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How Kentucky's bankruptcy exemptions function

During a bankruptcy proceeding, some may worry that they might have to surrender all of their property. Fortunately, you are entitled to "exemptions" that permit you to keep many of your possessions during your bankruptcy. There are two sets of exemptions, those created by the Kentucky legislature and those provided by federal law. You can choose either, but you must use only one or the other, and you cannot mix between the two.

Your bankruptcy attorney can explain the differences between the exemptions, and help you determine which set would be better for your circumstance. For instance, Kentucky's exemptions allow you to protect equity in a home up to $5,000, but the federal exemption is currently $23,675.

You can also protect some equity in a motor vehicle, personal property such as furniture and clothing, and in tools of your trade. If you are married and both parties are filing bankruptcy, some of these exemptions may be doubled.

Many Chapter 7 filings are declared "no asset" bankruptcies by the trustee, because these individuals have suffered economic setbacks of such a severe degree that they simply do not own the high-value items that would produce a meaningful return for the trustee. If you have a home or vehicle that is a secured debt, you may need to file a Chapter 13 to keep those items.

Another factor in determining which type of bankruptcy you will need to file is the "means test," which was created by the 2005 amendments to the Bankruptcy Act. This test measures your income and expenses and if you earn more than the test allows, you cannot file a Chapter 7. Your bankruptcy attorney will assist with this calculation and they can answer any other questions you may have with the process.

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