Top Five Bankruptcy Exemptions in Indiana

Coronavirus and COVID-19 quarantines have caused some fundamental economic changes. It might take many months or many years for Indianans to fully bounce back. And, with consumer debt at an all-time high, many families have little margin for error.

Bankruptcy might be a good option for those experiencing severe financial distress. Normally, these problems do not get better. They get worse. Chapter 7 eliminates unsecured debts, like credit cards and medical bills, in a matter of months. Chapter 13 gives debtors up to five years to repay past-due debts without worrying about creditor harassment. Bankruptcy does more than eliminate debt. It also protects assets, as outlined below.

There are a lot of decisions to be made, and only an experienced Chicago bankruptcy lawyer can give debtors the legal advice they need to make good choices.

Home Equity

Married couples can protect up to $38,600 in home equity. Generally, people who have lived in their homes for less than ten years have little home equity. The bulk of their mortgage payments go to prepaid interest. And, if the couple has substantial home equity, an attorney can usually offer some non-bankruptcy options.

On a related note, an attorney also knows how to maximize your home equity exemption. A tenancy of the entirety is one example. It is illegal for creditors to seize one person’s property to pay someone else’s debts, even if that person is a spouse.

Additionally, there is usually a difference between a home’s fair market value and its as-is cash sale value. That second value is the only one that matters in a bankruptcy. Frequently, a home’s “garage sale” value might only be a fraction of its fair market value. That change could affect the home equity exemption.

Personal Property

On a similar note, furniture, electronics, and other personal property items usually have almost no fair market value. As a result, it is rather easy to include all of them in the personal property exemption. If need be, a debtor can also apply part of the wildcard exemption to household goods and personal property. This exemption also applies to home health aids and cash in a checking account.

Wildcard Exemption

Many states do not have one of these exemptions, but Indiana does. Debtors can protect up to $10,000 in any otherwise non-exempt real or personal property.

Many people use the wildcard exemption to shield motor vehicles. Generally, new cars have practically no equity and used cars have practically no value. Other people use the wildcard exemption to bolster one of the other exemptions or protect their savings accounts.

Current Wages

Indiana law protects 75 percent of earned income that has not been paid at the time of filing. So, people who file bankruptcy still have income to meet their financial obligations, including pre-scheduled ACH debits.

Pension Plans

The Supreme Court recently reaffirmed that these accounts are entirely exempt, regardless of their value. That’s important, because retirement accounts often have an emotional value that is greater than their financial value. In addition to a retirement nest egg, an IRA, 401(k), or other such account represents security and a reward for financial sacrifice.

Reach Out to Experienced Lawyers

Bankruptcy debtors retain most or all of their assets. For a free consultation with an experienced Chicago bankruptcy attorney, contact the Bentz Holguin Law Firm, LLC. We routinely handle matters in Illinois and Indiana.

Resource:

newyorkfed.org/newsevents/news/research/2020/20200211

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