According to the National Bankruptcy Forum, Kentucky ranks eight in the nation for its bankruptcy rate, with 345 bankruptcy filings per 100,000 residents. Though there are several factors that contribute to this high rate of filings, experts suspect that low personal per capita income, wage stagnation, mounting student debt and unexpected medical bills all play a major role in the accumulation of insurmountable debt. If you are one of the many Kentucky residents who have found themselves in over their heads with debt, you may worry that you will lose everything if you file for bankruptcy. Fortunately, Kentucky and federal law provide for certain exemptions.

Once you decide to file for bankruptcy, you must then decide which exemptions you wish to use: the federal exemptions as outlined in the U.S. Bankruptcy Code or the Kentucky exemptions, which you can find in KRS Chapter 427. You must pick one method and stick with it. For instance, if you elect to use the federal homestead exemption instead of the state’s, you must use federal exemptions for all categories. Regardless of whether you use the federal or state exemptions, if you are married and filing jointly, you may double the exemption amounts for any property you own.

The federal homestead exemption is significantly more generous than the state’s. Kentucky’s homestead exemption amount is $5,000, or $10,000 if you file jointly. The federal exemption is $23,675 of equity in your principal place of residence.

The state exemption for personal property is $3,000 in farming equipment and $3,000 in household furnishings. You may elect to exempt up to $5,000 for a burial plot in lieu of using the homestead exemption. The federal exemption for personal property is $12,625 for household goods. If you qualify for the wildcard exemption, you may also transfer up to $11,850 of any used portion of the homestead exemption to your personal property exemption, plus gain an additional $1,250.

Kentucky exemptions allow you to exempt a vehicle with a value of $2,500, plus one spare tire. The federal vehicle exemption is slightly more, at $3,775.

If you have any unpaid weekly earnings, Kentucky law allows you to exempt up to 75% of them or 30 times the federal or state hourly minimum wage, whichever is greater. Federal law does not allow you to exempt unpaid weekly earnings.

Both federal and state law allow you to exempt your pension or retirement accounts. However, federal law places a cap on exemptions of $1.28 million.

This article is not meant to serve as legal advice. It is for educational purposes only.