This past year has been difficult for millions of Americans from all stations in life. Financial futures have been threatened or savings wiped out by reduced hours and layoffs, businesses shuttered and overwhelming medical debt. For many Kentuckians, even governmental interventions such as stimulus checks and moratoriums on evictions and foreclosures just haven’t been enough.
If you have fallen behind in mortgage or other debt payments, are experiencing creditor harassment or wage garnishment and are beginning to feel that there is no end in sight, it may be useful to consider bankruptcy. Working with a caring and knowledgeable bankruptcy attorney can provide options for your individual situation, and also help you to find solutions that will put you on a firm financial footing.
Debt relief options in bankruptcy
The two main types of bankruptcy that are filed for individuals under the Federal Bankruptcy Code are Chapter 7 and Chapter 13. Depending on which of these an individual is eligible to file, unsecured debt like credit card or medical bills, as well as some IRS tax debts may be eligible for discharge.
A Chapter 7 bankruptcy filing will put an immediate stay on wage garnishment, foreclosure proceedings and creditor harassment. Most if not all unsecured debt will be discharged with this filing, including credit card and medical debt. The filer may keep all exempt property according to state law, but all non-exempt property will be liquidated.
In Kentucky, bankruptcy filers may take advantage of federal exemptions, provide protections for over $22,000 for assets such as:
- the family home and primary vehicle
- clothing and jewelry
- household appliances and tools of the trade
- worker’s compensation, pensions and insurance
A Chapter 13 filing will offer some debt relief by reorganizing a debtor’s obligations, which may include a discharge of some debt. The process is overseen by a court-appointed trustee and will halt foreclosure proceedings and allow people to catch up on back payments through a structured repayment plan. Filers will keep the family home and car, and will repay most other debt within a period of three to five years.
The Kentucky means test for Chapter 7
To be eligible for file for Chapter 7 in Kentucky, the individual will have pass the state’s means test, which assesses overall debt based on monthly income, number of household members, projected income in the next 60 months, as well as other factors such as consumer debt or if the filer is a disabled veteran.