Kentucky residents may protect certain types of property from liquidation during a Chapter 7 proceeding. By filing a Schedule C with your petition, you may exempt your household goods, personal belongings, jewelry and tools for work.
According to the United States Bankruptcy Court for the Western District of Kentucky, if your creditors do not file an objection, you may keep your listed exemptions. You may also hold on to your primary residence if its value falls within the exemption amount.
How may I keep my home with an exemption?
You may maintain ownership of your home by filing for a homestead exemption even with an outstanding mortgage. Under Kentucky Revised Statute Chapter 427, you may protect your home from bankruptcy as long as its equity value does not exceed $5,000.
For example, if the current market value of your property is $150,000 and your mortgage balance is $175,000, you may keep it. Because of negative equity, your mortgage is higher than your home’s market value. If you still owe $145,000 or more, you may hang on to your property since its equity value does not exceed $5,000.
How may I hold on to my vehicle with an exemption?
Much like keeping your residence, Kentucky’s statutes may allow you to hang on to your vehicle. When your car’s equity value is no more than $2,500, you may claim it with your exemptions. If you still make payments on an auto loan, however, the difference between the balances owed and your car’s value cannot exceed $2,500.
Kentucky also has a “wildcard” exemption that allows you to keep any property of your choice worth no more than $1,000. Some individuals believe that a Chapter 7 bankruptcy requires selling their property. With an exemption, however, you may continue owning your home, vehicle and meaningful personal assets.