Credit card debt can become difficult to manage when high interest rates make it harder to reduce balances. If families in New Albany have fallen behind on their bill payments, Chapter 7 bankruptcy may provide a way to address qualifying credit card debt and other unsecured obligations.
To determine whether Chapter 7 is an appropriate option, families should review their financial circumstances, including their income, debts and assets. This information can help them understand whether they meet the requirements for filing and how bankruptcy may affect them.
Steps to take before filing Chapter 7
Chapter 7 bankruptcy may allow families to eliminate certain unsecured debts. However, bankruptcy does not discharge all debts. Several factors can affect how Chapter 7 may address their financial situation:
- Knowing which debts may be discharged: Families should review each debt to understand whether Chapter 7 can eliminate it. Chapter 7 can typically discharge credit card debt. However, federal bankruptcy law protects certain debts from discharge.
- Checking eligibility for Chapter 7: If a family’s current monthly income exceeds Indiana’s applicable median income for a household of the same size, they may need to complete a second means test. The test determines if allowable expenses permits them to remain in Chapter 7.
- Reviewing property: Filing Chapter 7 does not necessarily mean families will lose all their property. However, exemptions can protect certain assets from creditors. Because Indiana has opted out of the federal bankruptcy exemptions, families generally must rely on Indiana exemptions along with certain applicable federal non bankruptcy protections.
- Completing required steps: Before filing, applicants usually must complete credit counseling with an approved credit counseling agency within 180 days before filing. In addition, they must complete a financial management course after filing but before receiving a discharge in the bankruptcy case.
Families should also consider the effect of bankruptcy on credit restoration after completing the case.
Starting the Chapter 7 process
Chapter 7 may provide families with a way to address qualifying credit card debt and work toward a fresh financial start. Consulting with a bankruptcy lawyer can help them understand their options before they proceed.
