One of the biggest fears people face while considering Chapter 7 bankruptcy is that they would lose everything they own. But bankruptcy doesn’t usually work like that. Bankruptcy is an option designed to give individuals a fresh financial start while allowing them to protect certain essential assets through exemption laws.
Protected assets and exemption limits
While bankruptcy is a federal process, each state maintains certain rules and regulations regarding exemptions. Indiana law protects certain types of property from creditors during a Chapter 7 bankruptcy. Depending on circumstances, exemptions might apply to assets such as:
- Primary residence: You could protect up to $22,750 in equity in your primary residence.
- Personal property: This might include vehicles, household goods and other personal belongings. The state provides up to $12,100 per person to shield physical property.
- Cash and bank accounts: You can protect up to $450 in cash, checking or savings accounts on the day of your filing.
- Social security benefits: Public benefits are 100% exempt from bankruptcy court.
- Unemployment benefits: Unemployment compensation is fully protected by law and cannot be used to satisfy most bankruptcy debts.
Because these exemptions protect the equity in your property rather than the total market value, many filers can keep most of their personal belongings. Because exemption protection can depend on the value of assets at the time of filing, careful planning might affect how much property remains protected.
Securing a financial future
Bankruptcy exemptions are designed to help people rebuild rather than start over with nothing. However, failing to claim these exemptions properly could put your assets at risk. If you are considering bankruptcy, seeking the guidance of an experienced legal professional could help you understand your rights and options to protect your assets.
