Indiana Bankruptcy Blog-What property can you keep if you file bankruptcy?

       I believe one of the reasons people often procrastinate visiting a qualified bankruptcy attorney is that they are afraid that when a debtor files bankruptcy that they will lose all of their "stuff."  While I can certainly appreciate this fear, this is the exception rather than the rule.  Due to the number of people that I meet with who believe they will be left after bankruptcy without the clothes on their back I wanted to write this blog posting on Indiana Bankruptcy Exemptions.

       It is important to note that exemptions vary from state to state, and this posting refers only to Indiana bankruptcy exemptions.  Bankruptcy "exemptions" are the dollar amounts of stuff that you are allowed to keep if you file bankruptcy.  These dollar amounts adjust periodically, but as of the date of this writing the below amounts are the Indiana exemptions.  This list of exemptions is not exhaustive.  I simply want to cover the exemption categories that are commonly used by bankruptcy debtors in Indiana.

-Intangible Exemption:  $350.00 for individual debtor or $700.00 for joint debtors
-Tangible Exemption:  $9,350.00 for individual debtor or $18,700.00 for joint debtors
-Homestead Exemption:  $17,600.00 for individual debtor or $35,200.00 for joint debtors
-IRA/401k:  unlimited
-Professionally Prescribed Health Aids for a Debtor or their dependent:  unlimited.
-Interest in Earned Income Credit of Income Tax Refund
-Any interest that the debtor has in real estate held as a tenant by the entireties. The exemption under this subdivision does not apply to a debt for which the debtor and the debtor's spouse are jointly liable.
-Funds in Health Savings Accounts, College Savings Plans and Cash Value of Life Insurance may also be exempt.  But these exemption rules are more in depth and beyond the scope of this blog.


       Now that I have listed these exemptions I feel it is necessary to explain that these exemptions are measured as of the date of the filing of your bankruptcy petition.  Therefore, on the date that your individual bankruptcy is filed you are allowed to have $350.00 and if you have more than $350.00 in cash, money in the bank, stocks, bonds, an income tax refund coming to you or money buried in the back yard combined the bankruptcy court can order you to give it to the trustee for payment to your creditors.  One common misconception people have is that if they have $1,000.00 in a bank account and have paid their mortgage, but the check they wrote to the mortgage company for $700.00 hasn't cleared yet that they have $300.00.  This is wrong.  The bankruptcy court does not care whether a check is cleared.  If your bank statement for the date that you filed a bankruptcy says you had $1,000.00 on the day that you filed, then you could be asked to turn over $650.00 to the trustee.

       The tangible exemption refers to the "stuff" that people own when they file bankruptcy.  This is only what you legally own.  A common misconception that people have is that they shouldn't file bankruptcy because the car they have is worth $15,000.00 and in an individual bankruptcy this alone would be more than the exemption.  While this would be true if the vehicle is owned outright, most of the people I advise have a loan against the vehicle.  In this example, if there is currently $10,000.00 due on the loan the person actual owns, or has equity of $5000.00 in the vehicle, which leaves them with $4350.00 worth of exemptions left for their household furnishings, jewelry, clothing, firearms, sporting equipment and all other tangible personal property.

      The same calculation of equity applies to the Indiana Homestead exemption.  If you own a $200,000.00 home and owe $175,000.00 on the mortgage there is $25,000.00 of equity.  If you are an individual debtor this may mean that you have $7,400.00 worth of equity that is not exempt.  In this situation, your attorney would likely need to negotiate a payment you could make to the trustee so that you would not lose your house.  However, in the current economic conditions I see very few debtors whose current valuation of their home leaves them with equity above and beyond the Indiana Exemptions.  

       I am always looking for new topics to write about on Indiana Bankruptcy Blog, so if you have an Indiana Bankruptcy question please feel free to post it as a comment.  As always, if you are living in Central Indiana and have questions about bankruptcy you should also feel free to contact me to set up an appointment to for a free initial consultation.  You can also reach me at 317-575-8222.

Halcomb Singler, LLP, is a debt relief agency.  It helps people file for bankruptcy under the bankruptcy code.  No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so.  The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.