For consumers who are enduring harassing creditor phone calls and who have few options to get them out from under crushing debt, bankruptcy may be their best choice. Congress has enacted laws regulating bankruptcy found in Title 11 of the United States Bankruptcy Code. There are basically two types or chapters of bankruptcy under which consumers can file for relief. A Chapter 7 discharges unsecured debt while allowing you to keep most, if not all, of your assets through available exemptions. A Chapter 13 reorganizes your debts into a reasonable monthly payment plan that ranges from three to five years. If you live in Kentucky, you should be aware of certain details regarding your bankruptcy filing.
Where to File for Bankruptcy in Kentucky
Kentucky has two bankruptcy districts: the Western District and the Eastern District. You can only file in the district in which you live. The state offers Western District and Eastern District web sites to help you to determine which serves your area.
Can Anyone File a Chapter 7 Bankruptcy?
Not everyone is eligible to file for Chapter 7. As in every state, your income must be less than Kentucky's median income. Otherwise, you have to meet a stringent means test before you can file, or you can elect to file for Chapter 13 protection instead.
The Duration of Chapter 13 Repayment Plans
If your average monthly income is less than Kentucky's median income, your Chapter 13 plan can only be 36 months. Exceptions exist if you can show the court good cause to extend the plan's duration. If your average monthly income is greater than or equal to Kentucky's median income, your Chapter 13 Plan generally will be 60 months long.
What Property Can I Keep?
You're entitled to keep certain property when filing for bankruptcy. Exactly what you can retain depends on what exemptions are available to you. Exemptions allow you to protect property from the claims of creditors under Kentucky law. Kentucky allows you to choose between federal or state exemptions, but you can't combine them. If you use the Kentucky exemptions, you can also use any applicable amounts in the federal non-bankruptcy exemptions.
Both state and federal exemptions include the following:
- Homestead equity
- Household furniture, clothing and jewelry
- Engagement and wedding rings
- One vehicle
- Burial plot
- Tools of the trade
- Tax exempt retirement accounts
- Unemployment, workers' compensation and welfare benefits
- Life insurance proceeds
- The greater of 75 percent of disposable earnings or 30 times the federal minimum weekly wage
- Wildcard for any other property, subject to limits
There are different values for state and federal exemptions. Kentucky has a homestead exemption of only $5,000, but the federal homestead exemption is $21,625 and it doubles for married joint filers. Kentucky's motor vehicle exemption is $2,500, compared to the federal exemption of $3,500. Other exemptions vary as well.
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This article provides a brief, general introduction to bankruptcy. For more detailed, specific information, please contact a Kentucky bankruptcy lawyer.
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