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Most of what keeps people from getting debt relief is not the law. It is what they have heard about the law from a relative, a co-worker, or a website written a decade ago. Bunch & Brock’s Lexington bankruptcy attorneys have represented individuals and businesses in the U.S. Bankruptcy Courts for the Eastern and Western Districts of Kentucky since 1976. Here is what is actually true. Call (859) 254-5522.
Bankruptcy is not right for everyone, and we tell clients so when it is not. But the decision should rest on the current Bankruptcy Code and Kentucky law, not on myths. Dollar figures below are the federal amounts in effect for cases filed from April 1, 2025 through March 31, 2028; they adjust every three years.
Myth: I’ll lose my house if I file Chapter 7.
Most Kentucky homeowners who file Chapter 7 keep their homes. What matters is equity — your home’s value minus what you owe — and whether that equity is protected by an exemption. Kentucky lets debtors choose the federal exemptions, and most Kentucky filers do because they are far more generous than the state’s own. The federal homestead exemption protects $31,575 of equity per filer, or $63,150 for a married couple filing jointly who own the home together. If your equity is within that amount and you keep making your mortgage payments, the trustee has no reason to sell the house.
If your equity exceeds the exemption, or you are behind on the mortgage, Chapter 13 lets you keep the home and catch up the arrears over three to five years while the automatic stay stops foreclosure.
Myth: I’ll lose my car.
The federal exemption protects $5,025 of equity in one vehicle per filer. Most financed cars have little or no equity, so most filers keep them by continuing the payments — typically through a reaffirmation agreement in Chapter 7 or through the plan in Chapter 13. A car with more equity than the exemption can often be protected with the federal “wildcard,” which adds $1,675 plus up to $15,800 of any unused homestead exemption to any property you choose. If your car has been repossessed but not yet sold, a Chapter 13 filing can usually get it back.
Myth: I’ll lose my retirement savings.
Almost never. Tax-qualified retirement accounts — 401(k)s, 403(b)s, pensions, and similar plans — are protected without a dollar limit. Traditional and Roth IRAs are protected up to $1,711,975 per person. Retirement money is often the single largest asset a filer owns and the one least at risk; the mistake we see is people cashing out a 401(k) to pay unsecured debt before they call a lawyer, converting a protected asset into money that is gone.
Myth: Bankruptcy ruins your credit forever.
A Chapter 7 case stays on your credit report for up to ten years and a Chapter 13 for seven, but the effect fades quickly, and most people’s credit was already damaged by the debt that led them to file. Because bankruptcy eliminates or restructures that debt, many filers are offered secured credit cards within months of discharge, and consistent on-time payments rebuild a score faster than most expect. Lenders look at your ability to pay going forward, and a discharged debtor has more of it than a person carrying the same balances.
Myth: I’ll never be able to buy a house again.
Mortgage lenders have published waiting periods after bankruptcy, and they are shorter than most people assume. Generally, FHA loans are available two years after a Chapter 7 discharge, or during a Chapter 13 after twelve months of on-time plan payments with court permission; conventional loans generally require four years after Chapter 7 and two years after a Chapter 13 discharge; VA loans generally require two years. Lender guidelines change, so treat these as a starting point, not a promise.
Myth: My spouse has to file too.
No. A married person may file alone. Whether a joint filing is better depends on whose name the debts are in, whether property is jointly owned, and the exemption math — a joint case doubles the federal exemptions on jointly owned property. We work through that comparison at the first meeting.
Myth: Bankruptcy wipes out every debt.
Chapter 7 discharges most unsecured debt — credit cards, medical bills, personal loans, deficiencies after repossession or foreclosure. Some debts survive:
- child support and spousal maintenance;
- most recent income taxes (older income taxes can be discharged when specific timing rules are met — this is worth asking about rather than assuming);
- student loans, unless you prove undue hardship in a separate proceeding;
- criminal fines, penalties, and restitution;
- debts for personal injury or death caused by drunk driving;
- debts incurred by fraud, and debts for willful and malicious injury, if the creditor objects and proves it;
- loans from your own 401(k), which are not treated as debts at all.
A debt you leave off your schedules may or may not be discharged depending on the circumstances; the answer is to list every creditor.
Myth: You have to be behind on your payments to file.
There is no such requirement. Many filers are current on everything and are simply unable to keep it up. Filing before the defaults start avoids the lawsuits, garnishments, and repossessions that make everything harder, and it is often the better time to file.
Myth: I should max out my credit cards first.
Do not. Charges for luxury goods or services and cash advances taken shortly before filing are presumed nondischargeable above set thresholds, any creditor can object to a debt run up on the eve of bankruptcy, and deliberately incurring debt you do not intend to repay is bankruptcy fraud — a federal crime. A pre-filing spending spree is the fastest way to turn a routine case into a contested one.
Myth: I make too much money to file.
Chapter 7 requires passing the means test if your household income exceeds the Kentucky median for a household of your size. The test is not simply income; it deducts allowed living expenses, secured debt payments, and other items, and many above-median filers qualify. Those who do not can still file Chapter 13 and pay what the formula says they can afford over three to five years — which is often far less than what they owe.
Myth: I can pay back my family first.
Repaying a relative or close friend within the year before filing is a preferential transfer, and the trustee can sue that person to recover the money. Payments to ordinary creditors within the 90 days before filing can be recovered the same way. Gifts or below-value transfers to family within two years — longer under Kentucky’s fraudulent-transfer law — can be undone as fraudulent transfers. If you want to protect a family member who lent you money, talk to us before you pay them, not after.
Myth: You can only file once.
You can file more than once; the limits are on how often you can receive a discharge. A Chapter 7 discharge is available eight years after a prior Chapter 7 filing and six years after a prior Chapter 13 filing (sooner if the Chapter 13 plan paid enough). A Chapter 13 discharge is available four years after a prior Chapter 7 filing and two years after a prior Chapter 13 filing. A case that was dismissed rather than discharged generally does not start these clocks, though a court order can restrict refiling and the automatic stay is shortened for repeat filers within a year.
Myth: Creditors can keep calling.
The moment your case is filed, the automatic stay prohibits creditors from calling, writing, suing, garnishing, repossessing, or foreclosing. A creditor who violates the stay can be liable for damages and attorney’s fees. For most clients, the phone going quiet is the first thing they notice.
Myth: My employer will find out and fire me.
Federal law prohibits both government and private employers from firing or discriminating against an employee because of a bankruptcy filing. Your employer is not notified unless you have a wage garnishment that the case stops or you are in a Chapter 13 with a payroll deduction order — and even then, only the payroll office sees it.
Myth: Only deadbeats file.
The people who file bankruptcy in Kentucky are overwhelmingly working people whose circumstances changed — a medical event, a divorce, a job loss, a failed business. Congress built the bankruptcy system for exactly that. Filing after months of trying to pay is not a failure of character; it is the responsible use of a legal remedy that exists for a reason.
Before You File: Two Requirements People Miss
Every individual filer must complete a credit counseling session from an approved provider within the 180 days before filing, and a separate debtor education course before the discharge is entered. Both are inexpensive and available online, but a case filed without the first one can be dismissed. We schedule both as part of every case.
Talk to a Kentucky Bankruptcy Attorney
Bunch & Brock was founded in Lexington in 1976 by Kentucky attorneys W. Thomas Bunch and Dan D. Brock, Jr. — at a time when few Kentucky lawyers concentrated on bankruptcy — and is in its fiftieth year of practice. Mr. Bunch’s sons, Tom Bunch II and Matthew Bunch, represent debtors in Chapter 7, 11, 12, and 13 cases throughout Kentucky today, and represent creditors as well, which means we know how the other side thinks.
To find out which chapter fits your situation, or whether bankruptcy is the right answer at all, call (859) 254-5522 or contact us online. We are a debt relief agency and help people file for relief under the Bankruptcy Code.
This page is provided for general information and is not legal advice. Dollar figures are the federal amounts for cases filed April 1, 2025 through March 31, 2028. Please consult an attorney about your specific situation.
Our Bankruptcy Attorneys
Attorney Tom Bunch II — Tom practices in debtor and creditor matters arising in bankruptcy, with extensive experience in Chapter 7, 11, 12, and 13 cases for individuals and businesses, and in non-bankruptcy alternatives including loan workouts, foreclosure defense, and debt settlement. He also handles Kentucky probate and estate planning. Attorney bio
Attorney Matthew Bunch — Matt handles complex bankruptcies and debt restructuring in Chapters 11 and 13 for individuals and companies, has negotiated with creditors on behalf of clients to avoid bankruptcy, and is the firm’s lead litigator. Attorney bio
Attorney Caryn Belobraidich — Caryn prepares and files Chapter 7 and Chapter 13 bankruptcy cases for debtors. She has over 30 years of experience representing debtors before the U.S. Bankruptcy Court for the Eastern District of Kentucky. Attorney bio
Attorney Matthew Bunch
Matt handles complicated bankruptcies and debt restructuring in Chapters 11 and 13 for both individuals and companies. He has also negotiated with multiple creditors on behalf of his clients to avoid bankruptcy. Matt is the firm’s lead litigator and handles contract disputes, certain personal injury claims and general litigation. [ attorney bio ]
