In this blog, we’ll share the details regarding this exemption increase, the different exemption categories, and how these exemptions impact Chapter 7 and Chapter 13 bankruptcy.

What Are Bankruptcy Exemptions?

Bankruptcy exemptions refer to tangible or intangible assets protected from seizure when you file for bankruptcy.

If you’re filing for Chapter 7 bankruptcy, you can retain exempt assets and protect them from seizure but only up to a particular point. The court-appointed bankruptcy trustee can confiscate any non-exempt assets to liquidate in order to pay back some of your debts. That said, the majority of those who file for Chapter 7 bankruptcy are able to keep all of their possessions.   

In Chapter 13 bankruptcy, you pool your debts into a three-to-five-year repayment plan, and you get to keep your property. These exemptions still apply because they decrease the amount that you’ll need to pay back to creditors with your repayment plan.

Why Did Bankruptcy Exemptions Increase in Indiana?

Last year, the Indiana Department of Financial Institutions (IDFI) increased the bankruptcy exemption amounts. This is standard procedure, as the IDFI updates the allowable exemption amount every six years to reflect inflation.

How the IDFI calculates this increase is through the United States Department of Labor’s Consumer Price Index for All Urban Consumers. The economic disruption caused by the COVID-19 pandemic and other factors surged inflation rates, and the IDFI adjusted bankruptcy exemptions to keep pace with new rates. These exemptions went into effect on March 1, 2022.

What Assets Are Exempt When Filing for Bankruptcy?

Before we dive into the new exemption amounts, it’s worth noting these different exemption types. The two main exemptions you can expect when filing for bankruptcy are the homestead exemption and wildcard exemption.

The homestead exemption allows for debtors to protect their home’s equity, and this applies to either residential property or personal property that’s used as a residence, such as a trailer. It’s important to note that the homestead exemption will not protect your equity in a secondary residential property, such as a rental or lake house.

The personal property exemption protects a certain amount of tangible and.The tangible assets could include equity in secondary residential property, a vehicle, household items, furniture, clothing, jewelry, or any other personal property.

The intangible assets exemption looks at cash or cash equivalents and include money in a debtor’s bank account, inheritance, tax refunds, claims against others, or any other non-physical asset.

2023 Bankruptcy Exemptions Indiana

The new bankruptcy exemption amounts in Indiana are:

• Homestead Exemption: The amount of protected equity increased from $19,300 to $22,750.

• Wildcard Tangible Asset Exemption:  You can exempt tangible property that’s worth up to $12,100, an increase from $10,250.

• Wildcard Intangible Asset Exemption: You can now protect up to $450 in intangible personal property while the previous amount was only $400.

2023 Married Filing Jointly Bankruptcy Exemptions

You should note that the exemption amounts above apply to individual debtors. Those married and filing jointly can exempt twice the amount, meaning:

• Homestead Exemption: $45,500

• Wildcard Tangible Asset Exemption: $24,200

• Wildcard Intangible Asset Exemption: $900

Are There Any Other Bankruptcy Exemptions in Indiana?

In addition to these new exemption amounts, you may have other exemptions, including different types of benefits, accounts, and personal property.

• Personal Property: Includes health aids, spendthrift trusts, tuition programs, education savings accounts, and military uniforms and equipment.

• Benefits: Indiana protects retirement benefits, which can include pensions, IRA accounts, retirement funds, and other types of retirement benefit plans.

• Insurance: Insurance policies and benefits are exempt, including fraternal society benefits and life insurance policies in which the debtor’s children, spouse, or dependent relatives are beneficiaries.

• Miscellaneous: Other protected assets include unemployment benefits, some partnership properties, workers’ compensation, and a percentage of unpaid wages.

Contact an Indianapolis Bankruptcy Lawyer

Facing bankruptcy is a daunting prospect, and the process can be incredibly confusing. To ensure that you file correctly and receive the maximum exemptions, consider contacting a bankruptcy attorney who will assist you through the process. 

If you’re considering filing for bankruptcy in Indianapolis or surrounding counties, contact the lawyers at Sawin & Shea, LLC. We’ll untangle the complexities of filing for bankruptcy and will help you get your finances back on track so that you can eventually live debt free. Plus, we’ll help you deal with conflict that arises from your financial situation, such as creditor harassment.

You can schedule a free consultation today by calling 317-759-1483 or by contacting us online here.

The post Indiana Increased Bankruptcy Exemptions in 2022. Here’s How it Affects You. appeared first on Indianapolis Bankruptcy Attorneys of Sawin & Shea.

What is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy is a form of personal bankruptcy that liquidates filers’ assets to discharge qualifying unsecured debts. Unsecured debts are not backed by collateral, such as car payments and home mortgages. Although the idea of liquidating your assets may sound stressful and undesirable, most of those who declare Chapter 7 can retain all of their possessions after filing.

The debts that you’ll be able to discharge with Chapter 7 bankruptcy include:

• Medical debts
• Credit card debts
• Majority of auto accident claims
• Personal loans
• Business debts
• Past-due rent debts
• Past-due utility debts
• Majority of attorney fees
• Majority of civil court judgments
• Old tax penalties and some unpaid taxes
• Repossession deficiency charges
• Collection debts
• Benefit overpayments

Although those who declare Chapter 7 can discharge many unsecured debts, they cannot discharge:

• Some types of taxes
• Debts owed to a child or former spouse that occurred because of a divorce or legal separation, including alimony and child support
• Government agency fines and penalties
• Most student loans
• Attorney fees in child custody cases
• Court penalties and fines
• Personal injury damages owed to a victim because the plaintiff drove while intoxicated
• Money owed to certain types of cooperative housing organizations
• Money owed for some kinds of tax-advantaged retirement plans

Who Can Declare Chapter 7 Bankruptcy?

Whether or not you qualify for Chapter 7 bankruptcy will depend on your income. You determine your eligibility by considering your monthly income relative to the median income within your state. You calculate your monthly income by averaging your earnings in the last six months.

If you’re an individual considering filing, you’ll compare your monthly income to other individuals. But if you have a family, you’ll compare your income to other families of the same size. You qualify for Chapter 7 bankruptcy if your monthly average is equal to or less than the median in your state.

If your average monthly income is more than your state’s median, you’ll need to pass what’s known as a “means test.” This test determines whether you have disposable income at the end of each month to pay off your unsecured debts over five years. Suppose you have enough money left over each month after necessary expenses and debt payments. In that case, the bankruptcy court will recommend that you declare Chapter 13 bankruptcy, which consolidates your debts into a three-to-five-year repayment plan.

There are also other disqualifying factors for Chapter 7 bankruptcy, including:

• You’ve already received a Chapter 7 bankruptcy discharge in the last eight years
• You’ve declared Chapter 13 bankruptcy in the previous six years

What Do You Need to File Chapter 7 Bankruptcy?

The first step you need to take to declare Chapter 7 bankruptcy is to schedule a consultation with an experienced bankruptcy attorney. They will work with you to gather your financial records, including all of your debts, expenses, assets, and income streams. You’ll also need to supply the bankruptcy court with a list of creditors, an income statement, and copies of your tax records.

After gathering all necessary documents, you must undergo an approved credit counseling session within 180 days of filing. You’ll also need to supply the court with a certificate indicating  that you’ve undergone credit counseling.

Finally, you’ll file a petition for Chapter 7 bankruptcy. You’re not required to have legal counsel, but representing yourself through the bankruptcy process can lead to costly, irreversible mistakes. It’s recommended that you hire a Chapter 7 bankruptcy attorney who can represent you and guide you through the process before filing.

What Happens After You File Chapter 7 Bankruptcy?

Filing Chapter 7 bankruptcy provides you with an automatic stay that prohibits creditors from being able to take any action to collect a debt against you, such as repossessions, wage garnishment, and legal action. Additionally, your creditors will not be allowed to contact you.

After you file, the bankruptcy court will appoint a trustee who’s in charge of reviewing your case and for non-protected assets. Your attorney will explain what you are allowed to keep through the Chapter 7 process and what might be at risk. Once again, most of those filing for Chapter 7 bankruptcy do not lose their any of their possessions. Additionally, your bankruptcy trustee will hold what is called a meeting of creditors, and you are required to attend this meeting. Creditors are allowed to attend, but they rarely do.

The Chapter 7 bankruptcy process usually takes three to four months; once you complete the process, you will discharge your qualifying debts.

Filing Bankruptcy Chapter 7 in Indiana? Contact Sawin & Shea Bankruptcy Attorneys

If you plan on filing for Chapter 7 bankruptcy, you need experienced Indiana bankruptcy attorneys who can represent you and ensure you’re on the right track to becoming debt free. For experienced bankruptcy support you can count on, contact the attorneys at Sawin & Shea, LLC at 317-759-1483, or contact us online here for a FREE case consultation.

The post Who Can Declare Chapter 7 Bankruptcy? appeared first on Indianapolis Bankruptcy Attorneys of Sawin & Shea.

Chapter 7 bankruptcy:

In this type of bankruptcy, your non-exempt assets (if any) have been liquidated to pay off a percentage of your debts. You have been through a process to have your debts discharged.

Pros:

• Because you are no longer overwhelmed with creditors and debts, you may be able to save money for secured loans or secured credit cards. (More on both of those below.)
• Because filing for bankruptcy stops ongoing negative reporting for old delinquent debts, it provides you with a starting point so that you can start to reestablish credit.

Con:

• Chapter 7 bankruptcy stays on your credit report for 10 years.

Chapter 13 bankruptcy:

In this type of bankruptcy, you and the bankruptcy trustee make a structured plan to pay off a percentage of your debts over a 3-5 year payment plan under the court’s protection.

Pro:

• Chapter 13 bankruptcy stays on your credit report for a maximum of 7 years, so you have a shorter time to wait before the bankruptcy rolls off your credit.

Con:

• Because you are on a repayment plan, you may need to work with the courts to get permission to borrow additional money while in your active Chapter 13 plan.

Whether you filed for Chapter 7 or Chapter 13 bankruptcy, you will want to raise your credit score to make it easier to secure a loan. (In a Catch-22 irony, securing a loan will help you improve your credit score.)

The components of your FICO credit score and weight of importance:

35%     Payment history

30%     Amounts owed

15%     Length of credit history

10%     Credit mix

10%     New credit

Steps to take to raise credit score after bankruptcy:

1. Get a secured credit card. A secured card is one where you put down a certain amount of money with the bank to guarantee your repayment. For example, you may put down $500. This is your limit. You are no risk to the bank because they already have your money.

Tips:

• Make sure that the credit card reports to the credit reporting agencies. This is the whole point of having it.
• Use the card sparingly, and keep a low balance, as you don’t want to spend your limit or have large purchases affect the “amounts owed” portion of your credit score.
• Pay off the amount due in full each month.

2. Get an unsecured credit card. An unsecured credit card doesn’t require a security deposit for approval.

Tips:

• Beware of fees.
• Read the fine print about APR (annual percentage rates). Some rates are promotional only and increase greatly after a few months.
• Keep a low balance within each month.
• Pay off the amount due in full each month.

How to obtain a personal loan:

1. Get a copy of your credit reports (Equifax, Experian, and TransUnion). You can make a free inquiry here. Make sure that the information is accurate and that all discharged debts are noted as such.
2. Determine your debt to income ratio (DTI). This is your monthly debt payments divided by your gross monthly income. You will need pay stubs, bank statements, and tax returns to prove this to your potential lender.
3. Prequalify through several lenders. This will not harm your credit score.
4. Compare the loan offers by examining such things as the APRs, fees, and loan terms.
5. Make a formal application with the lender you choose. You will need all of the documentation mentioned above.

Tip:

• Credit unions often offer better rates than banks because they are non-profit organizations.

If you are not unable to qualify for an unsecured loan:

• Apply for a secured loan. You will need to use collateral for this, such as money (why would you try to borrow money if you already have money? Because you are trying to build credit) or the title to your car.

Con:

• You could lose your money or car if you default on a payment.
• Apply for a Home Equity Loan or a Home Equity Line of Credit (HELOC). These loans use the difference between your home’s value and your mortgage balance as collateral.

Pro:

• The interest may be lower than on a personal loan because you have collateral (your house).

Con:

• You are putting yourself at risk of losing your home.
• Ask someone with a high credit score to co-sign your loan.

Pro:

• Lenders will be more willing to lend money when they know that the co-signer has good credit. There is not as much of a risk for them.

Cons:

• Your co-signer will be responsible for paying back the loan if you don’t.
• Additionally, if you default, the lender can garnish the wages or sue the co-signer if the debt is not paid back in its entirety immediately.
• Not only could this damage your co-signer’s credit, but it would undoubtedly damage your relationship.

An experienced bankruptcy attorney can work with you to help you maneuver the intricacies of life after bankruptcy.

At Sawin & Shea LLC, we are committed to providing compassionate and non-judgmental representation to all of our clients. Our attorneys have helped thousands of people just like you get the fresh start they deserve. We are here to help.

Speak to an attorney today at (317) 759-1483. Or contact us online.

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