For the most part, filing for bankruptcy in Kentucky is no different than filing anywhere else in the United States. This is because the bankruptcy process falls under the federal government’s purview. This is important because your creditors likely operate out of different states, so bankruptcy being governed by state law would be even more difficult than it is today.
However, some aspects of the bankruptcy process are modified by Kentucky law. State laws often determine which property an individual can keep after filing for bankruptcy. Any pieces of property you can keep after bankruptcy are known as exemptions.
This is where things get tricky; consulting with a bankruptcy lawyer on your exemptions can prove highly beneficial, as individuals in Kentucky are allowed to choose the state list of exemptions or federal, but not both. There’s generally no picking and choosing between the two lists. Your bankruptcy attorney can determine which exemption list would be more beneficial for your case.
Kentucky Bankruptcy Exemptions
Kentucky Homestead Exemption
The homestead exemption is the most commonly used in Kentucky bankruptcy cases. You may protect up to $5,000 worth of equity in any real or personal property you use as a permanent residence in Kentucky.
For example, if you own a home worth $150,000 and still owe $145,000, you have accumulated $5,000 of equity in your home. In this case, you can protect the total value of your equity using the Kentucky homestead exemption.
Personal Property Exemptions
As the name implies, this exemption type covers a variety of personal belongings and payments.
- Up to $3,000 in household furnishings and clothing
- Up to $3,000 in tools, equipment, and livestock used for farming
- Up to $2,500 in one motor vehicle
- Any health aids or medication professionally prescribed for you or your dependent(s)
- Alimony and support payments, up to a reasonable amount determined by the bankruptcy court
- Any victim reparation funds (if you or a dependent were subject to a crime and the defendant was ordered to make payments to you in reparation)
- Wrongful death award from the death of a person you were dependent on
- Up to $7,500 in personal injury awards from an injury to yourself or your dependent(s)
- Awards for loss of future earnings, up to a reasonable amount determined by the bankruptcy court
Pensions & Retirement Accounts Exemptions
Pensions and some other retirement accounts are protected during bankruptcy under Kentucky law.
- Police and firefighter pensions
- State and county employee pensions
- Teacher pensions
- ERISA-protected retirement accounts
Public Benefits Exemptions
These are state-provided benefits that are protected from bankruptcy claims.
- Unemployment benefits
- Public assistance programs
- Workers’ compensation payments
This exemption protects payments that you or your dependents are due from insurance companies.
- Benefits paid or owed by a life or casualty insurance company
- Life insurance proceeds if a clause in the policy prohibits them from being used to pay a beneficiary’s creditors
- Life insurance proceeds if the beneficiary is someone other than the insured
- Group life insurance proceeds
This exemption allows individuals to protect up to $1,000 of value in any real or personal property not covered by previously defined exemptions.
Federal Bankruptcy Exemptions
Federal Homestead Exemption
If you own your home, you may protect up to $25,150 of equity in any real property. If you owe more money on your mortgage than your home is worth, you have no equity accumulated.
Federal Wildcard Exemption
If you don’t own any real property or have no equity to protect, federal exemptions allow you to use up to $12,575 as a wildcard exemption.
Wildcard exemptions allow you to apply protection up to a specified value for items that belong in other categories or that do not fall under a designated category. You may use wildcard exemptions across multiple categories.
For example, if you want to protect $2,000 in jewelry but only $1,700 in exemptions for jewelry, you may apply $300 from your wildcard exemption amount to preserve the remainder of your jewelry.
Federal Person Property Exemptions
Federal bankruptcy exemptions protect a variety of personal property categories.
- $4,000 for your motor vehicle
- $13,400 total value on household goods, with a cap of $625 per item
- $1,700 for jewelry
- $2,525 for tools of the trade (can include implements, books, etc.)
- Professionally prescribed health aids or medications
Intangible Asset Exemptions
Federal bankruptcy exemptions protect intangible assets or accounts you may receive a monetary benefit from that are not real or personal property.
- Retirement accounts
- Life insurance (cash value)
- $13,400 in loan value, accrued dividends, or interest on a life insurance policy
- Wrongful death payments for a person you were dependent on
- Up to $15,000 in personal injury recovery
- Loss of future earnings payments
- IRAs and Roth IRAs up to $1,362,800
- Victim of crime compensation
- Unmatured life insurance policy
- Disability, unemployment, or illness benefits
- Life insurance payments for a person you were dependent on
This may not be a complete list of exemptions under federal and state laws, but it should cover most common exemptions. Only you can determine which exemptions will work best for you, and consulting with a bankruptcy attorney is the best way to ensure you have a clear understanding of the exemptions you are eligible for and what you may be able to protect through bankruptcy proceedings.
Contact Attorney Chris Kurtz today for a FREE bankruptcy consultation if you are struggling with debt. Chris Kurtz will help you find a clear path through your financial situation and come out the other side free of debt and ready to move on with your life.