While personal bankruptcy does bring with it a certain degree of protection, it is also accompanied by a great deal of uncertainty. That uncertainty can often lead to stress and fear (specifically over what personal assets one might lose during their bankruptcy case). 

Fortunately, the law allows for a certain number of exemptions that allow one to protect important assets so that they are not lost in bankruptcy. Kentucky residents have the option of utilizing either the state’s bankruptcy exemptions or those established at the federal level.

Kentucky’s bankruptcy exemptions 

One can find the state’s bankruptcy exemptions in Section 427 of Kentucky’s Revised Statutes. The one that most ask about is the homestead exemption. The state allows one to exempt $5,000 of equity in their home. Thus, if one has less equity built up in their homes than that, their home is not subject to sale by the bankruptcy trustee. 

In addition, the state allows for the following exemptions: 

  • $3,000 in household furnishings, clothing, tools, equipment, and livestock 
  • $2,500 in one vehicle (and one spare tire) 
  • $1,000 in professional tools (office equipment and supplies) 
  • $300 in tools of one’s trade 

In addition, there is a $1,000 wildcard exemption that one can apply to any piece of real or personal property. 

Reviewing the Federal Bankruptcy Code 

Section 11.522 of the U.S. Bankruptcy Code lists the federal homestead exemption as $25,150. Exemptions are also available for motor vehicles ($4,000), household goods ($13,400), and valuable items such as jewelry and artwork ($1,700). Both state and federal laws allow for exemptions for interests in retirement accounts, pensions, alimony and child support, as well as employment and military benefits.