Bankruptcy exemptions for Indiana residents
The goals of bankruptcy are to give the debtor a fresh start and to pay back creditors. While this may involve giving up some assets, there are certain ways debtors can keep some of their possessions.
April 16, 2013
Deciding whether or not bankruptcy is the right option for one's financial future can be a difficult decision. The goals of bankruptcy are to give the debtor a fresh start and to pay back creditors. While this may involve giving up property and assets, there are certain ways debtors can keep some of their possessions. This is where bankruptcy exemptions come in. Exemptions are a part of the bankruptcy code that determine the property debtors get to keep in a bankruptcy proceeding. Also this may determine the bankruptcy Chapter the debtor may select.General overview of bankruptcy
Bankruptcy is a broad term for a Federal law that allows businesses and individuals to escape from debt and pay off their creditors. Although there are various types of bankruptcy, the two most commonly used are Chapter 7 and Chapter 13.
Under Chapter 7 bankruptcy, a person's assets are liquidated with the exception of the most necessary assets. In exchange for discharging the debt, the bankruptcy filer turns all nonexempt property over to the bankruptcy trustee to be sold to pay off the debts.
Chapter 13 bankruptcy results in a debt adjustment plan. The filer keeps all property, but pays all disposable income directly to a bankruptcy trustee every month. The trustee makes payments to creditors from this income under a plan the bankruptcy court approves. The debts are usually paid over a three to five year period. In situations where the equity exceeds the exemption, the debtor can possibly "buy back" the extra value.
Indiana bankruptcy exemptions
States may opt out of the Federal exemptions. Indiana has opted out and has its own rules about exemptions when debtors file for Chapter 7 or Chapter 13 bankruptcy. Exemptions are what property is safe from the bankruptcy process and creditors. Typical exemptions are things such as homes, cars, insurance policies and retirement accounts.
What the trustee can take is subject to the exemption and the properly perfected secured claims. If the value of a home or car is greater than the exemption amount, this does not mean the debtor will automatically lose it. Instead, it depends on the equity left after paying the properly perfected secured claims.
Indiana bankruptcy law exempts certain property from bankruptcy, including a debtor's residence as well as any real estate rights that do not exceed $17,600. Then, the state code also exempts other real estate up to $9,350 and intangible personal property, such as deposit accounts and cash, up to $350.
In addition, possible exemptions also include: medical savings accounts, retirement plans, disability benefits for veterans, and education accounts such as tuition programs.
In order to determine how much the exempt property is worth, the plaintiff and the debtor will each get an appraiser to determine the amount. If for some reason these two cannot come up with an agreed upon amount, a third appraiser will be used. If the value of the property is greater than the exemption amount, the trustee will sell the property, but the debtor will get the amount of the allowable exemption from the proceeds of the sale.
Exemptions help applicants hold on to certain assets
In a Chapter 7 bankruptcy, the trustee cannot sell exempt assets to creditors but may sell nonexempt assets to pay debts. Moreover, the trustee's ability to sell is also subject to the existence of second claims put on a mortgage. However, if there are any loans securing the property, these do not affect the exemptions. A Chapter 13 exemption helps determine what the debtor will have to give to unsecured creditors. The trustee will not sell all nonexempt assets, but rather will sell only a portion of them to creditors. This sale will pay the minimum amount so the court will confirm a debtor's reorganization plan.
Harassment from creditors and the possibility of losing a home or other possessions can be extremely stressful when considering bankruptcy as an option. It is wise to seek out the counsel of an experienced bankruptcy attorney who can assist you in reviewing finances and determining whether bankruptcy is the right option.
Article provided by The Law Office of Andrew L. Kraemer
Visit us at www.kraemerlawyer.com