If you file for bankruptcy in Kentucky, the Kentucky motor vehicle exemption allows you to protect $2,500 in equity in a carhelps determine whether you can keep your car, truck, van, or other vehicle if you file for Chapter 7 bankruptcy. Here you’ll find information about the Kentucky car exemption: how much it is, what types of vehicles it covers, how it works for married couples, how to find the applicable statute, and more.
(For more information about exemptions, including how they work and which ones you can use, see our Bankruptcy Exemptions area. For information specific to the motor vehicle exemption, see our Motor Vehicle Exemption in Bankruptcy area.)
The Kentucky Motor Vehicle Exemption and Your Car
Kentucky’s motor vehicle exemption plays a large role in determining whether or not the bankruptcy trustee can take your vehicle to repay your unsecured creditors. If the equity in your car is less than Kentucky’s car exemption, then the trustee cannot sell it. If the equity in your car is significantly more than the applicable exemption amount, the trustee is likely to sell your car to repay your unsecured creditors. For details, see The Motor Vehicle Exemption: Can You Keep Your Car in Chapter 7 Bankruptcy?
Keep in mind that even if your car is safe from the bankruptcy trustee, the lender may be able to repossess your car during or after bankruptcy. To learn more, see Your Car in Chapter 7 Bankruptcy and If You Are Behind on Your Car Payments, Can Chapter 7 Help?
The Amount of Kentucky’s Motor Vehicle Exemption
In Kentucky, you can exempt up to $2,500 of equity in your car or other vehicle.
Example. Kelly owns a 2009 Toyota Corolla worth $11,000. She owes the dealer $9,000 on the loan, so there is $2,000 of equity in her car. Kelly can use the Kentucky motor vehicle exemption to fully protect her car if she files a Chapter 7 bankruptcy.
The Federal Motor Vehicle Exemption
Kentucky allows you to choose between the state exemptions or the federal bankruptcy exemptions. The federal motor vehicle exemption amount changes every three years. To find the current amount, see our article The Federal Bankruptcy Exemptions.
Using Kentucky’s Wildcard Exemption to Protect Your Car
If the equity in your car is more than $2,500, you may be able to protect the extra equity using a wildcard exemption. The Kentucky wildcard exemption allows you to protect up to $1,000 of equity in any property, including your vehicle. (To learn more, see The Kentucky Wildcard Exemption.)
Example. Kelly’s 2009 Toyota Corolla is worth $11,000, and she owes the dealer $7,500 on the loan. There is $3,500 of equity in her car. Kelly can combine the motor vehicle and the wildcard exemptions to protect all of the equity in her car in a Chapter 7 bankruptcy.
Can Married Couples Double Kentucky’s Motor Vehicle Exemption?
Some states allow married couples filing a joint bankruptcy petition to double the listed exemption amounts. Married couples filing bankruptcy in Kentucky can double their motor vehicle exemption to protect a total of $5,000 of vehicle equity.
(To learn about the advantages and disadvantages of joint bankruptcy filings, see Nolo's section on Bankruptcy Options for Married Couples).
What Vehicles and Insurance Are Covered by the Motor Vehicle Exemption?
The Kentucky exemption allows you to protect one motor vehicle, such as a car, truck, or van, and any necessary accessories, including one spare tire.
Kentucky’s Tools of the Trade Vehicle Exemption
If you are a mechanic or a person who services mechanical or electrical equipment, or an attorney, minister, physician, surgeon, chiropractor, veterinarian, or dentist, you can protect up to $2,500 of equity in one motor vehicle and accessories, including one spare tire.
Checking Kentucky’s Exemption Laws
You can find Kentucky’s motor vehicle exemption at Ky. Rev. Stat. Ann. 427.010.