Can a Creditor Take My Property?
If a creditor has a judgment against you, the creditor may try to enforce the judgment by taking your property. This section only involves enforcement of court judgments for money. Note that this section does not involve:
- Foreclosures of mortgages on real estate.
- Repossession of property according to a sales contract or loan.
- Seizure of bank accounts.
- Mechanics liens or similar liens.
- Wage garnishments.
- Judgments for child support.
- Tax proceedings.
So the creditor has a judgment against me. Does that mean it can take my property?
Maybe, but this really does not happen very often. However, it is still important to know your rights.
Does a court judgment mean the creditor has a lien on my property?
In Indiana, court judgments automatically become liens on real estate.
Does that mean the creditor can foreclose on my property?
Not necessarily. The creditor can file a “judicial foreclosure,” seeking possession of your property much the same as if it had a mortgage – but you have rights to exemption of your property.
What are exemptions, exactly?
An exemption is property that the law protects from seizure to enforce a court judgment. If your property is exempt, then the creditor cannot take it.
What are the exemptions on real estate?
If the real estate is your residence (house or mobile home), your exemption is $15,000 per owner. So a married couple can exempt up to $30,000 in the residence. To calculate the exemption, take the market value of the property, and subtract the mortgage(s) or any other liens. Two examples for an individual homeowner:
- Value is $50,000, mortgage is $45,000. Since the net equity (value minus mortgage) is $5,000, or less than the exemption of $30,000 (for a married couple), the property is exempt from the judgment. The creditor cannot take this property.
- Value is $50,000, mortgage is $10,000. Since the net equity is $40,000, the exemption is $30,000 (for a married couple), and the creditor has an enforceable lien against the difference ($40,000 minus $30,000, or $10,000). The creditor could try to get $10,000 from your property.
NOTE: If a married couple owns land jointly, all of the property (regardless of value) is exempt against debts owed by either husband or wife. (This protection does not apply to debts owed jointly by both husband and wife). If you are in this situation, you should talk to an attorney.
What about non-residential real estate or mobile homes?
Indiana’s residential exemption applies to any kind of residence. A mobile home is given the same exemption as residential real estate, $15,000 per person. If you own land but don’t live on it, however, the only exemption you’re allowed is the “personal property” exemption. (See information about this below).
What happens if I want to sell or refinance the property?
The judgment creditor’s lien may be satisfied out of the proceeds of refinance or sale. Sometimes this can be negotiated or dealt with through legal proceedings –you may wish to seek legal advice first.
What about personal property?
Personal property such as household goods, appliances, automobiles and clothing, along with non-residential real estate, is exempt up to $8,000 per person. As with real estate, you first subtract the value of any liens. For example, if you have a car worth $5,000, and you owe the finance company $3,000, your value is $2,000.
Note: $8,000 is the total exemption you’re allowed for all such property – you don’t get $8,000 per personal property item.
Are there special exemptions?
Yes, for certain kinds of property. These include:
- $300 for bank accounts, CD’s, stock, bonds, and similar property.
- Professionally prescribed health aids, regardless of value.
- Most or all retirement or life insurance – seek the advice of an attorney.
- Earned income credit refunds (IRS Code §32) received, or to be received.
- Money in certain educational funds.
What should you do to prevent seizure of your property?
You should make a list of all property you own and its market value. For personal belongings such as clothing, furniture, appliances or other household goods, use the value you might reasonably get for the property at a yard sale. Use the “book value” for your property (available at banks, the library, or online). For your home, you can use appraisals – but be wary of appraisals done for refinancing, which tend to run high.
The list needs to be filed with the court, and served upon the Sheriff and the attorney representing the creditor. If you don’t do this, you may lose your rights to claim exemptions. You should seek legal advice if you are concerned with losing your property.
Last revised: 7-2005
LSC Code: 1020500
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