What happens to your property if you file bankruptcy?

As an Indiana bankruptcy attorney with my practice primarily in Indianapolis, I am frequently confronted with people wanting to know "what happens to my property if I file bankruptcy"....and it is an important question. You have worked hard to accumulate certain assets and you want to keep them. Trust me...I get it and part of the planning process requires me to work with clients to determine what they own and show them how I can protect those assets. By the way, most people filing for bankruptcy do not own any property that can be taken away from them by the Bankruptcy Court.

Under the Bankruptcy Code, each state can decide whether to follow the federal exemptions (rules that set forth what property you can keep) or create their own. Indiana long ago decided to create their own exemptions. In most cases, the exemptions apply to each debtor (person filing bankruptcy). So in a joint case the exemption values usually double.

Let's talk about your house first and foremost as that is what most of my Indiana bankruptcy clients are concerned about. We have what is referred to as a Homestead exemption. It is $17,800.00 which doubles to $35,600.00 for spouses who co-own their homes. So if your house is jointly owned with your spouse and is worth $130,000.00 but you owe $100,000.00 on it, then the bankruptcy trustee cannot attempt to take your house from you as the exemption has consumed all of your equity. If the house is not your primary residence then a different set of rules apply as that type of property is not given homestead protection. Instead, it would be covered by the general "wildcard" exemption.

For Indiana bankruptcy filers that "wildcard" exemption is $9,350.00 per individual or $18,700.00 for jointly owned property if both spouses file bankruptcy. This exemption applies to equity in real estate that is not your primary residence, cars, furniture, clothing, jewelry and other tangible items of personal property. As stated above, it is rare for a client to have equity in personal property that exceeds the exemption. As a result, most clients are able to keep all of their personal property.

Most retirement accounts are also exempt from collection regardless of their value. To receive this protection, the accounts must meet certain federal criteria. If the account was established through your employer and was funded with pre-tax contributions then it is exempt and therefore protected. Certain other retirement accounts can be shielded as well....even those set up by individuals who are self-employed. However, this must be examined on a case by case basis.

The Indiana bankruptcy exemptions allow you to protect up to $350.00 for non-tangible personal property (some examples.....monies in a bank account on the date of filing, tax refunds received after the date of filing of your bankruptcy, and non-retirement investment accounts.)

While the norm is that as an Indiana bankruptcy attorney I can protect your assets as part of the bankruptcy process, it is critical that full disclosure of the assets is made from the start. This will allow me to apply the appropriate exemptions to your property.

If you are contemplating filing bankruptcy, please feel free to contact my bankruptcy office. Even if you do not live in the Indianapolis area I can still be of assistance as bankruptcy hearings for most people living in central Indiana are held in Indianapolis or handled by the Indianapolis Bankruptcy Court. Please visit my website (www.vanwinklelegal.com) for more information.