What can you keep if you file for bankruptcy in Kentucky?
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What can you keep if you file for bankruptcy in Kentucky?

| Feb 1, 2021 | Firm News |

Many people who have insurmountable debt avoid filing for bankruptcy because they worry about losing their homes. In fact, Kentucky bankruptcy law allows individuals to retain a primary residence and other exempt assets.

Understanding these exemptions can help inform the decision about repaying debt or claiming bankruptcy.

Homestead exemption

Kentucky residents filing for bankruptcy can keep up to $5,000 in equity in a home where they live. They can also apply this exemption to a burial plot.

In addition to the primary home, Kentucky allows bankruptcy exemptions for furniture and clothing valued up to $3,000.

Personal property exemptions

Bankruptcy filers can also keep personal property that includes:

  • Medical devices prescribed by a doctor
  • Up to $2,500 in motor vehicle equity and an additional $2,500 for a work vehicle
  • Up to $3,000 in livestock, equipment and tools
  • Up to $1,000 in office furnishings, equipment, books and instruments used for professional practice

An additional $1,000 wildcard exemption can apply to any real or personal property.

Wages and income

Kentucky bankruptcy law protects:

  • Legal award for personal injury up to $7,500
  • Unlimited legal award for wrongful death and crime victim reparation
  • The full value of court-ordered child support and alimony
  • Workers’ compensation, unemployment and public assistance benefits
  • Pensions and retirement accounts
  • Life insurance proceeds

State residents can select the federal bankruptcy exemptions instead of the Kentucky exemptions. However, they cannot mix and match between the two categories and must carefully review both lists based on the bankruptcy filer’s specific financial situation. Married couples who are filing together can double the exemption amounts.