{"id":286848,"date":"2021-04-22T07:45:25","date_gmt":"2021-04-22T12:45:25","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/bankruptcy\/bankruptcy-laws-by-state\/indiana-bankruptcy-exemptions-and-law.html"},"modified":"2021-04-22T07:51:01","modified_gmt":"2021-04-22T12:51:01","slug":"indiana-bankruptcy-exemptions-and-law","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/bankruptcy\/bankruptcy-laws-by-state\/indiana-bankruptcy-exemptions-and-law.html","title":{"rendered":"Indiana Bankruptcy Exemptions and Law"},"content":{"rendered":"\n
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Indiana Bankruptcy Exemptions and Law<\/h1>\n
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\n By J.P. Finet, J.D.<\/a> | Legally reviewed by Bridget Molitor, JD<\/a>\n | Last updated\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n

Having too much debt can be a traumatizing experience. Not only do you feel the hopelessness of knowing you can never pay all of your bills, but you may also by getting threatening calls from collections agencies or even be facing court action to garnish your earnings. There’s a way out. Bankruptcy can help.<\/blockquote>\r\n

Why File for Bankruptcy?
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Filing for bankruptcy can stop creditor harassment and give you the time you need to organize your debts to either create a payment plan to repay what you owe or discharge the debt entirely. When you exit bankruptcy, you may be nearly debt-free and ready to move on with your life. Additionally, Indiana provides special rules that let you protect some of your property from your creditors during bankruptcy.
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<\/a>Indiana Bankruptcy Law<\/h2>\r\n

The U.S. Bankruptcy Courts are federal courts governed by federal law. However, the U.S. Bankruptcy Code<\/a> allows states to establish their own rules regarding the property their residents can keep when they file for bankruptcy. This is known as \u201cexempt property."<\/p>\r\n

Some states will let you choose between the federal bankruptcy exemptions<\/a> provided in the Bankruptcy Code and state law exemptions, but Indiana requires you to use its rules when you file for bankruptcy in the state. We talk more about bankruptcy exemptions below. In order to understand what property you can keep, however, it’s first important to understand how bankruptcy works.<\/p>\r\n

Chapter 7 vs. Chapter 13 Bankruptcy<\/h2>\r\n

Almost every personal bankruptcy is filed under either Chapter 7<\/a> or Chapter 13<\/a> of the Bankruptcy Code. Filing for either will help you resolve your debt problems, but each chapter does it differently. Which one you should choose is often driven by your financial situation and whether you want to keep your assets.<\/p>\r\n

Chapter 7 bankruptcy is often called a \u201cliquidation bankruptcy" because if you file under that chapter you must turn over most of the assets that are not protected by an exemption to a bankruptcy trustee appointed by the court. The trustee will then sell your property to repay your creditors. In return for giving up your non-exempt assets, the court will usually discharge nearly all of your debts. To file under Chapter 7, your income must be below certain levels.<\/p>\r\n

Chapter 13 will let you reorganize your debts so that you can pay them off over three to five years under a court-approved repayment plan. To file under Chapter 13, you need to show the court that you have enough income to make the payments under your plan.<\/p>\r\n

The court can force your creditors to accept your Chapter 13 repayment plan and even force them to accept less than they are owed. If they have a choice, homeowners usually choose to file under Chapter 13 because they can usually keep their homes.<\/p>\r\n

The Automatic Stay Protects You From Creditors<\/h2>\r\n

When you file for bankruptcy under either Chapter 7 or Chapter 13, the court will issue an automatic stay that should stop all efforts to collect debts from you. The automatic stay is a powerful tool that forces your creditors to work with you in the bankruptcy process by giving them no other options for collecting what you owe them.<\/p>\r\n

The stay stops harassing phone calls, foreclosure actions, and even court cases against you. If one of your creditors knowingly violates the stay and contacts you directly, the judge can impose penalties on the creditor, including paying your attorneys’ fees.<\/p>\r\n

Secured vs. Unsecured Debt<\/h2>\r\n

Filing for bankruptcy will let you resolve your debt issues, but not all of your debt will be treated the same way. In most cases, your debts will be given one of two labels: secured<\/a> or unsecured<\/a>. How your debt is classified will often dictate what type of bankruptcy you choose and how much of your debt you can discharge.<\/p>\r\n

Unsecured Debt<\/h3>\r\n

Nearly everyone who files for bankruptcy has at least some unsecured debt. Debt is considered to be unsecured when you owe money to a person or organization and they have no right to seize your property if you fail to pay them. Unpaid credit card bills, medical bills, and court judgments are three of the most common types of unsecured debt.<\/p>\r\n

Secured Debt<\/h3>\r\n

You have secured debt when your creditor has the right to seize or repossess your property if you don’t pay. Often, secured debt is created by a loan contract when you give a lender the right to seize your property if you don’t repay the loan. Mortgages and auto loans are the most common types of secured debt.<\/p>\r\n

Secured and Unsecured Debt in Chapter 7<\/h3>\r\n

In a Chapter 7 case, your unsecured creditors<\/i> are usually paid from whatever the trustee was able to earn from selling your non-exempt property. Any unpaid unsecured debt will be discharged. However, some priority unsecured debt cannot be discharged, like child support and alimony.<\/p>\r\n

Since most people filing for Chapter 7 bankruptcy have little property to sell, most unsecured creditors will only receive a small fraction of what they are owed, if they are paid at all.<\/p>\r\n

Your secured creditors <\/i>maintain their interest in your property during bankruptcy, so the court rarely discharges those debts. That leaves you with three options for your unsecured debt:<\/p>\r\n