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Bankruptcy Exemptions Now Too Low For Indiana

Bankruptcy Exemptions Indiana

Indiana bankruptcy exemptions are quite low compared to other states. The recent housing value boom has left the residence exemption for bankruptcy in Indiana more lacking than ever. Indiana, like a minority of other states, has a very limited residence protection amount in bankruptcy. Coming in at a meager $19,300 per bankruptcy filer, this amount of equity protection that is allowed during Chapter 7 is making bankruptcy relief hard or out of reach for certain segments of Indiana’s public. It is even causing some bankruptcy filers who only purchased their home a few years ago to now to have too much equity in their homes for that purpose.

How Does Indiana’s Bankruptcy Exemption Work?

In Indiana, you are allowed to keep up to $19,300 worth of the house for your residence when you file for bankruptcy. This amount also doubles to $38,600 if you have a married couple filing who are both on the deed of their residential home. Outside of mobile homes, there are virtually no homes in Indiana that fit into the $19,300 protection when they are paid in full. Therefore, it usually plays out that you must have approximately $19,300 (or less) of equity in your home (due to a large mortgage being on your property) if you want to keep your residence. It does not matter if your residence has been paid off for 20 years or even generationally as your family home. You will lose your house most likely if you need bankruptcy relief if the value significantly exceeds this $19,300 amount in the State of Indiana.

How Does Indiana’s Residence Exemption Stack up Against Neighbor States?

It does not stack up very well. For instance, the State of Ohio has a residence exemption of $145,425. This is 7.5 times larger than Indiana’s exemption. Ohio’s exemption also can actually protect the full value of a modest residence, which is a near impossibility in Indiana. Michigan’s exemption is $38,225 per bankruptcy filer. In Michigan, this amount also increases after you reach the age of 65 or if you become disabled. The increased exemption for Michigan is $57,350 per filer. Flordia and Texas homestead exemptions are very large with Texas being unlimited in value and Flordia reaching the millions.

On the lesser ends, the Federal Exemption for residence (which is available in many states, but not Indiana) is still also larger than Indiana at $25,150. Indiana’s neighbors Kentucky and Illinois have some of the most dismal and low residence exemptions in the entire nation, coming in at only $5,000 for Kentucky and $15,000 for Illinois. However, it is important to point out that federal bankruptcy exemptions are allowed to be taken in Kentucky, effectively raising their $5,000 to $25,150 per person for any person who opts for such protection. Essentially, Indiana stacks up very poorly compared to the national average for residence protection. It also stacks up very poorly to that of Indiana’s immediate neighbors except for Illinois as the only exception.

Why Does This Matter?

Central Indiana has been reported as one of the fastest real estate value growth areas in the nation. Coupling this fact with very restrictive residence exemptions, many home values are increasing too quickly to be clearly protected during bankruptcy filings. Even some mortgage holders who put little or no money down are finding this problem only a few years after their home purchase. These elevated values may only be temporary, but it is currently it could effect the bankruptcy analysis and which Bankruptcy Chapter Indiana residents choose to file under.

A greater wrong hood, however, is more simple and obvious: no person’s paid-in-full home is ever truly “safe” in Indiana. The state legislature must believe that it is okay for a person’s paid-in-full residence to be “up for grabs” in Indiana at all times by creditors. It does not matter if you incurred unexpected hardship or medical debts. It does not matter if your home has been paid-in-full in your family for generations. You will lose your paid-in-full residence if you manage to incur too much debt in Indiana. The circumstances do not matter. It’s currently Indiana law.

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How Long Can I Stay in My House if I Stop Paying?

Mortgage Foreclosure

How long can you usually stay in your house if you stop paying your mortgage? This most simple answer is 8 to 10 months. You can usually stay in your house for 8 to 10 months for free after you stop paying on the mortgage. Sometimes this amount of time can even be longer, ranging up to 2 to 3 years.

The Mortgage Foreclosure Action Will Come

After about 3 to 5 months, you will usually receive a lawsuit at your residence called a Mortgage Foreclosure action. This Mortgage Foreclosure lawsuit will be asking your state court to start the legal process of taking your home back. You will receive the mortgage foreclosure complaint and summons. The instructions will usually explain that you will have about 20-30 days to make an “answer” with the court. You may also have the opportunity to ask for a settlement conference.

If you plan to keep your house or want to defend against the foreclosure, this is probably a good time to hire a local attorney. The attorney can help you answer the lawsuit and start settlement negotiations. Try to find an attorney that will work for a flat, upfront fee for the entire foreclosure defense. Getting an attorney can also add significantly to the amount of time you can stay in the house even if you are eventually unable to work out a deal. Remember, you can also file bankruptcy many times to either stop or slow down foreclosure proceedings and possibly save your house.

Stay in the House and Keep it Secure Until Sheriff Sale

If you stop paying on your house, you can many times stay there for a very long time for free. However, it is very important to keep living in the house and keep it secure. The mortgage company greatly prefers that you stay in the house and keep it secure. Stay there right up to the time that you let it go back to the lender or someone else during the sheriff sale.

The sheriff sale date will be set after the full mortgage foreclosure process is complete. Most states usually require that the creditor goes to the full judgment stage until they are even allowed to go back to the court to ask for a sheriff sale date. After the mortgage company asks for a sheriff sale, the date will usually be set out about 45-60 days giving you notice. You will need to be out of the house the day of the sheriff sale. Therefore, it would be wise to complete your moving the day before if possible.

Remember, although you were able to live in the home for “free” until sheriff sale, eventually the mortgage lender can come back and collect against you. If there was a deficiency on the mortgage after the sale, you would be liable for it in the future. The mortgage company could come back after you for the balance. Therefore, it may be wise to consider Chapter 7 or a settlement option after the mortgage foreclosure has come to completion.

Chapter 13 Cannot Modify Mortgages

Chapter 13 Cannot Modify Mortgages

Chapter 13 cases are very powerful at stopping foreclosure or forcing payments. Yet, Chapter 13 bankruptcy cases cannot modify mortgages. It has been proposed many times in Congress or in legal circles that Chapter 13’s should be able to alter mortgage terms. No changes to the bankruptcy code have been made for this purpose. Explaining what Chapter 13’s can and cannot do with mortgages will help clarify what is actually available in a Chapter 13 case.

What Chapter 13’s CAN Do with Mortgages

Chapter 13’s are powerful because they can always stop foreclosure and even sheriff sales. If you are filing your first Chapter 13 case, you can almost always stop your foreclosure or sheriff sale. This is almost a “given.” It is a near 100%, “bullet-proof” way of stopping the foreclosure process.

Chapter 13 also provides a built-in mechanism for curing arrears (behind amounts that you owe to the mortgage). Chapter 13 also forces the mortgage company to take ongoing payments usually through paying these amounts to the Chapter 13 trustee. This is a wonderful system because it works every time. It also is very predictable because the same thing happens every time.

What Chapter 13’s CANNOT Do with Mortgages

Chapter 13’s cannot “modify” mortgages generally in any way. This means that the terms, the monthly payment, and any amount behind are generally non-negotiable and non-alterable in Chapter 13. Because there are no provisions in the bankruptcy code (and case law) for forcefully modifying a mortgage through bankruptcy, the mortgage company generally expects everything to stay exactly the same. The mortgage company expects to receive full payment for their arrears amount and any monthly ongoing payment. This expectation is so strong and well known that it is virtually impossible for anything else to happen through a Chapter 13 plan even if the creditor is willing to agree otherwise.

Therefore, even though Chapter 13 is very powerful, sometimes getting a loan modification can be a more affordable option if it becomes available. Some mortgage holders will file a Chapter 13 case to stop a sheriff sale or foreclosure only to later negotiate a loan modification. By paying the mortgage for 6-18 months through the Chapter 13 plan, it can prove that debtor can afford loan modification payments. It may actually be in the mortgage holder and the debtor’s best interest to make a loan modification agreement. Eventually, Chapter 13 can even be dismissed in such cases. Sometimes a loan modification can be a much more stable, long-term solution than the Chapter 13 case. This is especially true if the Chapter 13 payment is excessively high due to the amount of the arrears or current monthly required mortgage payment.

Because Chapter 13’s cannot modify mortgages, many battles never occur in the Chapter 13 case. If the loans could be modified, it would be normal to expect opposition and heavy negotiation in bankruptcy. Not having to deal with these battles does have an advantage. It makes Chapter 13 very predictable and reliable. The powers of Chapter 13 are then loaded and ready to save any mortgage situation.

More on Chapter 13 Bankruptcy

Local Farmers at Risk Through Tariffs

Farmers Tariffs - Bankruptcy

Indianapolis Bankruptcy News

Farming in central Indiana has already gone through difficult times. Many farmers have faced growing balances on operating lines of credit. Farmers near Indianapolis also always face the inherent instability of farm product markets. This particular problem, poor market prices, is being intensified by trade war tariffs.

Local Soy Bean Farms Hit Hard

One of the worst hit products is soybeans, which are now at a 10-year low. Many farmers refused to sell at these lower prices last year, hoping to ride out the market storm. However, farmers can only store soybeans for a limited period of time. They can also only store their full crop if they have the facilities for it. They will be forced to sell soon, regardless of market pricing.

Although there are numerous uses for soybeans, the market is being stunted by the retraction of the Chinese export market. The U.S. market still demands high amounts of soybean products, but the Chinese retraction as created a serious over-supply problem. Farmers may be forced to alter their operations in response to this demand change. To make matters worse, fears are growing that the Chinese market could eventually be fed by foreign markets instead of the U.S. market, permanently replacing this demand sector.

Other Farm Producers Also Hit Hard

Although the soybean market is a good example, other farm markets in Indiana are also being hit. With many farms operating on tight margins and operating loans, the smallest fluctuation in market prices can hit hard. To make matters worse, many of these market fluctuations are unprecedented in recent times. Many farm operations could face insolvency and bankruptcy. A trend towards more farm bankruptcy filings may be lurking right around the corner. Operations that were barely paying the bills may not be operating in the next 2-3 years.

Trade Negotiation Needed Soon

Although many farmers are not against these tariffs in principle, most farmers agree that major trade negotiations should be completed as soon as possible. Even beyond the farming sector, many other sectors of the economy are getting hard by the tariffs including tech industries, automobile markets, and steel. Although many favor trade negotiation, most people want to get these new agreements in place as soon as possible so that tariffs can stop across the board.

More Indianapolis Bankruptcy News

Student Loan Crisis Looms – Are Current Solutions Constitutional?

Student Loan Crisis

As the student loan crisis looms, many proposals to this crisis are being presented in anticipation of the next presidential election. Various presidential candidates are presenting their own solutions. Questions come quickly into play – such as are these solutions constitutional? Is bankruptcy or something else the best solution?

Elizabeth Warren’s Student Loan Solution

Elizabeth Warren, a former law professor and current Democratic candidate for president, has proposed canceling $50,000 in student loan debt for individuals whose household income is below $100,000. This process would be automatic and apply to both private and government-backed student loan debt. This could effectively cause the forgiveness of up to 75% of those currently holding student loan debt in the United States. The process will happen directly with current credit information and former tax returns.

Although this proposal appears to be very powerful and desirable to many Americans, it appears to be blatantly unconstitutional. Without full government compensation (which would be devastating to the Treasury and tax burden), this proposal would directly violate the contracts clause and takings clause of the Constitution. To make matters worse, this proposal would relate the debt-forgiveness to income. The people paying the most taxes would likely receive the least benefit from the forgiveness program. They would also possibly be required to “pay the bill” dependent upon the method in which the loans are “forgiven.” Interestingly, many other programs proposed also follow Warren’s lead, making them income driven and a full, forced forgiveness.

Obvious and Simple: Bankruptcy is Constitutional

There is an obvious long-term solution to the student loan crisis. This obvious solution is to allow student loans to once again be fully dischargeable in bankruptcy. This would return to the root of the problem and fix it at its source. The entire student loan problem originated with “student loans” being put into a separate class in the first place.

Student loans are not the usual loan situation: they are heavily protected and easy to generate. What other unsecured loans can you generate in large amounts right when you reach the age of 18 for college? Student loans have turned education into big business. They have breached the sacred nature of education and turned everything into a big-business type model. The schools, even the best of them, have become predatory by aggressively seeking to fill up their rosters at the highest cost possible. All of the schools have systems for easily coupling each student with future, burdensome student loans

This can be seen the clearest by examining the recent wave of “for-profit” schools that have recently been shut down. These schools were enrolling the least qualified of students for meaningless educational programs. The predatory nature of these schools was obvious. They had entire classes of students burdened with high student loan debts with virtually no value received for their “educational” program. The one thing most of these schools had in common was an eager and convincing enrollment officer. Everything was set up for the young student to sign easily on all lines necessary for a student loan to pay for the school’s programs. Are the rest of the public and private schools honestly much different?

Student loan debts should have never been made non-dischargeable in bankruptcy. Returning student loans to a “dischargeable” status in bankruptcy would be the great equalizer. Over time, student loans would no longer retain a special, “god-like” status to oppress young people eager for higher education. Student loan decisions would be made like all other loan decisions: they would be based on the likelihood of the person actually to pay the loan back. Education would no longer be big-business funded by never-ending supplies of debt-based “funny-money.” Education instead would be about actually educating those who are best qualified and dedicated to receiving advanced education or training. The College and University system was just fine before student loans were made non-dischargeable. It will adapt to find the same balance after student loans are dischargeable in bankruptcy once again.

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