Residents of Louisville who may be contemplating filing a bankruptcy petition often wonder whether they will be forced to give all of their assets, including their home, to their creditors. The comforting and often surprising answer is “Not always.” Kentucky statutes give residents of the state an opportunity to declare certain assets as beyond the reach of creditors. Assets that fall within the statute are known as “exempt assets” because they are exempt from creditors’ claims.
The easiest way to understand exemptions is to simply work down the list. A person’s equity in the home is exempt up to $5,000. If the home is sold, the proceeds of the sale are also exempt. Certain insurance contracts are exempt, including annuity contracts up to $350 per month, group life insurance proceeds, health or disability benefits and certain life insurance proceeds. Alimony and child support are exempt but neither type of debt can be discharged in bankruptcy. Pensions for police and firefights are exempt, as are IRSs, and pension plans for public employees such as state employees, teachers and urban county employees.
Certain kinds of personal property are also exempt. These assets include a person’s burial plot in lieu of the value of the homestead, clothing up to $3,000. A person may declare one automobile exempt up to a maximum of $2,500. Public assistance, including crime victim’s compensation, unemployment compensation and workers’ compensation, are exempt.
The tools of the debtor’s trade, including a library, office equipment, instruments and furnishings of ministers, attorneys, physicians, surgeons, Chiropractor, veterinarian or dentist, are exempt up to $1,000. A farmer’s tools are exempt up to $3,000. A minimum of 75% of earned buy unpaid wages may also be declared exempt.
This listing does not include exemptions that may be available under the federal list of exemptions. The advice of a competent bankruptcy attorney can be very valuable in sorting through the many issues raised by declaring certain assets exempt from creditors.