What are the Indiana Bankruptcy Exemptions?

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In a Nutshell

Most people are unaware that there are two types of exemptions that can be used if you file bankruptcy. When Congress enacted bankruptcy laws they allowed states to choose if they wanted to allow their residents to use the federal bankruptcy exemptions or state specific exemptions to keep their property. Indiana is one of the states that only allows filers to use the Indiana bankruptcy exemptions. So, when you fill out your bankruptcy forms, you will need to make sure that you are using the Indiana exemptions, not federal exemptions. One exception to this rule is that you can use the federal nonbankruptcy exemptions to protect certain retirement accounts and disability benefits. Keep in mind that choosing the right exemption to use is essential for your case to run smoothly.

Written by Attorney Karra Kingston.  
Updated July 28, 2020


What Are Indiana Bankruptcy Exemptions and Why Are They Important in Chapter 7 Bankruptcy?

Most people who file bankruptcy do so to get a “fresh start” and lasting debt relief. The idea behind filing bankruptcy is that once your debts are eliminated, you will be in a position to start your life over. If you filed for bankruptcy and lost all of your belongings, it would be extremely difficult to start over. The only way to really start over would be to have your debts eliminated and be left with enough property to support yourself and your dependents. Congress understands that if people were left destitute, they would be in a far worse position. So, when you file for bankruptcy, you get to keep some of your property. Indiana bankruptcy exemptions allow you to protect certain property that has value. The bankruptcy court feels it is necessary to allow people to keep their property to meet a basic standard of living. The bankruptcy court, however, does not think it would be fair for people who aren’t paying their debts to be able to keep luxury items that are not essential. That’s why exempt property is specifically identified in both federal law and state exemptions. Non-exempt property can be sold by the bankruptcy trustee

Does Indiana Allow The Use Of Federal Bankruptcy Exemptions?

Most people are unaware that there are two types of exemptions that can be used if you file bankruptcy. When Congress enacted bankruptcy laws they allowed states to choose if they wanted to allow their residents to use the federal bankruptcy exemptions or state specific exemptions to keep their property. Indiana is one of the states that only allows filers to use the Indiana bankruptcy exemptions. So, when you fill out your bankruptcy forms, you will need to make sure that you are using the Indiana exemptions, not federal exemptions. One exception to this rule is that you can use the federal nonbankruptcy exemptions to protect certain retirement accounts and disability benefits. Keep in mind that choosing the right exemption to use is essential for your case to run smoothly. 

To stop people from moving to different states to get more favorable exemptions, there is a time limit on how long you must reside in Indiana to benefit from the Indiana exemptions. Under the Bankruptcy Code, you must be an Indiana resident for at least 730 days (two years) when your bankruptcy case is filed to use the Indiana exemptions.

Another thing to make note of is that married couples filing together must both use the Indiana exemptions. The exemption amounts apply to each spouse individually. Thus, married couples can double the number of exemptions. 

Indiana Bankruptcy Exemptions

Real Property Exemptions: Indiana Homestead Exemptions

The Indiana homestead exemption allows you to protect a certain amount of equity in your home. Equity is the value of your property minus the amount you owe. Keep in mind, that if you plan to use the Indiana homestead exemption, you must live in the property. 

The homestead exemption in Indiana is $19,300. This can be used for real estate or personal property used as a primary residence. For example, if you own property worth $500,000 and you owe $490,000 then the property is exempt because you have $10,000 of equity, which is less than $19,300. If, however, you only owe $400,000 then the property would not be fully protected because you have $100,000 of equity. 

Personal Property Exemptions: 

Consumers filing bankruptcy can keep their personal property under the Indiana bankruptcy exemptions. Keep in mind that filers can use the wildcard exemption to protect any non- residential property or tangible property. Examples of tangible property can be your TV, phone, jewelry, household goods, and furnishings, animals, etc. The wildcard can be used on anything you want to protect that doesn’t have an exemption or does not have enough of an exemption. The value of any property that can be exempt using the wildcard exemption is $10,250.  

Below, we will look at some of the exemptions that can be used to keep your personal property. 

Motor Vehicle Exemption:

  • Indiana does not have a vehicle exemption. Essentially, this means that your motor vehicle is not protected. However, you can use the wildcard to protect the value of your vehicle (minus the amount  you owe on a car loan, if any). Remember the wildcard exemption can be used on any non-residential property or tangible property up to $10,250.00

Military items: Ind. Code §10-16-10-1 

  • There is no limit for military arms, uniforms, and military equipment.

Other Indiana Exemptions:

Wages: Ind. Code § 18-4-20

  • You can keep up to 75% of earned unpaid wages. Keep in mind that if the 75 percent is less than 40 times the accepted minimum wage amount set by the US guidelines, it will supersede the 75 percent of earnings. 

Education Savings Account: Ind. Code § 34-55-10-2(c)(9) & Ind. Code § 34-55-10-2(c)(10)

Education savings accounts are protected by an unlimited exemption for contributions made more than two years before the filing of the bankruptcy. If the contributions were made between 1 year of filing the bankruptcy petition, the exemption is limited to $5,000 only. If the contribution is less than one year there is no exemption. 

Pensions 

  • Pension benefits for firefighters and police officers are protected by Indiana Code § 36-8-7.5-19 & § 36-8-7.5-22.

  • Retirement plans for state teachers are protected under Indiana Code § 5-10.4-5-14 

Retirement Accounts - 11 U.S.C § 522(b)

Retirement Accounts can be exempt up to their full value. Below are the types of retirement accounts that fall under such:

  • Tax-exempt retirement accounts:

  • 401(k)s, 403(b)s, profit-sharing, and money purchase plans, SEP and SIMPLE IRAs, IRAS, Roth IRAs, ERISA-IRAs, and qualified benefits 

  • Nonprofit corporations' employees; public employees; other pensions and IRA payments needed for support.

Pursuant to the Bankruptcy Code, you can use this exemption to protect certain qualifying retirement accounts even though Indiana law requires you to use Indiana bankruptcy exemptions. 

Money Benefits: 

Public Assistance:

The following public benefits can be exempt up to the full monetary value:

  • Workers' compensation (except child support claims) - Ind. Code §22-3-2-17

  • Earned income tax credit - Ind. Code §34-55-10-2(c)(11) 

  • Workers' compensation - Ind. Code §22-3-2-17 

  • Unemployment compensation - §22-4-33-3

Health aids; funds in medical savings accounts and health savings accounts:

  • There is no limit on the amount you can exempt. However, you can only exempt up to $400 of intangible personal property (except for money owed to you). Intangible property  can include certain types of tax refunds and whole insurance with cash surrender values. 

  • This applies to state medical care savings accounts and federal health savings accounts. 

Insurance:

The following insurance policies can be exempt up to the full value. This includes life insurance policies that name the spouse, children, dependent relatives, or any creditor as a beneficiary are exempt from claims. 

  • Life insurance policy or proceeds if the beneficiary is spouse or dependent.

  • Group life insurance policy.

  • Life insurance proceeds if policy prohibits use to pay creditors.

  • Mutual life or accident policy proceeds as needed for support.

  • Fraternal benefit society benefits.

  • Employer's life insurance policy on an employee.

Crime Victims Compensation:

  • An unlimited amount of value can be protected. 

Filing Chapter 7 Bankruptcy 

The Indiana bankruptcy exemptions can seem confusing. If this is your first time reading Indiana law, you may have some trouble understanding how to apply the exemptions. Speaking with an Indiana bankruptcy attorney is a good way to find out about your options. An Indiana bankruptcy lawyer can give you legal advice about bankruptcy and help you determine if Chapter 7 bankruptcy or a Chapter 13 bankruptcy is the right option for you. Many bankruptcy law firms provide clients with free consultations where you can bring your credit card bills, list of assets, and finances and have an attorney review it. A lawyer can help you better understand the bankruptcy process so that you don’t get overwhelmed. 

If you don’t have the financial means to hire a lawyer at this very moment, Upsolve has free bankruptcy tools you can use to help you file for bankruptcy. Upsolve’s free web app has helped thousands of people file for bankruptcy for free.



About the author
Attorney Karra Kingston

Ms. Kingston began her career as a bankruptcy attorney. She has appeared in front of many federal court judges and has helped numerous debtors obtain a fresh start. Ms. Kingston understands the complex federal rules for discharging debt. While working as a bankruptcy attorney, Ms... read more

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