Kentucky Bankruptcy Exemptions

Bankruptcy exemptions allow you to keep equity in property, both real and personal, to start life over with.  There are both the Federal Exemptions that the bankruptcy court suggests and individual state exemptions.  Kentucky uses the Federal exemptions.   Indiana uses it’s own state exemptions that will not allow you to keep as much property as the Federal exemptions.  

You are allowed to keep over $21,000 in equity in your home  in Kentucky.  Federal Exemptions increase with cost of living increases every year.   If you don’t use the exemption on your personal home you may use one half of the unused part of that exemption (about $11,000) to keep any other property such as bank accounts, another home or a car.   Example: if you own a $20,000 car an it has a 10,000 dollar loan you can keep it in Kentucky using the $10,000 dollar wildcard from the home exemption and deducting the $10,000 dollar loan.

There are exemptions allowing you to keep cars, household goods and furniture, guns, personal injury claims,  books, tools, and all sorts of property.   Losing property is very rare due to the high Federal Bankruptcy Exemptions.

However you can only keep what you own.  People that attempt to creatively transfer property to their relatives can’t use the exemption since they no longer own it losing what they could have claimed.   And the person they gave the item to can be required to return it to the court to be sold for the benefit of creditors if it was purchased below value. 

Income tax refunds are cash, easily taken by the Chapter 7 Trustee, more highly sought than any other asset, but easily exempted.  In Kentucky, the Chapter 7 Bankruptcy Trustee normally will not take your income tax refund but the Chapter 13 Bankruptcy Trustee will take your tax refund after the plan is confirmed.   This is because in a Chapter 7 case you are asking to keep your property and you can claim an exemption to keep it.  In a Chapter 13 case all of your disposable income is used to pay creditors so an income tax refund while the case is pending is disposable income and is lost.  In a Chapter 13 you are saying that all the funds that I have over and above the income I need to pay my expenses I will turn over to the Chapter 13 Trustee for 5 years.   Your income tax refund is part of your income during that 5 years.

Attorney Nick C. Thompson Louisville Kentucky Bankruptcy Exemptions