Chapter 7 bankruptcy, also known as liquidation bankruptcy, allows creditors to liquidate some of your assets to repay the amount owed. In most cases, those filing under Chapter 7 are already struggling and don’t necessarily have major assets on which to draw. However, equity in your home or your vehicle is also subject to liquidation, and these are often the most important assets you own. Individual debtors are allowed to exempt some of their property from liquidation. These exemptions represent an important tool for those declaring bankruptcy. We will discuss which assets are subject to liquidation and how you can protect them.

Liquidation of Home Equity in Chapter 7 Bankruptcy

Indiana offers debtors a homestead exemption that allows them to protect $22,750 in home equity. The exemption applies to the amount paid on your mortgage. A creditor would be allowed to recover or place a lien on any amount in excess of $22,750. The exemption only applies to real estate in which you reside. When you declare bankruptcy with your spouse, you can double the amount of the homestead exemption. That would be a total of 45,500.

Liquidation of Equity in a Personal Vehicle

Indiana does not offer specific protection for your personal vehicle. Instead, you have a wildcard exemption that can apply to any personal property that you want to protect. This includes your personal vehicle. The wildcard exemption goes as high as $12,100 and can apply to your personal vehicle if you so choose. However, if you apply the wildcard exemption to your personal vehicle, that is less money that you have to exempt other personal property. 

Other Valuables Subject to Liquidation in Chapter 7

Almost anything can be liquidated in a Chapter 7 bankruptcy. The role of your attorney is to determine which assets you want to protect and which ones you can safely part with. In many cases, the exemptions will apply to homes and vehicles as those tend to be the two most valuable and important assets that Indiana debtors want to ensure are protected. However, you can apply the wildcard exemption of $12,100 to collectibles, works of art, machine tools, musical equipment, and whatever else. 

Indiana also allows you to exempt $450 in intangible property. This includes money or items that represent money. It can also include cryptocurrency, tax refunds, claims against other parties for damages, and rights to inherit. 

Your bankruptcy attorney will go over which items you want to protect and those you can part with. It is our job to protect you from creditors who are looking to seize your items for liquidation. 

Talk to an Indiana Bankruptcy Lawyer Today

Chris Arrington represents the interests of individuals who are struggling to repay their debts. If you need to file for bankruptcy, call our office today to schedule an appointment, and we can begin discussing what property you want to protect from creditors.