Kentucky Chapter 7 Bankruptcy Laws
If a Kentucky debtor has had trouble making his bill payments for months or even years, he may consider filing for bankruptcy. The quickest way to receive a discharge of his debts would be to file for Chapter 7 bankruptcy. However, not all debtors can file for Chapter 7 bankruptcy; the debtor must meet certain qualifications.
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Bankruptcy Abuse and Consumer Protection Act
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To deter abuse of the bankruptcy system, a debtor must pass the means test to file for Chapter 7 bankruptcy. The means test compares the debtor's family income to the median family income for a family of the same size in Kentucky. If the debtor's family income is below the state median, he can file for Chapter 7 bankruptcy.
As of 2010, the Census Bureau listed Kentucky's median family incomes as $37,450 for a single earner; $45,491 for a family of two; $54,488 for a family of three; and $64,230 for a family of four.
If the debtor does not pass the means test, there is a presumption of abuse, and the bankruptcy court will dismiss the debtor's Chapter 7 case. If the debtor qualifies for Chapter 7 bankruptcy, he may file a bankruptcy petition in the Kentucky bankruptcy court serving his district. When the debtor files his bankruptcy petition, an automatic stay goes into place. Any creditor previously attempting to collect a debt from the debtor must cease all collection actions. The stay may only be lifted by court order.
Role of the Trustee
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A bankruptcy trustee will administer the debtor's Chapter 7 case. The trustee conducts the first meeting of creditors where the debtor will attest, under oath, to the accuracy of his bankruptcy filings. Creditors may object at any time. If no creditors have objections, the trustee may proceed with the case.
The trustee sells all of the debtor's nonexempt property and uses the proceeds to pay the debtor's creditors. In most cases, the debtor owns no property in excess of her exempt property. Those would be no-asset cases. The trustee will report this to the court, and the debtor will receive a discharge of her debts. If the debtor has assets that can be sold, the debtor should receive a discharge of her debts after the property has been sold and creditors have been paid. Each state has a list of property that cannot be sold.
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Exempt Properties
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The state of Kentucky lists the following property as exempt from sale: either a homestead or burial plot valued up to $5,000; a motor vehicle up to $2,500; health aids; clothing, furniture, jewelry, and articles of adornment up to $3,000 total; wrongful death recoveries; personal injury recoveries up to $7,500; medical expenses paid and reparation benefits received under motor vehicle reparation law; prepaid tuition accounts; alimony and child support; pensions; insurance; public benefits; tools of the debtor's trade up to a certain amount; wages; and any other property, known as wildcard property, up to $1,000. Refer to state laws for a complete list.
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