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Bankruptcy: Indiana

Filing bankruptcy in Indiana aims to achieve two things.  First, it gives honest debtors a chance to be relieved of crippling debt, and second it repays creditors to the extent that the debtor’s property value or earnings permit. 45,681 bankruptcies were filed in Indiana in 2010, ranking Indiana 5th in the country for the number of bankruptcy filings per capita. 74% of Indiana’s bankruptcy petitions in 2010 sought protection under Chapter 7 bankruptcy.

Filing Bankruptcy in Indiana

Federal law governs bankruptcy proceedings in Indiana, and as such all bankruptcy cases are filed in the US Bankruptcy Courts located at:

  • Indiana Northern District Court: Fort Wayne, Hammond, Lafayette, South Bend
  • Indiana Southern District Court: Evansville, Indianapolis, New Albany, Richmond

Indiana law prohibits petitioners from using exemptions listed in the U.S. bankruptcy code, instead requiring the use of Indiana bankruptcy exemptions. With the guidance of a bankruptcy attorney Indiana debtors can achieve a full understanding of what personal property they are permitted to keep in bankruptcy, and what must be sold.

Chapter 7 Bankruptcy, Indiana

Chapter 7 bankruptcies in Indiana are the most common bankruptcy filing. Chapter 7 is preferable for petitioners who don’t have a significant amount of assets, such as investments and substantial equity in a home. This is because a Bankruptcy Trustee may liquidate personal property that isn’t protected by Indiana’s bankruptcy exemptions. Liquidation occurs when the Trustee converts personal assets to cash for distribution to creditors. Indiana’s Chapter 7 bankruptcy law allows petitioners to keep some essential property; the exempt assets are strictly off-limits to creditors looking for repayment.

The vast majority of Chapter 7 cases are “no-asset” cases where no property is taken.

Indiana Bankruptcy Exemptions

Indiana bankruptcy law assigns specific property exemptions that permit debtors to retain certain personal property and assets so they may move forward from bankruptcy as productive members of society.  That is, the creditors cannot force debtors to sell the shirt off their backs.  Bankruptcy in Indiana permits petitioners to choose from eligible exemptions on the state list.

Property exemption values are subject to change; for up-to-date information, it is prudent to meet with an Indiana bankruptcy attorney to discuss options.  Indiana bankruptcy exemptions include:

Indiana Homestead Exemption

  • $17,600 total: Real or personal property used as residence (Husband and wife may double)

Indiana Tenancy by Entirety Exemption

  • Property held as tenancy by the entirety may be exempt against debts incurred by only one spouse

Indiana Personal Property Exemption

  • $350:  Any intangible personal property, except money owed to you
  • Money in medical care savings account or health savings account
  • Health aids
  • Spendthrift trusts
  • Unlimited value: Education savings accounts and prepaid tuition for contributions made at least two years prior to filing; $5,000 total for contributions made 1 year or more prior to filing. No exemption for contributions made less than 1 year prior to filing.

Indiana Tools of the Trade Exemption

  • National guard uniforms, arms and equipment

Indiana Wage Garnishment Exemption

  • 75% of earned but unpaid weekly disposable earnings, or 30 times the federal hourly minimum wage (Low-income debtors may be authorized for more)

Indiana Public Benefits Exemption

  • Crime victims’ compensation, unless seeking to discharge the debts for which the victim was compensated
  • Workers’ and Unemployment compensation

Indiana Insurance Exemption

  • Fraternal benefit society benefits
  • Employer’s life insurance policy on employee
  • Group life insurance policy
  • Mutual life or accident proceeds to extent necessary for debtor’s reasonable living expenses.
  • Life insurance policy, proceeds, cash value, or avails if beneficiary is insured’s spouse or dependent
  • Life insurance proceeds if clause prohibits proceeds to be used to pay beneficiary’s creditors

Indiana Pensions and Retirement Savings Exemption

  • Firefighters, Police officers, Sheriffs
  • Public employees, State teachers
  • Public or private retirement benefits and contributions, IRAs (Contributions other than Roth IRAs must be tax-deductible)

Indiana Miscellaneous Exemption

  • Property of business partnership

Indiana Wild Card Exemption

  • $9,350 total: Any real estate or tangible personal property

Chapter 13 Bankruptcy, Indiana

In 2010, 26% of petitioners filed for protection under Chapter 13 bankruptcy laws in Indiana.  When a debtor files Chapter 13 bankruptcy in Indiana, a court-appointed Trustee restructures the petitioner’s debts and implements a 3-5 year repayment plan, assigning the debtor’s future earnings to repay creditors.  Chapter 13 petitioners in Indiana keep most – or all – of their property.

How to File Bankruptcy in Indiana

Eligibility for property exemptions ought to be a significant consideration for debtors deciding if bankruptcy is a practical answer to their financial problems. The objective is to find a solution that will preserve major assets and qualify debts for discharge. Since every case is unique, an Indiana bankruptcy attorney can help debtors understand the complexity of their financial situations and advise whether Chapter 7 or Chapter 13 bankruptcy are among the best options in their circumstances.

Bankruptcy Attorney: Indiana

It is the debtor’s obligation to know their rights and duties as bankruptcy petitioners.  An Indiana bankruptcy attorney can interpret and advise the federal laws and state exemptions for those considering filing bankruptcy.  Because personal bankruptcy cases are complex and upsetting, seeking the counsel and support of a trusted Indiana bankruptcy attorney is highly recommended.