Exemptions in Chapter 13 Bankruptcy

Chapter 13 bankruptcy is a kind of bankruptcy filed by those with higher incomes usually. It allows protection of their assets and involves a 3-5 year repayment plan. Chapter 13 bankruptcy’s cost comes in the form of paying off the value of the nonexempt property.

If you qualify for Chapter 13 bankruptcy and are looking to know what the exemptions are, it is best to get in touch with a Chapter 13 bankruptcy exemptions lawyer who can help you file for bankruptcy and get debt relief. 

How Do You Protect Property With Exemptions?

Bankruptcy exemptions allow debtors to secure or protect their essential property, such as household goods, vehicles, and retirement accounts. Exemptions do not cover non-essential properties such as vacation cabins and collections. Exemptions protect essential property in Chapters 7 and 13 bankruptcies and help ensure creditor payments, but the process they go about is quite different.

• Chapter 7 Bankruptcy is known as liquidation bankruptcy. In this type, nonexempt assets are sold by the bankruptcy trustee, and the profit will be used to pay the debtor’s creditors. 
• Chapter 13 Bankruptcy or repayment chapter does not involve the selling of nonexempt assets. The debtor would have to pay the nonexempt portion to unsecured creditors via a repayment plan.

The common ground in both chapters is that the creditors receive the nonexempt property value. Get in touch with a Kentucky bankruptcy attorney if you are dealing with these bankruptcy issues.

What are the Types of Exempt Property?

Exempt property is usually defined by state and federal law. In this area, Chapter 13 doesn’t differ much from Chapter 7, and each state has its law regarding what properties classify as exempt complete with definitions for these types. These state laws also limit the value of exempt property. 

In general, types of exempt property include:

• Automobiles
• Homestead
• Personal items
• Household items
• Jewelry

Before filing for Chapter 13 bankruptcy, it is advisable to contact a Chapter 13 bankruptcy lawyer from Paducah, KY, who can help you check with state laws regarding the limit on how much you can be exempted from. A bankruptcy attorney is a person to go to to get debt relief.

How is a Repayment Plan Calculated in Chapter 13 Bankruptcy?

Chapter 13 bankruptcy requires you to repay your debts through monthly payments that the bankruptcy trustee receives. This is why this type is called repayment bankruptcy. The rules for this are quite complex, but the amount you’ll pay in general depends on:

• Income
• Living expenses
• Type of debt you owe and its amount
• The property you own

In calculating the amount, the first step is determining the disposable income by deducting expenses from the monthly income. Multiply the disposable income by the months in the repayment plan. Next, you will determine the value of the nonexempt assets that state law determines.  

The third step involves determining which debts to pay in full. Typically, debts paid in full include mortgage and car payments, income tax debt, and support payments. Calculating can be complicated, so you should get in touch with a Chapter 13 bankruptcy attorney from Paducah, KY, who can provide sound legal advice.

What are Kentucky Laws on Chapter 13 Bankruptcy Exemptions?

If you’re from Paducah, KY, and are seeking to file for Chapter 13 bankruptcy, it is best to be aware of Kentucky exemptions, which include the following:

• Homestead Exemption. Protection of up to $5,000 of equity in real and personal property in Kentucky that is used as a residence. Homestead exemption can be used to protect burial plots.
• Motor Vehicle Exemption. Protection of up to $2,500 equity is allowed.
• Wildcard Exemption. One can keep the real or personal property of their choice up to $1,000.
• Alimony and Awards. You can keep the alimony necessary for your and your dependents’ support. It can range up to $7,500 in value in a personal injury award that resulted in an injury on you or a dependent. 
• Insurance. Proceeds or benefits to be paid by the insurance company.
• Personal Property. $3,000 worth in goods and clothing, farming tools, and equipment.
• Pension and Retirement Accounts. ERISA-qualified accounts.
• Public Benefits. Assistance and unemployment or workers’ compensation.
• Trade Tools. $300 in profession-related tools, such as office equipment, dental tools, etc.

Each state has its unique laws on what assets you can exempt. If you’re from Kentucky, familiarize yourself with your state’s law and get legal advice from a Kentucky bankruptcy lawyer who can walk you through the process from bankruptcy filing to dealing with creditors.