Why More Hoosiers are Filing Chapter 13 Bankruptcy

July 12, 2023

In recent years, there has been an increase in the number of Hoosiers filing for Chapter 13 bankruptcy. This increase can be attributed to various factors.  One factor is simply the easy repayment structure offered by Chapter 13.  Other times, Indiana residents are now forced to file Chapter 13 due to having too much equity in their homes. This blog post will explore these factors in more detail to understand why more Hoosiers are filing for Chapter 13 bankruptcy.

Repayment Structure of Chapter 13 Bankruptcy

Hoosiers Filing Chapter 13 Payment PlanOne primary reason why more Hoosiers opt for Chapter 13 bankruptcy is its unique repayment structure. Unlike Chapter 7 bankruptcy, which involves a total elimination of debts, Chapter 13 allows repayment of debts over three to five years. This repayment plan is based on the debtor’s disposable income.  Many times you are not required to repay all of your debt.  It is also a more manageable option for those who wish to retain their assets and avoid foreclosure or repossession.

By providing a structured repayment plan, Chapter 13 bankruptcy offers a viable solution for debtors who want to regain control of their finances without having any chance of losing their homes, cars, or other valuable assets.

Hoosier Households Above the Median Income

Another factor contributing to the rise in Chapter 13 bankruptcy filings among Hoosiers is that many Indiana households have incomes above the state’s median. To qualify for Chapter 7 bankruptcy, debtors must pass a means test that compares their income to the state’s median income. If their income exceeds the median, it is usually a requirement for them to file Chapter 13 Bankruptcy instead of Chapter 7.

Housing Price Inflation Leads to Chapter 13 Bankruptcy

Inflated home prices have also played a significant role in the increasing number of Hoosiers considering Chapter 13 bankruptcy. With the surge in property values, many homeowners now have substantial home equity. This equity can be problematic when attempting to file for Chapter 7 bankruptcy.  To avoid losing their homes and protect their hard-earned equity, many Hoosiers are opting for Chapter 13 bankruptcy instead. This form of bankruptcy allows them to restructure their debt into manageable payments, retain their valuable assets, and ultimately safeguard their financial future while navigating difficult economic circumstances.

Indiana only currently offers a residential exemption of $22,750 per person.   This means you can only protect about $22,750 in equity.  In our quickly rising real estate market, we are finding many clients who must file Chapter 13 because they have too much equity in their homes now to file Chapter 7.

Difficult Economic Times

The challenging financial times have significantly contributed to the rise in Chapter 13 bankruptcy filings. The COVID-19 pandemic has profoundly impacted the Indiana economy.  This has led to job losses, reduced working hours, and financial instability for many Indiana residents. As businesses shuttered and unemployment rates soared, countless Hoosiers struggled to make ends meet. To compound matters, the subsequent inflation has increased the cost of living, making it even more difficult for individuals and families to manage their expenses. In response to these hardships, an increasing number of Hoosiers are turning to Chapter 13 bankruptcy.  It helps them restructure their debt, regain control of their finances, and ultimately find a path toward a more secure and stable financial future.

If you are an Indiana resident who needs debt solutions, schedule a free consultation with Bymaster Bankruptcy Law Offices.





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