Bankruptcy is a system of federal law, so the process to file for Chapter 7 bankruptcy or to file for Chapter 13 bankruptcy is nearly identical in every state, including Kentucky. However, Kentucky state laws play an important role, especially in setting property exemptions, which determine what property you get to keep (if you file for Chapter 7) and how much you have to repay your creditors (if you file for Chapter 13). There are also important state-specific resources available to you.
Kentucky Credit Counseling
Before you file for Chapter 7 or Chapter 13 bankruptcy in Kentucky, you will have to get credit counseling from an agency approved by the United States Trustee’s Office. Here’s a list of Kentucky agencies that have been approved to provide this counseling.
Where to File for Bankruptcy in Kentucky
Kentucky has two federal bankruptcy districts. You can find information, forms, local rules, and more at each bankruptcy district’s website.
The Western District (includes Louisville)
The Eastern District (includes Lexington)
Kentucky Property Exemptions
Like every other state, Kentucky has a set of property exemptions. (To learn more about how property exemptions work generally and which exemptions you may use, see Bankruptcy Exemptions: What Do I Keep When I File for Bankruptcy?)
In Kentucky, bankruptcy filers may choose between the state’s list of exemptions and a list of federal exemptions (not all states offer this option). Filers must choose the Kentucky list or the federal list; they may not mix and match some exemptions from one list and some exemptions from the other.
Kentucky offers a somewhat skimpy homestead exemption: Filers may exempt only up to $5,000 of home equity. Kentucky allows filers to exempt up to $2,500 of equity in a vehicle. It also provides a wildcard exemption of $1,000, which filers can apply to any property they want to keep. Here is a detailed list of Kentucky exemptions.
The Means Test
When you file for bankruptcy, you must compare your income to the median Kentucky income for a household of your size. If your income is less than the Kentucky median, you will be eligible to file for Chapter 7 and, if you choose to file for Chapter 13, you can use a three-year repayment plan (rather than five years).
Currently, the median income for a two-person household in Kentucky is just over $44,500; these figures change periodically. You can find the most recent amounts on the website of the U.S. Trustee at www.justice.gov/ust. Click on “Bankruptcy Reform,” and then “Means Testing Information.” Or go directly to the Census Bureau table here.
Debtor Education in Kentucky
After you file for bankruptcy but before you receive your discharge, you must take a debtor education course. Like the mandatory credit counseling you must take before filing your forms, you must receive debtor education from an agency approved by the U.S. Trustee’s Office. Here is a list of Kentucky agencies that are currently approved to provide this counseling.
Finding a Bankruptcy Lawyer
If you're considering bankruptcy, you may want to talk to an experienced Kentucky bankruptcy lawyer.