Bankruptcy exemptions and residency requirements in Indiana
If you are contemplating filing for bankruptcy in Indiana, you may have many questions. For instance, can you keep the car you need to get to work? What happens to any equity in a home where you have lived for years? Will a bankruptcy wipe out all of your retirement savings?
Usually these questions can be answered after discussing your individual financial picture with a bankruptcy attorney. Whether through Chapter 7 or a Chapter 13 filing, requesting relief through the bankruptcy court stops creditor harassment and offers dependable debt relief.
Bankruptcy exemptions: What are you allowed to keep?
Property that is exempt is excluded from your bankruptcy estate. This means you can keep exempt property. Federal and State bankruptcy exemptions vary. The United States Code provides centralized bankruptcy rules and procedure throughout the country; however, each state can create its own bankruptcy exemptions.
What this means is that what you are allowed to keep will vary based on the state where you file for bankruptcy. Exemptions are different in Indiana and neighboring Illinois, which "opted out" of the federal exemption scheme and has created its own exclusive exemptions.
Qualifying for Indiana bankruptcy exemptions
The question of whether you will be eligible to claim protections offered by Indiana or the Federal exemption system depend on residency. Federal law requires a filer to be domiciled in Indiana for two years (730 days) before being able to take advantage of Indiana exemptions. If the requirement is not met, the filer will have to use the exemption from his or her prior state of residence.
A recent case detailed what can occur when the two-year residency requirement is not met. In the case, a woman filed for Chapter 7 bankruptcy protection in Indiana using the federal exemptions. The woman was a resident of Indiana at the time she filed, but she had moved from Illinois three months before she filed. She had lived in Illinois for six years prior to her move. The Indiana bankruptcy court found that she needed to use the Illinois exemptions, because Illinois state residents were barred from using the federal bankruptcy exemptions.
Detailed Indiana exemptions
In Indiana, if you file for bankruptcy in 2012 and meet the Indiana residency requirements you can exempt up to $17,600 per person in equity in a family residence and $9,350 in other real estate or personal property such as a car. Keep in mind that these amounts change periodically.
Indiana Statute also sets forth a number of exemptions involving personal property. Other exemptions include:
- Money in a checking or saving account up to $350
- Health aids prescribed for the person filing bankruptcy or his or her dependent
- Retirement account contributions not subject to federal income tax
- Pre-tax medical or health savings accounts
- College savings accounts in some cases
Before exhausting your retirement accounts and taking other extreme measures, seek the counsel of an Indiana bankruptcy attorney to discuss whether bankruptcy protection might provide a solution to your financial worries.
