Bankruptcy Exemptions in Kentucky
One of the reasons many people avoid bankruptcy is that they fear possible social stigma. Their conception is based on rumors and television portrayals, and, as a result, many individuals that could effectively use bankruptcy as a fresh start do not, instead suffering unnecessary consequences for financial issues that may not be their fault. And while the public perception of bankruptcy is one thing, the reality can sometimes be quite another. One misconception is that during a bankruptcy, no matter the type, all your property is turned over in order to help pay for outstanding debts. This is simply not true. There are bankruptcy exemptions on both the federal and state levels that allow you to keep many of the things most important to you. An experienced and effective bankruptcy attorney can help you take advantage of these exemptions.
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If you are in dire financial straits and are considering a bankruptcy for either you or your business, contact Bunch & Brock, Attorneys at Law, and let us help. Bunch & Brock of Lexington has more than 35 years’ experience in handling bankruptcies, both big and small, and we are eager to use our experience to help you. We’re proud serve our community’s legal needs, from large corporations to individuals. We will listen to your concerns and evaluate your situation to help you find the best solution for your family or your business. We have the knowledge, experience and resources to help you use bankruptcy to your best advantage. For answers to your questions or to set up an appointment, contact us online or call us today at 859.254.5522.
Most Common Types of Kentucky Bankruptcy
In Kentucky, two main types of bankruptcy are employed. Each is for different situations and services different financial needs; they both allow exemptions but in general the federal exemptions are more generous.
Chapter 7: In Chapter 7 bankruptcy, many of the assets are liquidated and sold at auction in order to pay off as many outstanding debts as possible. However, some personal and professional items may be exempted, meaning the court or creditors may not take them.
Chapter 13: Chapter 13 bankruptcy is essentially a restructuring of debt, often times negotiating for easier payments and, if a business, giving time to implement a different business plan. Exemptions for Chapter 13 often allow repayment options to go even lower.
Types of Exemptions
There are two basic types of exemptions: federal and state. Federal exemptions are put in place by the federal government, and are applicable in every state. State exemptions are enacted by the states themselves and apply only to the specific state for which they are created. Each state also has specific rules about which exemptions may be employed, whether federal, state, or both. In Kentucky, an individual applying for bankruptcy may choose to use federal or state exemptions, but not both. Some general rules apply to most exemptions. While the goal of the courts isn’t to take everything you own, you likely will have to forfeit some non-exempt property.
Luxury Items – These items include property and materials often considered superfluous and unnecessary by the court. Examples include vacation homes, expensive vehicles, yachts and other non-essential items where there is sizeable non-exempt equity.
Jewelry – Exemptions are generally reasonable in this category. For example, wedding rings, up to a specific price, depending on state or federal law, are mostly exempt. However, high-priced jewelry is very rarely protected.
Animals– The state and federal governments, as a general rule, have no interest in collecting your pets. The exception, of course, are high-value animals, including horses set out to stud and other animals used for profit.
Examples of Kentucky Exemptions
The state of Kentucky has specific laws in place to protect specific items during bankruptcy and specifically allow individuals to employ federal exemptions. Some of these include:
Under Title 11 of the United States Code, Section 522(d), a debtor may keep:
- No more than $12,250 in household goods and items, versus $3,000 under Kentucky exemption laws of KRS 427.010(1)
- No more than $2,300 in value of professional books or tools of the trade, versus $3,000 of farming livestock, tools or equipment under Kentucky exemption laws
- No more than $3,675 of equity in one motor vehicle, versus $2,500 of equity under Kentucky law
- All health aids professionally prescribed for the individual or their dependents.
- A “wildcard” exemption of $1,225 plus $11,500 of unused exemption from your homestead exemption for a total of $12,725, versus $1,000 under Kentucky’s wildcard exemption.
- A homestead exemption of $22,975 of equity in your primary residence, versus $5,000 under Kentucky law KRS 427.060
Bunch & Brock has been serving our community and the entire state of Kentucky from offices in Lexington for more than 35 years. We don’t just serve the community – we are members of it, and we look forward to helping our neighbors when they need us. If you have legal questions regarding bankruptcy or would like to set up an appointment, contact us online or call us at 859.254.5522.