It’s important to know that bankruptcy laws are designed to give you a fresh start, not leave you with nothing. One key concept in bankruptcy is “exempt property.” These are assets that remain protected from creditors during bankruptcy proceedings.
How do exempt properties work?
Indiana does not follow the use of federal exemptions. Instead, the state has its own set of exemptions that it follows in bankruptcy cases. This includes:
- Your home, specifically up to $22,750 of your primary residence’s equity (as of 2022)
- Up to $12,100 worth of any property except real estate
- Any personal property, including health aids, military equipment and up to $450 in intangible property like patents or copyrights
- Most pensions and retirement benefits
- Public benefits such as Social Security and unemployment benefits
- Insurance benefits, including life and accident insurance proceeds
- Up to $5,000 in certain education accounts
Take note that the Indiana Department of Financial Institutions (IDFI) adjusts the exemption amounts every six years to account for inflation.
When initiating the bankruptcy process, you will need to list all your assets and their values. Then, you’ll apply the appropriate exemptions to protect as much of your property as possible. The court-appointed trustee may then sell any non-exempt property to pay off your debts.
For example, let’s say you own a home worth $100,000, and you owe $90,000 on the mortgage. That leaves $10,000 in equity. Indiana’s homestead exemption of $22,750 would fully protect this equity, meaning you’d likely get to keep your home.
What do you need to keep in mind?
In Indiana, there is no specific exemption for vehicles, but you can use the wildcard exemption for this purpose. The state also doesn’t offer exemptions for tools of the trade (equipment used in your profession).
Always remember that while exemptions can protect different types of property, they have limitations. The timing of your bankruptcy filing and any liens on your property can affect what’s exempt.
Regain your financial footing
Understanding exempt property is crucial when considering bankruptcy in Indiana. It can help you protect important assets and start rebuilding your financial life. However, bankruptcy law can be complex, and everyone’s situation is unique. If you’re thinking about filing for bankruptcy, it’s always best to talk to an attorney who can guide you through the process.