Chapter 7 Bankruptcy Laws in Kentucky
- Kentucky protects certain assets in Chapter 7 cases.Kentucky state contour against blurred USA flag image by Stasys Eidiejus from Fotolia.com
Congress creates laws that regulate bankruptcy throughout the country, and the U.S. Bankruptcy Court carries them out. Most laws regarding bankruptcy are followed by all states, including Kentucky. However, district bankruptcy courts are established in each state, and the states are then allowed to modify some of the exemptions for protecting an individual's assets. The courts carefully enforce the laws regarding the filing of Chapter 7 bankruptcy. - Bankruptcy courts in Kentucky are divided into an Eastern and a Western District. The Eastern District has court locations in Ashland, Corbin, Covington, Frankfurt, Lexington and Pikeville. The Western District has locations in Bowling Green, Louisville, Owensboro and Paducah. Anyone filing a Chapter 7 bankruptcy must do so with the clerk of the court for the nearest county of residence.
- Those individuals filing Chapter 7 bankruptcy must qualify through a "means test" to determine if they have the ability to pay creditors. A Statement of Financial Affairs must be filed listing assets, debts, and the names and addresses of all creditors. To qualify, a person's income must not be higher than the state's median income for families. In Kentucky, the median income in 2009 for a single-person household was $23,479 and $59,600 for a six-member family. Anyone above the median may have to file Chapter 13, which establishes a debt repayment program.
- Chapter 7 is also known as "liquidation," which means the assets of the person filing can be liquidated to pay creditors. However, Kentucky is among the states establishing their own exemptions which cannot be considered among the assets of the bankruptcy estate. Exempt assets generally include equity in a home, a vehicle (up to $2,500) and some jewelry. Other exemptions include alimony and child support, pensions and tools of the trade up to $300, plus farming equipment, livestock and poultry. Because of the protections that these exemptions provide, it is advisable to use an attorney when filing.
- Kentuckians filing Chapter 7 bankruptcy must follow federal guidelines. The 2005 Bankruptcy Act created several new requirements in an effort to stem the increasing number of bankruptcies. The Act requires that petitioners complete a credit counseling course before filing and a personal financial management course soon after filing. In addition, the individual must attend a "341 meeting" of creditors. Although creditors rarely show for the meeting, they are allowed to ask questions as is the case trustee, the court-appointed person who oversees the process.
- With Kentucky's exemptions and other considerations, usually there are few assets to liquidate in Chapter 7 cases. Unless there are legal challenges, the debts are typically discharged within a couple of months after the hearing. For some property, such as automobiles, the individual is allowed to keep the property as long as he continues making timely payments. From there, the individual is granted a fresh start from debts. However, in Kentucky, as in other states, the person cannot file for another bankruptcy for at least eight years.
