Can I Keep My House and Car If I File Chapter 7 Bankruptcy in Indiana?

Filing for Chapter 7 Bankruptcy in Indianapolis, IN, raises one of the most common questions people have: will they lose their home and car? This post explains how Indiana's exemption laws work, what dollar amounts may protect your property, and what to expect at key points in the process.

How Indiana Exemptions Work in Chapter 7 Bankruptcy

Indiana exemptions determine what property you may keep when you file for bankruptcy. Indiana is an opt-out state, meaning under Indiana Code 34-55-10-2 you must use Indiana's exemptions and cannot choose the federal exemption list.

Equity is the key concept. Equity is the difference between what your property is worth and what you still owe on it. In Chapter 7 bankruptcy, property not covered by an exemption can be sold by the bankruptcy trustee for the benefit of your creditors. Keeping your equity within exemption limits is how most Indianapolis filers hold onto their home and vehicle.

Can You Keep Your House When Filing Chapter 7 Bankruptcy in Indianapolis?

Indiana's homestead exemption under Indiana Code 34-55-10-2(c)(1) protects up to $22,750 of equity in real or personal property you use as a residence. A married couple filing jointly can double this to $45,500.

Here is a practical example. Suppose your Indianapolis home is worth $180,000 and you owe $162,000 on your mortgage. Your equity is $18,000. Because that falls below the $22,750 limit, the trustee generally cannot sell your home. However, if your equity were $35,000 and you file alone, the amount above $22,750 could be at risk.

A few additional points to keep in mind:

▸ The homestead exemption only covers your primary residence, not investment or rental properties.

▸ Amounts double for spouses who co-own and file jointly.

▸ You must continue making mortgage payments. Filing stops foreclosure temporarily through the automatic stay, but your lender's lien remains in place.

What About Your Car?

Indiana has no separate motor-vehicle exemption. A car is protected through the tangible personal-property allowance under Indiana Code 34-55-10-2(c)(2), which exempts up to $12,100 of equity in tangible property that is not your residence.

Most Indiana residents with auto loans have minimal equity after subtracting the loan balance and can keep their vehicles by continuing to make payments through a reaffirmation agreement, which is a new promise to your lender that keeps you personally responsible for the debt in exchange for keeping the car.

Consider this scenario: your car is worth $8,500 and you owe $5,000. Your equity is $3,500, well within the $12,100 limit, so your vehicle is likely protected. If you own your car outright and it is worth $14,000, however, equity above $12,100 could be exposed.

If your vehicle equity exceeds the wildcard limit, you might explore filing Chapter 13 to protect any extra equity. Learn more on the Chapter 13 bankruptcy page.

What Happens at the 341 Meeting of Creditors?

About a month after filing, you will attend the 341 Meeting convened by the bankruptcy trustee assigned to your case. You will answer questions under oath about your bankruptcy paperwork to confirm its accuracy. Creditors can attend but often do not. The meeting typically lasts about five minutes.

For Indianapolis filers, the meeting is held in the Southern District of Indiana. Bring identification, proof of your Social Security number, recent account statements, and your latest tax return.

FAQ: What Assets Can I Keep If I File Chapter 7 Bankruptcy in Indiana?

Indiana exemptions may protect your home (up to $22,750 in equity), vehicle equity and other personal property (up to $12,100 via the wildcard exemption), retirement accounts, and household goods. The exact protection depends on your equity and filing situation. Visit our page on what assets you can keep for more detail.

FAQ: What If My Equity Exceeds Indiana's Exemption Limits?

If your home or vehicle equity exceeds exemption amounts, the trustee may sell the property to pay creditors. Chapter 13 bankruptcy may be a better fit, since it allows you to repay creditors over time while keeping your assets.

FAQ: Do I Have to Keep Paying My Mortgage and Car Loan After Filing?

Yes. Exemptions protect your equity, not your loan obligation. To keep your home or car, you generally need to continue making payments and, for a vehicle, sign a reaffirmation agreement. Filing stops collection actions temporarily but does not eliminate secured debts.

Talk to an Indianapolis Bankruptcy Attorney Before You File

Understanding Indiana's exemptions before you file Chapter 7 Bankruptcy in Indianapolis, IN, can make a significant difference in what you are able to keep. Equity amounts, asset values, and filing status all affect the outcome.

McManus and Associates serving Indianapolis, IN, offers free consultations to help you review your assets, understand which exemptions apply, and decide whether Chapter 7 or another path makes the most sense for your goals. Call 317-841-0315 to schedule your free consultation, or contact the firm online. You can also find McManus and Associates on Google Maps to read client reviews and get directions.