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Back Child Support and Bankruptcy

Finding yourself with large amounts of back child support can be a difficult position.  Many people are desperate for a solution for paying their back child support. Bankruptcy can be a solution for back child support in certain situations. It is important to understand exactly what bankruptcy can and cannot do with back child support.

Image of Stressed Man who is behind on Child support

Chapter 7 bankruptcy cannot discharge back child support

Many people turn to Chapter 7 bankruptcy in hopes that it will get them some kind of relief from their difficult back child support situation. However, back child support cannot be discharged in chapter 7. Although Chapter 7 can still be of great assistance because it can discharge many other debts, any back child support amount will remain the same after you file your Chapter 7 case.

Chapter 7 coupled with a child support modification

In certain situations, Chapter 7 bankruptcy can eliminate other forms of debt in order to allow a person to focus on modifying and then repaying back child support obligations.  With heavy debt loads and aggressive collection, paying down a child support debt can sometimes be impossible.   By removing all other debts, the focus can turn entirely to reducing back child support amounts through a payment plan or modification.

Child-support modifications are essential in situations where a party is paying more child-support than what their income requires.  If a period of unemployment or a drop of income has occurred, you may need to seek a family law attorney to help you modify the amount you pay in child support.   Such a modification coupled with a Chapter 7 bankruptcy filing can be life-changing.  Such a combination can turn an impossible situation into a workable and much less stressful setup.  A setup you will be able to afford.  

Chapter 13 can assist in paying off back child support obligations

Chapter 13 can sometimes assist in paying off back child support obligations. Through the Chapter 13 case you can sometimes pay your back child support obligations through the Chapter 13 plan.  This gives workable format for the child support debt to be repaid.  All your debts (sometimes including the back child support) can be repaid through one monthly payment. 

By the end of the Chapter 13 case, the entirety of your back child support debt is required to be paid.  In addition, you must also have your current, ongoing child-support payments up-to-date by the end of the Chapter 13 plan.  Similar to Chapter 7 in how it alleviates your debt situation, Chapter 13 bankruptcy can also be used to powerfully restructure your debts to allow child support obligations fully paid off.

What Happens To Your Car Payment When You File For Chapter 13?

When you file for Chapter 13, what happens to your car payment?    Usually you will be required to pay car payments through the Chapter 13 plan.  Also, the Chapter 13 case can make your car payments much lower and much easier to pay.

Who pays my car payment during the 13?

The Chapter 13 Trustee usually pays your car payments through the terms directed on your Chapter 13 plan. During the Chapter 13 case, the Trustee usually pays off your automobiles first because they are “secured” debts.   After the cars are paid, the Trustee then switches to paying your unsecured creditors.   A monthly prearranged payment is made to each automobile creditor that follows the terms of your plan.  If there are no specific terms, the Trustee just pays the maximum amount possible to the automobiles at each stage of the plan.  Essentially, the Chapter 13 Trustee ensures that your cars are paid an appropriate amount and that all terms of the plan are followed.

Can I pay my automobiles directly instead of having the Chapter 13 trustee pay them?

Generally, in the Indiana Southern District for Bankruptcy, the Chapter 13 trustee requires all short-term debts to be paid through the plan. Therefore, if you have a conventional automobile loan, the Trustee will usually request that it be paid through the Chapter 13 plan.   In some cases for appropriate reasons, the Trustee will allow direct payments to automobile creditors. Usually, the Trustee prefers that only almost-paid-off automobiles have their payments made directly to the creditor.  Remember, that the Trustee can bring an objection to your plan.  If you are not following the requirements for paying an automobile properly through Chapter 13 plan, it may slow down the confirmation of your Chapter 13 case.   Later you may be forced to amend your plan to have the TImage depicting that a vehicle can be surrendered in bankruptcyrustee pay the automobile payment.

Leases and Other Special Circumstances

Generally, all lease automobile payments are paid directly to the lease creditor. If you are leasing an automobile, you need to make those payments directly.   In other rare circumstances, it may also be appropriate to structure an automobile payment to be paid outside the plan.   Keep in mind that all Chapter 13 plans are different. Ultimately, it is your responsibility to both read and understand the terms of the plan.   The debtor signs the Chapter 13 plan, pledging that they will follow its terms and conditions.  If you have questions about your Chapter 13 plan, you need to ask your attorney immediately.

You Included My House and Car in the Bankruptcy?

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What Do You Mean? You Included My House and Car in the Bankruptcy?  Our clients frequently request that we do not include their house or car in their Indianapolis Chapter 7 bankruptcy. You can usually keep your house and cars when you file for Chapter 7 Bankruptcy in Indianapolis. However, the bankruptcy system requires that everything that you own or anybody that you owe money to be included and listed your Indianapolis bankruptcy filing.

Why You Must Include Your House and Cars in Your Indianapolis Chapter 7 Bankruptcy

You must include your house and cars in your Indianapolis bankruptcy because the court must have an accurate picture of everything that you own. The Indianapolis Bankruptcy Court must be able to determine whether you have any non-exempt assets. Although almost all of our clients are able to keep their house and cars as long as they keep making the payments, the court must have full access to your financial information.

Including Your House or Car in Your Indianapolis Chapter 7 Bankruptcy Does Not Mean That You Will Lose Your House or Car During the Bankruptcy

Our office has “included” our clients house and cars in hundreds of Indianapolis Chapter 7 bankruptcy filings. In these cases are clients were able to keep their house and cars if they were able to continue making the payments. Therefore, perhaps a redefining of times is all that is in order. Instead of “not including your house and cars,” perhaps including the house and cars with the intent to retain them is a more accurate picture of the bankruptcy process.

Conclusion: You Must Disclose All of Your Property and Debts When You File Bankruptcy

Just because you must disclose all of your property and debts when you file for a Chapter 7 bankruptcy in Indianapolis, it does not necessarily mean that you will lose any of your property. In almost all of our cases, the Bankruptcy Trustee will allow our clients to keep their property because it is protected by Indiana’s bankruptcy exemptions.

Will I Lose Everything I Bought With Credit Cards?

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Many times our clients ask, “Will I lose everything I bought with credit cards when I file for bankruptcy?”  The answer to this question is “No.”  You will not lose everything you bought with credit cards when you file for bankruptcy.

Generally, you can keep everything that you bought with credit cards when you file for bankruptcy. The reason why you can generally keep everything you bought with credit cards when you file for bankruptcy is because credit cards are usually unsecured debts. An unsecured debt is a loan or other form of debt that has no security interest that can be taken back if you default on the loan payments.

Other loans such as mortgages or car loans are called secured loans because the loan is “secured” with the collateral of your house or car. With these secured loans, the security interest – such as your house or car – can be taken back to help cover the creditor’s losses if you default on the loan payments.

Credit cards, on the other hand, are usually completely unsecured loans. That means that the creditor is only extending you a line of credit on the credit card and they do not desire to take a security interest in anything that you purchase. It is simply an open line of credit that you’re able to use however you desire: as long as you abide by the terms of the agreement.

Credit cards cannot usually “take back” your purchases. Therefore, you can usually keep anything that you have already purchased with the credit card if you default on your credit card payments. If you are bogged down with excessive credit card debt, you may need to consider your options for debt relief. If you have any questions about credit cards or any other matter relating to debt relief, give her office a call.

~Indianapolis Bankruptcy Attorney John F. Bymaster

 

Why Bankruptcy Can Be Good For Your Credit

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Why Bankruptcy Can Be Good For Your Credit- Bankruptcy can be very good for improving your credit score. A credit score that has suffered from default in payments or other negative credit reporting can be restored though eventually after a bankruptcy filing. Let’s discuss how Chapter 7 Bankruptcy or Chapter 13 Bankruptcy can help restore your credit score.

Bankruptcy can be good for your credit score by wiping the slate clean. After you file Chapter 7 Bankruptcy, the slate is wiped clean on your credit. Everything that was on your credit history before is now replaced with a blank credit history that can be a solid foundation to build upon. If you continue to struggle with your past credit or attempt to settle your debts, your negative credit reporting will stay on your credit report. However, with bankruptcy, your past credit is erased. Your credit is erased and replaced with a single entry: the date, place, and chapter of your bankruptcy discharge. Bankruptcy can be good for your credit by creating a new clean foundation to build upon.

After all of your credit data is eliminated, you will have a new foundation to build upon after filing bankruptcy. Any future good credit payment history will be of a very high benefit to you in restoring your credit. Because this good credit will stand out alone with no blemishes, you will be able to build your credit very quickly.

Bankruptcy can be good for your credit because some people may have a higher credit score immediately after the bankruptcy. Most people believe that after bankruptcy they will have somewhat of an “F” credit rating. However, to most creditors, you more of have a C credit rating. This is because you do not have any more debt on your credit report and you cannot file bankruptcy for approximately eight more years. Many creditors, such as small loan or auto finance providers, are willing to take a chance on such a restored credit situation. This availability of limited loans allows many people to rebuild their credit history even faster after bankruptcy.

Bankruptcy can be good for your credit score because many people are able to get larger loans or even finance houses after two years. Even just two years after filing bankruptcy, it may be possible to be applicable for mortgage loans and loans of a larger nature. If you take the time to carefully rebuild your credit after bankruptcy, you may be able to pursue lifelong dreams such as buying a home. Such possibilities would have been very difficult to achieve for many people outside of starting over with bankruptcy relief.

Do not hesitate if bankruptcy is what your credit needs. If you have excessive defaults and other negative material on your credit report, do not hesitate if bankruptcy is what your credit needs for recovery. Bankruptcy could very likely be the first step in recovering your credit situation so that you can enjoy a life that is not plagued with the difficulties that come with bad credit. If you need help in recovering your credit or want any more information about debt relief, give our office a call.

~Indianapolis Bankruptcy Attorney John F. Bymaster