Indiana home values are surging even at higher amounts generally than the rest of the nation. These home values increasing usually do not slow down the volume of Indiana bankruptcies filed. In fact, sometimes the increase in value can cause more bankruptcy. With Indiana home values on the rise, Hoosiers will also be faced with unique situations when they file for bankruptcy.
With more bankruptcy cases on the rise, defaults on mortgage payments will also start to occur. More and more Indiana residents will face mortgage foreclosure. This also creates a “domino” effect that will lead to even more bankruptcy filings.
Even more concerning is the fact that many Indiana home values will not be “safe” in Chapter 7 bankruptcy because of their elevated status. Homes that were bought only 4-5 years ago will frequently now have $50,000 or even $100,000 more sale value. In Indiana, the exemption (protection) in Chapter 7 for residence equity is only $19,300 per person. This could be wholly inadequate to protect Indiana residents that are now facing a higher home value. They could be forced into a Chapter 13 repayment plan or to settle with the Chapter 7 trustee in order to keep their house.
The worst aspect of rising Indiana home values is the fear that eventually a market correction or crash could be coming. In 2008, the real estate crash caused record new numbers for bankruptcy under the new 2005 Bankruptcy Code. It is very possible that a major mortgage default and market crash could eventually happen again. This can be a worse-case Indiana-bankruptcy scenario. If this happens, many people could also ultimately lose their jobs as the entire economy suffers. Rising home values can be a blessing that can quickly change into a curse. It can be a great way to gain equity and savings, but can also cause crashes if the market elevates too quickly.