Chapter 7 bankruptcy can give you a clean financial slate by erasing debts, but not everything goes away. Some debts survive the process and remain your responsibility. The rules are federal, but Indiana law changes what you can keep and how your case moves forward.
Domestic support obligations
Chapter 7 does not erase domestic support debts. These must be paid in full, even after discharge. This includes:
- Child support
- Spousal maintenance
- Missed support payments
These debts are not negotiable.
Tax debts
Most tax debts stay after Chapter 7. Some older income taxes may qualify for discharge. But this only happens when they meet strict timing rules. Debts that usually remain include:
- Recent income taxes
- Unfiled returns
- Fraud-related tax debts
A tax debt is not dischargeable when the return was due less than three years ago, filed less than two years ago or assessed within 240 days, as outlined in 11 U.S.C. § 507.
Student loans
Student loans are not automatically erased. You must file a separate court action and prove undue hardship. This applies to:
- Federal loans
- Private loans
- Cases of long-term financial strain
The new federal guidelines may improve your chances.
Debts from fraud or willful misconduct
Debts tied to fraud or willful harm stay. These include:
- Fraud or false statements
- Embezzlement or theft
- Willful injury to others
- DUI-related injury claims
These debts reflect misconduct, not financial hardship.
How Indiana bankruptcy law affects Chapter 7
Indiana law shapes what you keep. Unlike some states, Indiana does not allow federal exemptions. You must use Indiana’s list. Key protections include:
- Up to $22,750 equity in your home
- $12,100 wildcard to protect any property
- No specific car exemption, but wildcard can apply
- Full protection for most retirement accounts
Indiana also applies a state-specific means test. If your income is above the Indiana median, you may not qualify for Chapter 7.
What should your next steps be?
Chapter 7 offers relief, not punishment. While some debts stay, many go. Indiana’s rules shape what you keep. A local bankruptcy attorney can guide you through the process.