Indiana Bankruptcy Exemptions: The property you can keep when you file for bankruptcy relief
One of the biggest concerns people have in filing bankruptcy is what they will be able to keep and what they will lose, if anything. For most people filing for bankruptcy, most if not all assets are kept and claimed as "exempt" from the bankruptcy estate; however, the value, nature, and amount of property that may be claimed as exempt varies from state to state, depending on what exemptions are available.
What is an Indiana Bankruptcy exemption?
An exemption or exempt asset essentially means that it is untouchable; it is not subject to execution, seizure or liquidation to benefit creditors (people or businesses to whom you owe money). In a non-bankruptcy context, exemptions are provided by both federal and state laws, depending on the nature of the asset. In bankruptcy, exemptions are determined by when and where you file. The bankruptcy code provides a schedule of exemptions but at the same time, Congress left it up to the states to individually decide who can use the federal exemptions or if state exemptions are to be used. Indiana has "opted out" of the federal exemptions, and debtors must use only the Indiana exemptions and non-bankruptcy federal exemptions.
Who can use Indiana Bankruptcy Exemptions?
To be able to use Indiana Bankruptcy Exemptions, a debtor must be a resident of Indiana and have been domiciled in the state for at least 730 days prior to the filing of the bankruptcy petition. If the debtor hasn't lived in Indiana for that entire period, then the only way Indiana exemptions can be used is if the debtor lived in Indiana for at least 91 days of the 180 days preceding that 730 day period. Confused yet? It can be complicated, and if in doubt, always seek professional advice.
What property is exempt in Indiana (what can I keep)?
Exemptions, and more particularly, the amount of the applicable exemption, change from time to time. Moreover, the exemption amounts listed on many of the most common websites that provide exemption information are out of date - in many cases, years out of date!
The current Indiana Bankruptcy Exemption amounts, as of the date of this article, are:
· For real estate: $17,600 per individual filer (amount can be doubled for joint filers
· For personal property: $9,350 (vehicles, furniture, household goods and the like)
· For intangible property: $350 (cash, coins, stocks, bonds, shares, funds on deposit)
Some assets are completely exempt from creditors, such as:
· social security
· term life insurance
· whole life insurance proceeds payable to spouse or lineal dependent
· retirement plans, 401(k), state pensions, health savings accounts, IRAs
· Earned Income Credit(s)
How are exemptions claimed in bankruptcy?
Indiana Bankruptcy Exemptions must be delineated on Schedule "C" to the Bankruptcy petition that is filed with the court. Creditors have the right to object to the exemption(s) if they are misused, inapplicable or if the property valuation is incorrect. If in doubt about how to value your property, you should obtain industry standard valuations (appraisals, inspections, evaluations, etc.)
What happens to "non exempt" property in an Indiana bankruptcy?
If you have property that is valued above the applicable Indiana bankruptcy exemption, then it is exposed to liquidation in a Chapter 7 proceeding and could be seized and sold for the benefit of creditors of the bankruptcy estate. One of the most common "non-exempt" assets in Indiana is the tax refund. If you receive a tax refund, part or all of it, depending on when you file for bankruptcy, will be part of the bankruptcy estate and you will likely be asked to turn it over to the bankruptcy trustee for distribution.
The 180 day rule regarding inheritances in Indiana bankruptcy
When you file bankruptcy in Indiana, all of your property, tangible or intangible, and any thing you have the right to possess becomes part of a "bankruptcy estate." Your Indiana bankruptcy exemptions apply to this property at the time of filing but you must no forget a very important rule. Any assets received or right to receive assets by way of an inheritance within 180 days of filing for bankruptcy automatically become part of the bankruptcy estate and depending on the amount and type of asset, may be "non-exempt." Moral of the story here is that if you expect to receive an inheritance soon, you should consider this before filing for bankruptcy relief.
Hiring a bankruptcy attorney or at least consulting with a bankruptcy lawyer is highly advisable because exemptions can be tricky and misuse or misapplication can result in the loss of money or property that would not otherwise be lost.