Chapter 7 Bankruptcy Kentucky: 3 Things You Need to Know

If you've hit a rough patch financially and are thinking about filing for Chapter 7 bankruptcy in Kentucky, there are a few key things you need to know before diving into it:
Information in this article does not constitute legal advice, it is for informational purposes only, and may not constitute the most up-to-date information. Readers should contact their attorney for advice on any particular legal matter.
  1. First, you need to figure out if you qualify for Chapter 7 bankruptcy and how much it will cost you to file in Kentucky.
  2. Consider alternatives before making a final decision. It can often be a good idea to weigh your options.
  3. Lastly, when filing in Kentucky, you'll want to know all the specifics of Chapter 7 bankruptcy.

Chapter 7 bankruptcy is pretty common in the United States in fact, I wouldn't be surprised if most of the 9,870 bankruptcy cases filed in Kentucky in the year ending June 30, 2021 were Chapter 7 bankruptcies.

If you want to get an estimate of your qualification and cost, take this Kentucky Chapter 7 Calculator below:

1) How Chapter 7 Bankruptcy Works in Kentucky

So, we've been chatting with a lot of folks lately, and it seems like there are two significant concerns on their minds:

  1. How quickly can they find some relief from their overwhelming debt?
  2. How much is this whole debt relief thing going to cost them?

When comparing different ways to get out of debt, Chapter 7 bankruptcy is usually the cheapest and fastest option compared to Chapter 13 bankruptcy, debt negotiation, debt management, and debt payoff planning.

How Fast Do You Get Relief in A Chapter 7 Bankruptcy in Kentucky?

In Kentucky, you can usually get a Chapter 7 bankruptcy discharge in as little as 120 days or four months.

When deciding to file a Chapter 7, you may hear the term "no-asset" in the Chapter 7 case. You may not have a house or other valuable assets exceeding Kentucky's bankruptcy exemptions. So, if you don't own any assets, this can be beneficial in Chapter 7, making it less complex. Remember that every case is unique, so consulting with an attorney can sometimes make sense if you are considering filing.

There are some challenges you'll need to navigate along the way. It's essential to understand the process's ins and outs and ensure you meet all the requirements. There are professionals out there who can guide you through bankruptcy laws and help you make the best decisions for your financial future. Just remember to do your research, seek expert advice, and take control of your financial destiny.

How Much Does It Cost To File Chapter 7 Bankruptcy in Kentucky?

Filing for Chapter 7 bankruptcy nationwide usually costs between $500 and $3000. However, this price is going to depend on where you file.

The price you pay for Chapter 7 bankruptcy can vary depending on where you're filing in Kentucky. Take Bowling Green and Lexington, for example. In Bowling Green, you might shell out around $1,170 for a bankruptcy attorney. But in Louisville, you could be looking at the same fee.

Sometimes, you can reduce the bankruptcy filing cost through a filing fee waiver. If you meet specific criteria, you might be eligible for a reduced fee or have it waived altogether. Check out the Kentucky filing fee waiver for all the details.

How Do I Qualify For Chapter 7 Bankruptcy in Kentucky?

A Chapter 7 bankruptcy is designed for those who cannot repay some debts. However, before you can file, you must go through an income evaluation to see if you qualify for a Chapter 7 bankruptcy. This evaluation is called the means test.

Unsecured debts are debts that don't have any collateral attached to them. So, if you file a Chapter 7 bankruptcy, you can discharge medical bills, personal loans, particular old income tax debts, old utility bills, credit card debts, and most personal judgments. A Chapter 7 bankruptcy is like a fresh start, allowing you to get back on your feet. If you pass the Kentucky bankruptcy means test, your unsecured debts can be wiped away.

What about secured debts in Chapter 7?

If you're looking to wipe out secured debts, such as car loans and mortgages, Chapter 7 may be able to help. However, you'll have to give up the asset to your creditor, and they will have to consider it payment in full for what you owe.

Now, let's dive into what it takes to qualify for Chapter 7 bankruptcy.

IMPORTANT: Chapter 7 Qualification via Kentucky Means Test

The Bankruptcy Means Test calculates your average monthly and annual income. It compares your income against the median income of other households in Kentucky.

If your average or median income is below the Kentucky median, you might qualify for a bankruptcy discharge under Chapter 7. That means you could be on your way to financial freedom! But how can you find out if you're eligible? To figure out if you meet the requirements for Chapter 7 bankruptcy, try out this Kentucky Chapter 7 Bankruptcy Means Test Calculator below.

Help! My Income Exceeded The Chapter 7 Means Test Allowable in Kentucky

If your income is higher than the average income in your state, you might need to take a closer look at part 2 of the means test or explore other options. The Means Test is not a straightforward pass-or-fail situation. It's a two-part test that requires some extra consideration. So, even if you "fail" the first section, you still have a chance to "pass" the second section and qualify for Chapter 7 bankruptcy.

Chapter 7 Bankruptcy Kentucky Income Limits

Let's talk about the Kentucky median income figures for the Means Test. These may be adjusted from time to time based on data from the IRS and Census Bureau. So, staying updated with the latest information is often a good idea. For bankruptcy cases filed on or after November 1, 2023, the Kentucky median income looks a little something like this:

# of PeopleAnnual Income
1$55,235
2$67,141
3$80,316
4$98,032
5$107,932
6$117,832
7$127,732
8$137,632
9$147,532

If you have more than nine members in your household, you may be able to add $9,000 for each additional family member.

Be sure to double-check the U.S. Trustees website for the most current figures when you're calculating the Means Test.

Will I lose my assets if I file Chapter 7 bankruptcy?

Let's talk about bankruptcy exemptions and how they can protect your property in a bankruptcy case. Exemptions protect certain assets from being sold in a Chapter 7 liquidation case. So, if you have a property that's not covered by these exemptions, it might be able to be sold.

To compare, in a Chapter 13 case, if you have non-exempt equity in your property, it could increase the amount you have to pay in your bankruptcy plan.

When protecting assets, most people are concerned about their homes. In Kentucky, specific homestead exemptions determine how much equity in your home is protected based on your age and marital status. Let's break it down:

  • If you're single, under, or over 65, the homestead exemption is about $5,000.
  • For you're married under or over 65, the homestead exemption is about $5,000.

According to Kentucky law, your homestead exemption is covered by "Ky. Rev. Stat. Ann. § 427.060 Real or personal property used as a residence." (Source: Kentucky Legislative Research Commission) It's always important to review all the other available Kentucky bankruptcy exemptions. The federal bankruptcy exemptions are laid out in 11 U.S. Code §522. The National Consumer Law Center lists federal bankruptcy exemptions on its website. Kentucky lets you use federal bankruptcy exemptions, so you have options!

Chapter 7 Bankruptcy Kentucky Pros and Cons

Like any debt relief option, Chapter 7 has its upsides and downsides. In a Chapter 7 bankruptcy, there's a chance you might end up losing your home. Now, let's dive into the pros and cons.

Pros

  1. Affordable debt relief solution
  2. You can receive a discharge in about 120 days.
  3. Fresh start that allows you to discharge the debt.
  4. You may be able to keep your home and belongings due to exemptions.
  5. It can put a stop to debt collection lawsuits. No more constant phone calls, threatening letters, or fear of legal action.
  6. No more deficiency. This is when you owe more on a loan than what your collateral is worth, and the difference is called a deficiency, but a Chapter 7 can wipe it away.
  7. Provides relief for unaffordable, unsecured debts.

Cons

  1. You need to meet income requirements for qualifications.
  2. You may lose your home and other belongings if your assets exceed the exemption limit.
  3. It'll have a negative credit report impact for ten years.
  4. It may hurt credit scores.
  5. If you have non-dischargeable debt, it may not be able to be wiped away. These are debts such as student loans and taxes that may not be able to be included.
  6. Difficult to prevent foreclosure

Now that we've covered the pros and cons let's shift gears and talk about some alternatives to Chapter 7 bankruptcy in Kentucky.

2) Alternatives to Chapter 7 Bankruptcy

We all know that Chapter 7 bankruptcy is a popular option for those struggling with debt. But what if you don't qualify for Chapter 7? Or maybe you've got too many assets to protect? Or perhaps you don't want to go down that road. Well, there are alternatives to Chapter 7 bankruptcy that you can explore.

Other options include Chapter 13 bankruptcy, debt settlement, debt management, consolidation loans, and debt payoff planning.

A debt consolidation loan combines all your debts into one payment. This allows you to take out a loan to pay off your various creditors, leaving you with just one monthly payment. It makes tracking your payments more accessible, but remember that you still pay off the total amount.

a) Chapter 13 Bankruptcy

With a Chapter 13 bankruptcy, you can restructure your debts into a more manageable monthly plan. This means you may be able to afford your house and car payments easier.

There are many benefits to a Chapter 13 bankruptcy. First off, it can put a stop to foreclosures, repossessions, and even wage garnishments. Through the bankruptcy plan, you can also catch up on mortgage payments, past-due car payments, and tax debt over three to five years. Chapter 13 bankruptcy might also allow you to reduce unpaid child support and alimony. However, it's important to note that you must continue making regular domestic support payments to stay in Chapter 13. In a Chapter 13 plan, some people may be able to lower their car loan payments and potentially get rid of second mortgages as long as they meet specific requirements.

Can you afford Chapter 13 bankruptcy?

A Chapter 13 repayment plan can be complex, so you may want to ask an attorney about it. There are the attorney fees and a repayment plan that looks at non-exempt equity and disposable income to determine how much, if any, of the debt you may pay back.

b) Debt Relief

If you're considering going the debt settlement route, there are a few things to remember. First off, consider the impact it might have on your credit score.

When you partner with a debt settlement firm, they will make you fall behind on the accounts you choose to include by about six months. They will then negotiate with your creditors on a lower overall amount you pay back over 2-4 years. This may hurt your credit score since you have to fall behind.

Ultimately, it is up to your creditors if they want to agree or deny negotiations, so there is quite a bit of risk involved. If they agree, then you pay the lower amount through an escrow account, but they will expect you to keep up on all the payments. However, if the creditors disagree, they may try to sue you. However, you can choose which accounts to include in the program. There may also be potential taxes on the forgiven debt, so that's something to be aware of.

c) Debt Management

Debt management companies focus on negotiating lower interest rates, and the program usually lasts about 3 to 5 years. Credit counseling is generally a more expensive option compared to the others. Some creditors, like personal loan lenders, may not want to work with a debt management company. There is also a potential impact on your credit score.

Debt management can be a good option for those with high-interest credit card debt. The firm will work to lower those so you can pay the principal significantly.

Debt management in Kentucky may be a suitable option if you have significant high-interest credit card debt. You can make your debt more affordable by reducing your interest rate from 22-30% to a more manageable 10%. This can be a beneficial solution for individuals in this particular situation.

d) Debt Payoff Planning

Debt can feel like a never-ending cycle, with interest piling up faster than you can say "financial hardship." But don't worry; you have options, such as debt payoff planning.

Debt payoff planning involves cutting down on expenses and putting any cash flow you have toward your debts to avoid interest charges. This isn't a one-size-fits-all solution. Depending on the size of your financial hardship, it may not be feasible for everyone. Payoff planning means you are paying the total amount back, so it's helpful if you can afford your debt but want to pay it off more efficiently.

An app called the Savvy debt payoff planner will help you prioritize your debts by combining efficient methods to create a plan to pay things off as quickly as possible. On average, it saves folks around $2,000 in interest.

3) Specific Kentucky Chapter 7 Bankruptcy Information:

If you're wondering if Chapter 7 bankruptcy is the way to go, it's essential to understand these critical points before filing.

First, Chapter 7 bankruptcy is often referred to as "liquidation bankruptcy, " meaning that if you qualify, your non-exempt assets may be sold to pay off your debts. The good news is that Kentucky's exemptions protect certain property types from being liquidated. These exemptions include your home, car, personal belongings, and retirement accounts. So, it's crucial to understand what assets are protected under Kentucky law.

Chapter 7 bankruptcy is a legal process that allows individuals to wipe out their debts and start fresh. One of the significant benefits of Chapter 7 bankruptcy is that it provides immediate relief from creditors coming after you. As we discussed before, you have to qualify, so it's essential to assess your income and determine if you meet the criteria for Chapter 7. Another challenge to consider is the impact on your credit score.

However, not all debts can be wiped out through Chapter 7 bankruptcy. Certain debts, like student loans and child support payments, are generally not dischargeable. It may also significantly impact your credit score, which can make it harder for you to get approved for loans or credit cards in the future. But, with some time and responsible financial behavior, you can rebuild your credit score and get back on track.

Credit Counseling and Debtor Education Courses

When you're going through the bankruptcy process, there are a couple of courses you need to take which are required if you want a discharge.

The first course you need to take is a credit counseling course. This has to be done before you file your bankruptcy case. It's designed to guide and help you better understand your financial situation.

The second course is called a debtor education course. It's meant to educate you on financial management and give you the tools you need to make better financial decisions in the future and get back on your feet after the bankruptcy.

The United States Trustee's Office has approved certain companies in Kentucky that offer these bankruptcy courses. You can find a list of these companies on the UST website, and these courses can be completed online. A small fee is involved, but they're designed to help you navigate the bankruptcy process and improve your financial future.

Kentucky Bankruptcy Court Locations

When filing for bankruptcy, you must attend the 341 creditors' meetings. Many of these meetings have been happening over the phone or through Zoom. But, if you have a meeting that needs to happen in person, it's essential to know where the courthouse is.

Here are the court locations for filing bankruptcy in Kentucky:

District of Kentucky

  • 001 Vandalay Drive, Frankfort, Kentucky.

Chapter 7 Bankruptcy Trustees Kentucky

Below is a list of Chapter 7 bankruptcy trustees in Kentucky, sorted by bankruptcy district. You can find the official list here.

DistrictNamePhone
EasternMichael L. Baker(859) 426-1300
EasternJ. Clair Edwards(859) 225-5275
EasternL. Craig Kendrick(859) 371-4321
EasternJames D. Lyon(859) 252-4148
EasternMark T. Miller(859) 887-1087
EasternLori A. Schlarman(859) 586-1526
EasternPhaedra Spradlin(859) 263-3210
EasternJames R. Westenhoefer(859) 624-0145
WesternJerry A. Burns(270) 796-9090
WesternMark H. Flener(270) 783-8400
WesternRobert W. Keats(502) 587-8787
WesternWilliam W. Lawrence(502) 581-9042
WesternMaurice R. Little(270) 821-0110
WesternHarry L. Mathison, Jr.(270) 827-1852
WesternW. Stephen Reisz(502) 584-1000
WesternBradley S. Salyer(270) 842-9005
WesternMichael E. Wheatley(502) 744-6484

Take a moment to review the local bankruptcy rules in Kentucky. Some of these local rules may have a few differences compared to the Federal Bankruptcy Rules.

Conclusion

Now that you have a lot more information about filing Chapter 7 bankruptcy in Kentucky, you might be curious about whether you qualify and how much it'll cost you. Feel free to take this Chapter 7 bankruptcy means test calculator below that can give you an estimate.

While most people choose to work with a bankruptcy attorney when filing for Chapter 7 or Chapter 13, you can file on your own. To learn more about this DIY approach, check out the resources on filing bankruptcy without an attorney.

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