Updated: April 12, 2019
If you file for bankruptcy in Indiana, you can protect property with Indiana’ bankruptcy exemptions. Many people can exempt everything they own, but not always. What will happen to nonexempt property will depend on the bankruptcy chapter filed.
Not sure which chapter to file? Start by reading When Chapter 7 Bankruptcy Is Better than Chapter 13 Bankruptcy.
Certain states offer you a choice between state exemptions and the federal bankruptcy exemption system, but Indiana isn’t one of them. In Indiana, you must use state exemptions. If helpful, you can use the federal nonbankruptcy exemptions, too.
Married couples filing together in a joint bankruptcy get a bonus. Indiana allows a couple to double the exemption amount if both spouses have an ownership interest in the property.
If you don’t exempt your property carefully, you could lose it. You’ll want to steer clear of these common issues.
Do I automatically get to keep exempt property? No. In most cases, you’ll be allowed to exempt property that you’ll need to maintain a job and household, such as furnishings, clothing, and some equity in a vehicle. You must list the assets you can protect official bankruptcy form Schedule C: The Property You Claim as Exempt and file it along with other required paperwork.
Will someone check my exemptions? The bankruptcy trustee—the court-appointed official tasked with managing your case—will review Schedule C to ensure that you have the right to protect the claimed property. A trustee who doesn’t agree with your exemptions will likely attempt to resolve the issue with you informally. If unsuccessful, the trustee will file an objection with the bankruptcy court. The judge will decide whether you can keep the property.
Example. Mason owns a rare, classic car worth $15,000 but the state vehicle exemption won’t adequately protect it. Believing that the car qualifies as art—at least in his mind—Mason exempts it using his state’s unlimited artwork exemption. The trustee reviews Schedule C disagrees with Mason’s characterization and files an objection to the exemption with the court. After consideration, the judge will likely side with the trustee and determine that the vehicle doesn’t qualify as a piece of art.
What if I make a mistake? Most trustees won’t file an objection unless it’s clear that the debtor is trying to pull something over on the court. At least not without trying to resolve the issue first. If there’s a minor exemption problem, the trustee will likely call you to work the issue out informally.
It’s worth noting that it’s not a good idea to finesse exemptions. Not only do you have an obligation to supply correct information on your bankruptcy forms, purposefully making inaccurate statements could be considered fraudulent. Bankruptcy fraud is punishable by up to $250,000, 20 years in prison, or both.
Learn more about how bankruptcy exemptions work.
Unless otherwise noted, all law references are to the Indiana Code which you’ll find on the Indiana General Assembly website.
The homestead exemption protects a certain amount of equity in your home or principal residence. A debtor can exempt up to $19,300 in real estate or personal property used as a residence. In addition, any interest that debtor has in a real estate held as a tenant by the entirety is exempt (unless both owners file for bankruptcy). Ind. Code § 34-55-10-2(c)(1); 11 USC § 522(b)(3)(B).
Indiana does not have a specific motor vehicle exemption, but you can use Indiana's wildcard exemption to protect equity in your car, truck, van, or another vehicle.
You can protect any nonresidential real estate or tangible property of your choosing up to a value of $10,250. Ind. Code § 34-55-10-2(c)(2).
All fraternal benefit society benefits are 100% exempt. Ind. Code § 27-11-6-3.
Life insurance policies that name the insured spouse, children, dependent relatives, or any creditor as a beneficiary and the proceeds of such policies are exempt from claims against the insured and the insured’s spouse; life insurance, mutual life, and accident insurance proceeds, including group policies, are exempt. Ind. Code §§ 27-1-12-14; 27-1-12-29, 27-2-5-1; 27-8-3-23.
Interest in specific partnership property is exempt. Ind. Code § 23-4-1-25.
Pension and Retirement Benefits
Certain pension benefits for public employees are exempt. Ind. Code § 5-10.3-8-9. Benefit plans for legislators and retirement benefits for teachers are also exempt. Ind. Code §§ 2-3.5-4-11; 2-3.5-5-9; 5-10.3-8-9; 5-10.4-5-14.
Pension fund for firefighters and police. Ind. Code §§ 36-8-7.5-19; 36-8-7.5-22.
Tax-exempt retirement plans are exempt in every state per federal law, regardless of the exemption scheme used. For current amounts, see Your Retirement Plan in Bankruptcy.
You can exempt the following personal property:
Unemployment compensation benefits are 100% exempt. Ind. Code § 22-4-33-3.
The lesser of 75% of earned but unpaid wages or 30 times the Federal minimum wage. Ind. Code § 24-4.5-5-105.
All workers’ compensation is 100% exempt except for child support claims. Ind. Code § 22-3-2-17.
Indiana’s exemption amounts are adjusted periodically and could have changed since the last update of this article. It’s important to be sure you have the most recent figures by checking the Indiana General Assembly or consulting with a local bankruptcy lawyer.
Get detailed information about filing for bankruptcy in Indiana.