Indiana, as with every other state, has its own particular regulations regarding protection of assets for debtors who file for bankruptcy. It's therefore important to be aware of all of the exemptions provided by state law in order to receive the maximum benefits allowed.
A debtor must also be prepared to protect those assets by determining their actual value. This will provide a clear picture of the level of protection that exemptions will provide and help to determine which type of bankruptcy will best protect the assets. The following information will help in deciding which plan of action best fits your situation.
What Are the Exemptions Provided for Bankruptcy in Indiana?
Bankruptcy exemptions mandate specific protections for specific types of property, such as residences and vehicles. Each state chooses whether to allow debtors to use their individual state exemptions or federal exemptions. Indiana only allows debtors to use their own state exemptions, but doubles the dollar amount in each category for married couples who file together.
Examples of Indiana's bankruptcy exemptions include:
- Homestead (for residences): $19,300
- Intangible personal property (cash,etc.): $400
- Wild card ( non-residential real estate or tangible personal property): $10,250
- Qualified retirement plans and various government benefits: protected in full under Indiana state law
Indiana also recognizes a type of home ownership known as "tenancy by the entirety". This ownership is reserved for married couples and protects any equity in the home from debts owed by a single spouse. Therefore, it is only available to debtors whose deeds are already titled in this manner.
Married couples must then calculate the amount of home equity saved through use of this exemption against the amount of exemptions lost through doubling of the wild card exemption when both spouses file together. The decision will rest upon the amount of equity in the home and the value of personal property that exceeds the total exemption ($10,250) provided to individual debtors.
What are the Preferred Methods for Determining Value to Assets?
The value of assets in bankruptcy cases is based upon the cost of their replacement at the time of filing. Although every individual possession must be declared, items of lesser value, such as home furnishings and clothing, can be grouped together and assigned "yard sale" type aggregate total values.
For example, larger appliances and electrical components can be priced individually according to replacement values found on ebay and other sites for sale of used items. Vehicles can also be valued at online valuation sites.
Homes and luxury items must be appraised by professionals in their respective fields in order to avoid unexpectedly negative values by appraisers appointed by the trustee handling the case.
What are Your Choices When Filing for Personal Bankruptcy in Indiana?
You must choose between chapter 7 and chapter 13 bankruptcy. The choice will depend upon your income and the amount of property that you wish to protect.
Chapter 7 provides discharge of debt without any type of repayment to creditors. It is designed for debtors with fewer assets or those who are willing to surrender property that is unprotected by exemptions.
You must qualify for Chapter 7 bankruptcy either through your income level or the amount of disposable income that remains after your monthly household bills are paid. A debtor automatically qualifies for Chapter 7 if their annual income falls below their state's median income.
For example, the state median income for Indiana (as of November 1, 2017) is $46,802 for a single-member household and $59,392 for a two-person household, with rising values for added members.
Debtors whose household income exceeds the state median must pass a "means test", which determines if they have sufficient disposable income to repay creditors. If their discretionary income is sufficient, or if they want to keep assets unprotected by exemptions, they must file for chapter 13 bankruptcy.
Chapter 13 entails the formation of an income-dependent three or five year repayment plan based on disposable income levels, followed by discharge of remaining debt.
The bankruptcy process can be daunting, but help is available. If you're filing in the Greater Indianapolis area, contact the Law Office of Travis Van Winkle LLC. We'll be there for you throughout the entire journey.