Exemptions in Chapter 7 Bankruptcy

Before you can understand what items can be exempted in a chapter 7 bankruptcy, it is important to first understand what chapter 7 bankruptcy is. Chapter 7 bankruptcy is the liquidation bankruptcy and this is often filed by most people since its main requirement is having an income that is below the state median. However easy it sounds, there is still a qualification that needs to be passed in order to be able to successfully undertake chapter 7 bankruptcy filing.

In bankruptcy there is the concept of exempt and nonexempt property. If you file for chapter 13 bankruptcy, you can keep your property but have to be able to fulfill a 3-5 year repayment plan. Chapter 7 bankruptcy doesn’t have such a policy, so it is important that you know what the exemptions are to understand what items you can keep and what things have to be sold to pay off your creditors. 

In this situation, know that the best course of action is still to get in touch with a Paducah, KY chapter 7 bankruptcy exemptions lawyer. 

How Much Property Can Be Kept in Chapter 7 Bankruptcy?

Chapter 7 bankruptcy exemptions depend on the state you’re from as each state has their own policies regarding exemptions and they require filers to abide by these. Some states allow you the freedom of the state exemption system or federal exemption scheme.

To elaborate, the federal system allows debtors to retain a certain amount of equity in their property such as vehicles, homes, retirement accounts, and wages. Household goods and clothing needed for daily life are also qualified as exempt property. 

What is the Chapter 7 Bankruptcy Estate?

Everything that is yours when you file for bankruptcy become part of the bankruptcy estate. The following assets are usually part of the estate:

• Properties you own
• Property in someone else’s possession such as loans
• Property given away
• Items you haven’t received but are entitled to 
• Proceeds
• Assets received within 180 days after filing
• Marital property shares

The bankruptcy trustee assumes control of the bankruptcy estate and what happens to it depends on whether it can be protected with an exemption.  The bankruptcy process can be complicated so be sure to enlist the help of a bankruptcy attorney.

What are The Rules for Exemptions in Kentucky?

Kentucky bankruptcy policies vary, just like in other states. Kentucky has a set of rules regarding exemptions including:

Homestead Exemptions

You’ll be able to protect about $5,000 of equity in real or personal property in Kentucky

Motor Vehicle Exemptions

$2,500 worth of equity on motor vehicles can be exempted. 

Wildcard Exemptions

You can keep real or personal party worth around $1,000 in Kentucky

Other Exemptions

• Alimony. You can exempt alimony and support to what is reasonably necessary for you and your dependents.
• Insurance. Proceeds or benefits paid by a cooperative life
• Personal Property. You can exempt around $3,000 in household goods, clothes, tools, equipment, and health aids. 
• Pension/Retirement Accounts. ERISA-qualified accounts, employees pensions, teacher’s pensions. 
• Public Benefits.
• Trade Tools. $300 tools for trade or profession