cannot touch the house.
Restructure a car loan. If the loan is old enough, the plan can pay the vehicle’s current value rather than the full balance, often at a lower interest rate.
Remove a wholly unsecured second mortgage. If the house is worth less than the first mortgage balance, a second mortgage or home equity line can be treated as unsecured and discharged at the end of the plan.
Pay tax debt and support arrears over time, without interest on most taxes, while the stay keeps the IRS, the Indiana Department of Revenue, and the county from collecting.
Protect a co-signer. Chapter 13’s co-debtor stay stops creditors from pursuing a family member who co-signed a consumer debt while the plan is in place.
Protect property that exceeds the exemptions. If you have equity a Chapter 7 trustee would sell, Chapter 13 lets you keep it by paying its value through the plan.
Chapter 13 requires regular income, which can be wages, self-employment income, Social Security, a pension, or a combination. Your debts must be under the limits set by the Bankruptcy Code, which almost every consumer is. You do not have to pass the means test to file, but your income does set the length of the plan and how much unsecured creditors receive.
Most of the attorney fee in a Chapter 13 is paid through the plan rather than up front, which is one reason it is the right chapter for people who cannot pay a full fee before filing. The court sets the fee framework and the trustee receives a percentage of plan payments for administering the case. We go through every number with you before anything is filed.
The plan is a commitment, and we are honest about that. For three to five years the trustee payment comes out every month, and major financial decisions such as buying a car or taking on new debt need court approval. In return, the calls stop, the house stays, and at the end you come out with a discharge and a credit file that has been rebuilding the whole time. If your circumstances change during the plan, it can usually be modified, and in some cases converted to a Chapter 7.
The first meeting is free, in person at either office or by phone or video. Bring whatever you have: bills, collection letters, pay stubs, a tax return if it is handy. We go through the whole picture, tell you whether bankruptcy is the right tool and which chapter, and quote a flat fee with a payment plan. Nothing is filed until you are comfortable with the plan. More about how we handle bankruptcy cases.
Admitted to the Indiana bar at 24, the youngest licensed attorney in the state at the time, Miguel pairs that early start with more than fifteen years helping Northwest Indiana families through injury claims and bankruptcy.
Yes. Filing before the sheriff’s sale invokes the automatic stay, which stops the sale by federal law. The missed payments are then paid through the plan while you resume regular payments.
Three years if your household income is below the Indiana median for your family size, five years if it is above. Plans can sometimes be completed early.
Usually not. Secured arrears and priority debts are paid in full. Unsecured creditors receive what your budget allows, and the remaining unsecured balance is discharged when the plan ends.
Tell us right away. Plans can often be modified for a job loss, illness, or other change. Ignoring a missed payment is what leads to dismissal; addressing it usually does not.
Call either office or send a message. We will tell you plainly whether bankruptcy is the right tool, and which one.