Indiana Bankruptcy Exemptions: Protect Your Property in Chapter 7

If you’ve been an Indiana resident for at least two years when you file Chapter 7 bankruptcy, you’ll be required to use the state’s bankruptcy exemptions to protect your property and belongings. Indiana offers a $22,750 homestead exemption you can use to help protect your primary residence. There is no motor vehicle exemption in Indiana, but you can use the state’s $12,100 wildcard exemption to protect your car and other personal property.

What Are Bankruptcy Exemptions and Why Do They Matter?

Bankruptcy exemptions are laws that help you protect property you own. Without exemptions, the bankruptcy trustee could sell your property and give the proceeds to your creditors. Exemptions ensure you can get a fresh start financially without starting over from scratch.

You can protect personal property, real property like your home or land, and money benefits like retirement accounts or pensions.

Can You Use Federal Bankruptcy Exemptions Instead?

No. If you’ve been an Indiana resident for at least two years, you must use the state’s exemptions. Every state has different bankruptcy exemption laws. Some states allow bankruptcy filers to choose between state and federal exemptions, but Indiana isn’t one of those states.

When you file bankruptcy in Indiana, you can also use federal non-bankruptcy exemptions. These mostly help you protect retirement accounts and certain government benefits.

If you haven’t lived in Indiana for at least two years, you’ll need to research which exemption laws apply to you.

What Are Indiana’s Bankruptcy Exemptions?

Indiana’s bankruptcy exemptions fall into three major categories:

• Real property, which includes real estate and land
• Personal property, which includes household goods, tools of the trade, and your car
• Money benefits, which include retirement accounts, government benefits, and bank accounts

The exemption amounts listed below apply to individual filers. If you’re married and filing jointly, you can double the exemption amounts.

Real Property Exemptions: Indiana Homestead Exemptions

The homestead exemption in Indiana is $22,750. The Indiana homestead exemption allows you to protect a certain amount of equity in your home. Your home must be your primary residence to use this exemption.

Equity is the value of your property minus the amount you owe. For example, say you owe $230,000 on a mortgage, and the home is worth $250,000. You have $20,000 of equity in the home. In this case, the homestead exemption fully protects your home.

Source: Ind. Code §§ 34-55-10-2(c)(1), (5)

Indiana’s Personal Property Bankruptcy Exemptions

Personal property covers a broad range of items. The following items are fully exempt under Indiana law:

• Uniforms, arms, military equipment
• Health aids
• Medical care savings account
• Health savings account
• Qualified tuition program
• Education savings account
• Interest in a refund or earned income credit for exempt bankruptcy property
• A spendthrift trust

In Indiana, contributions to education savings accounts (including 529 plans) are fully exempt if made more than two years before filing. Contributions made between one and two years before filing are exempt up to $5,000. Contributions made within one year of filing are not exempt.

Source: Ind. Code §§ 10-16-10-1, 34-55-10-2(c)(4), 6-8-11-19; 34-55-10-2(c)(7), 34-55-10-2(c)(8), 34-55-10-2(c)(9), 34-55-10-2(c)(10), 34-55-10-2(c)(11), 30-4-3-2

Indiana’s Wildcard Exemption

Compared to other states, Indiana doesn’t have particularly generous personal property exemptions. The wildcard exemption is crucial for Indiana filers. It allows you to protect up to $12,100 of tangible property and/or nonresidential real estate.

Examples of tangible property include your TV, phone, jewelry, household goods, furnishings, and animals. It also includes your car, if you have one.

Indiana doesn’t have a specific motor vehicle exemption, unlike most other states. You’ll need to use the wildcard exemption to protect your vehicle.

Money Benefits in Indiana Bankruptcy

Money benefits include wages, pension accounts, retirement accounts, and public assistance.

Wages

You can keep up to 75% of your unpaid wages. If this amount is less than 30 times the federal minimum wage, you can keep the higher amount.

Source: Ind. Code § 24-4.5-5-105

Pensions and Retirement Benefits

Many pension accounts and retirement benefits are fully exempt in bankruptcy in Indiana:

• Pension, retirement, or IRA account
• Police and firefighter pension funds
• Legislators benefit plan
• Public employees retirement
• Indiana State Teachers’ Retirement Fund benefits
• Tax-exempt retirement accounts, including 401(k)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, IRAs, Roth IRAs, and qualified benefits up to $1,512,350 per person

Source: Ind. Code §§ 34-55-10-2(c)(6), 36-8-7.5-19, 36-8-7-22, 2-3.5-4-11; 2-3.5-5-9, 5-10.3-8-9, 5-10.4-5-14, and 11 U.S.C § 522(b)

Public Assistance

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

• Workers’ compensation
• Earned income tax credit
• Unemployment compensation

Source: Ind. Code §22-3-2-17, 34-55-10-2(c)(11), 22-3-2-17, 22-4-33-3

Insurance

The following insurance policies can be exempt up to the full value:

• 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

Get Help Filing Chapter 7 in Indiana

Bankruptcy is a legal process that can be overwhelming to understand. The good news is that help is available. You can speak with a bankruptcy attorney for free to discuss your specific situation.

A bankruptcy attorney can help you understand which exemptions apply to your property. They can also help you determine if Chapter 7 or Chapter 13 bankruptcy is right for you.