If you’re in a financial bind, your best option might be to seek a fresh start through Chapter 7 bankruptcy. However, you may be concerned that doing so could cause you to lose your biggest investment – your home. In most cases, you don’t forfeit your home when you file for Chapter 7 bankruptcy. 

What is Chapter 7 Bankruptcy?

Filing for Chapter 7 bankruptcy, also called liquidation bankruptcy, allows you to discharge all or most of your debt. However, a court-appointed trustee can sell any nonexempt property. Upon filing a Chapter 7, you receive automatic court-oredered protection from creditors and aren’t subject to lawsuits, repossessions, or wage garnishments. 

Some of the most common reasons that people file for Chapter 7 bankruptcy include debt collection lawsuits, sudden loss of income, medical bills, overwhelming credit card debt, and separation or divorce. 

From July 2020 to June 2021, there were 15,719 bankruptcies filed in Indiana. In the United States, Chapter 7 bankruptcy is the most common type of bankruptcy filed.

Can I Keep My Home?

The answer to that question depends on how much equity you have in the real estate. It is important to have a good valuation of the property and a solid number for what you owe against the house. People with real estate can keep their home when they file for Chapter 7 bankruptcy as long as their equity does not exceed Indiana’s Homestead Exemption. The Homestead Exemption is the amount of equity in your home that the state of Indiana will allow you to keep before a bankruptcy trustee can seize it. If the equity in your home doesn’t exceed the limits, you can keep it. 

Under Indiana’s Homestead Exemption, you can keep up to $22,750 in equity in your home if you’re single and up to $45,500 if you’re married. There is a special unlimited exemption available for married couples holding real estate as tenants by the entirety as long as there is no joint unsecured debt. 

It is possible to lose your home during Chapter 7 bankruptcy if the equity in your home is more than the exemption amount. This is how you can figure that out:  

• Figure out the fair market value of your home
• Subtract the homestead exemption
• Subtract the amount you owe on the mortgage
• Subtract any additional property liens

If the resulting number is negative, your home is protected from the bankruptcy trustee. 

Can I Keep My Car When I File for Chapter 7? 

There is no specific exemption for vehicles in the state of Indiana, but you can use the personal property exemption, which allows you to protect up to $12,100 worth of personal property if you’re single or up to $24,200 if you file jointly.  

Will I Lose My Furniture in Chapter 7?

There is a way to hold onto personal property, such as furniture or a recreational vehicle, by using available amounts of the personal property exemption.

What if I Have More Property Than You Can Exempt in a Chapter 7?

If you have nonexempt property that you do not want to lose through the Chapter 7 liquidation process, then a Chapter 13 bankruptcy may be in order. In Chapter 13 you enter into a reorganization plan that forces your creditors to take what the law says you can afford, or what you have to pay them. Creditors must receive what they would have received had you gone into a Chapter 7 liquidation. The obvious difference here is that you do not have nonexempt property taken and sold. You “buy back” your nonexempt equity over the 3 to 5 year reorganization plan.

Compassionate Chapter 7 Bankruptcy Representation

At Sawin & Shea, LLC, we understand that filing for Chapter 7 bankruptcy is intimidating. With over 75 years of bankruptcy service experience, we can help you and your family get the fresh start you deserve. If you are wondering when filing for bankruptcy what can you keep or have any other questions, we have the answers. We are committed to providing compassionate and non-judgmental representation to all of our clients. Our attorneys know exactly what is a discharged bankruptcy and have helped thousands of people just like you. We are here to help.

Speak to a bankruptcy attorney today at (317) 759-1483 or contact us online.