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Does Chapter 7 bankruptcy mean I will lose everything?

On Behalf of | Apr 5, 2023 | Bankruptcy |

If you are struggling with debt, you are not alone. Many people in Indiana have found themselves overwhelmed with debt, especially as interest rates rise, interfering with certain types of loans.

Filing for personal bankruptcy protection under Chapter 7 of the U.S. Bankruptcy Code is one of the fastest and most dependable ways to get out from under overwhelming debt, but many people are intimidated by the thought of doing so. They fear that Chapter 7 means they will lose everything.

Fortunately, this is not true. Indiana provides exemptions that allow those who file for Chapter 7 to keep many of their most important possessions.

What are exemptions?

Chapter 7 is sometimes known as “liquidation bankruptcy,” because it requires filers to liquidate some of their assets in order to pay off creditors. However, the U.S. Bankruptcy Code allows states to exempt certain types of property from this liquidation requirement so that filers have sufficient resources to make a fresh financial start after completing the bankruptcy process.

For example, Indiana allows for a homestead exemption, which lets a filer keep a certain amount of the equity in their home. Indiana does not provide an exemption for a vehicle, but does offer a “wildcard” exemption, which many filers use to keep a car or truck after bankruptcy.

Exemptions also protect a variety of homewares and most types of retirement accounts, health savings accounts and certain contributions to education savings accounts.

Starting over

There’s no shame in asking for help when you’re in trouble. That’s what bankruptcy protection is all about. When a person is stuck in debt that they can’t get out of on their own, bankruptcy gives them a chance to start over.