One of the largest myths surrounding bankruptcy is that if you declare bankruptcy, it will result in the loss of all your possessions. Individuals who want to avoid declaring bankruptcy do so out of the fear of having to give up their house, car, other personal items, or even their pension. However, under bankruptcy law, there are several exemptions that will protect a portion of your belongings.

Each state has its own bankruptcy exemptions; in Indiana, there are several.

What are bankruptcy exemptions?

Bankruptcy exemptions are statutes that protect certain property from seizure by creditors or bankruptcy trustees. Bankruptcy exemptions are put in place to ensure individuals are able to maintain a minimum standard of living during bankruptcy proceedings. 

When someone files for bankruptcy, they need to list all of their possessions, which include savings accounts, a car, land, or a house, and personal property. These exemptions will then decide whether an individual is allowed to retain their possessions. 

Indiana bankruptcy filers are required to utilize Indiana state exemptions when filing for bankruptcy.

Homestead exemption

Homestead exemptions also exist in Indiana as a way to safeguard equity in your home. The homestead exemption can also be used by individuals to safeguard some equity in their homes in case they file for bankruptcy.

Those individuals who only have a small amount of equity in their homes will be able to retain their homes even after filing for bankruptcy. However, mortgage payments should also be made if the owner wants to stay in their home. 

The exact amount of protection that can be provided through the homestead exemption depends on certain factors.

Vehicle exemptions

A dependable car is vital for many people in Indiana to commute to work, take care of their kids, and meet other obligations. There are exemptions that will allow you to have some equity in your car, even if you file for bankruptcy.

If your car is valued higher than your exemption allowance, it does not mean that you don’t have any options. 

Retirement accounts and benefits

Retirement accounts are protected by state and federal law. Qualified plans, pensions, and other tax-deferred retirement plans are sometimes exempt during bankruptcy.

In addition, social security payments, disability payments, and unemployment benefits may be considered exempt from creditor claims.

These provisions are essential since bankruptcy laws aim to give debt relief without making the individual bankrupt and financially destitute.

Personal property and household goods

Furthermore, Indiana bankruptcy exemptions could also cover some common household and personal items, such as:

• Apparel
• Furniture
• Appliances
• Some tools for work purposes
• Photographs and other personal effects of family members

This is because people require some essential items before they can move on after bankruptcy proceedings.

Talk to a Danville, IN, Bankruptcy Lawyer Today

Chris Arrington represents the interests of Danville, IN, residents who need to file for bankruptcy. Call our office today to schedule an appointment, and we can begin reviewing your case right away.