Bankruptcy is a federal court process. As a bankruptcy attorney in Indiana, I explain to people that the whole idea behind the process is to help consumers and businesses eliminate their debts or gain time to repay them. As part of a bankruptcy proceeding, one of the major misconceptions is that your property will be sold to pay down your unsecured debts. (Unsecured debts are debts for which no collateral has been pledged; a car loan or a home loan is a secured debt because it has property backing up the loan.) However, this is not true in most cases. Under bankruptcy law and specifically Indiana law, there are certain kinds of property that are exempt from being taken or sold.
There is more than one kind of individual bankruptcy and several kinds of small business bankruptcy. The differences between the various types of bankruptcy filings relate to who qualifies to file each kind of case and who doesn’t, and then with which property may be sold to pay off debt, and which property is exempt.
People who need debt help come to see me with all kinds of questions – plus all kinds of misinformation and all flavors of fear. One very reassuring thing I can tell everybody is that it’s rare for an individual to lose possessions in a bankruptcy proceeding.
The good thing is that, if you are honest with your attorney, her or she should be able to tell you, before you ever file, exactly what possessions can be taken from you. In any event, an individual will not lose lose those possessions that are important to him. Those might include his clothes, a car to get around in, and furniture to sit on and sleep on!