If you file for Chapter 7 bankruptcy in Kentucky, you can use Kentucky’s bankruptcy exemptions to protect your property. Kentucky’s bankruptcy exemptions also play a role in Chapter 13 bankruptcy. Continue reading to learn what property is protected by Kentucky’s bankruptcy exemptions.
The Bankruptcy Exemptions in Kentucky
Exemptions are specific laws that allow you to protect certain property from your creditors, such as your car or home. If you file a Chapter 7 bankruptcy, you can keep the items that are protected by Kentucky’s bankruptcy exemptions. If you file for Chapter 13 bankruptcy, Kentucky’s bankruptcy exemptions play a role in how much you repay your creditors through your Chapter 13 plan.
Federal Exemptions Available in Kentucky
Kentucky has its own state exemptions that you can use when you file a bankruptcy. There is also a set of bankruptcy exemptions established by federal law (called the federal bankruptcy exemptions). In Kentucky, you may choose between the state and federal exemptions. However, you may not mix and match -- you must choose either the Kentucky or the federal exemptions.
If you choose to use the Kentucky bankruptcy exemptions, you may also use any of the applicable federal non-bankruptcy exemptions. The federal non-bankruptcy exemptions protect items such as federal and military retirement accounts and veteran’s benefits.
Married Couples May Double Kentucky Exemptions
Married couples who file a joint bankruptcy in Kentucky are allowed to “double” the exemption amounts, meaning if you and your spouse file a joint bankruptcy, you may each claim the full exemption amount for any property belonging to you. Note that you may only claim an exemption and protect property that belongs to you.
To learn more about bankruptcy exemptions, including how they work, which state exemption system you should use, and special rules for the homestead exemption, see Nolo’s Bankruptcy Exemptions topic page.
Commonly Used Kentucky Bankruptcy Exemptions
Below is a list of commonly used Kentucky bankruptcy exemptions. Unless otherwise indicated, all references are to the Kentucky Revised Statutes Annotated.
Up to $5,000 worth of equity in any real or personal property in Kentucky that you use as a permanent residence. You may use your homestead exemption to protect a burial plot for yourself or your dependent. Ky. Rev. Stat. Ann § 427.060 & 090
Example. You own a home worth $120,000 and you owe $116,000 to the mortgage lender; which means you have $4,000 worth of equity in your home. You can protect the full value of your home with the Kentucky homestead exemption.
To learn more, see The Kentucky Homestead Exemption.
Ky. Rev. Stat. Ann § 427.010(1) protects:
- Up to $3,000 worth of household furnishings and clothing.
- Up to $3,000 worth of tools, equipment, and livestock used in farming.
- Up to $2,500 of equity in 1 motor vehicle with accessories, including 1 spare tire.
- Professionally prescribed health aids for you or your dependent.
Ky. Rev. Stat. Ann § 427.150 protects:
- Alimony and support, to the extent reasonably necessary for you and your dependents’ support.
- Crime victim’s reparation funds.
- Wrongful death award from the death of a person upon whom you were dependent.
- Up to $7,500 of value in a personal injury award resulting from injury to your self or your dependent, to the extent reasonably necessary for the support of you and your dependents.
- Awards for loss of future earnings, to the extent reasonably necessary for the support of you and your dependents.
Pensions and Retirement Accounts
ERISA-qualified retirement accounts. Ky. Rev. Stat. Ann § 427.150
Police or firefighters’ pensions established in a city of the first, second, or third class (except for the payment of child support). Ky. Rev. Stat. Ann § 427.120
Firefighters’ pensions. Ky. Rev. Stat. Ann. § 67A.620; Ky. Rev. Stat. Ann. § 95.878
Police officers’ pensions. Ky. Rev. Stat. Ann. § 427.120; Ky. Rev. Stat. Ann. § 427.125
State employees’ pensions. Ky. Rev. Stat. Ann. § 61.690
Teachers’ pensions. Ky. Rev. Stat. Ann. § 161.700
Aid to blind,aged, disabled. Ky. Rev. Stat. Ann. § 205.220(c)
Public assistance, includes earned income tax credit if eligible for Kentucky benefits. Ky. Rev. Stat. Ann. § 205.220(c); In re Beltz, 263 B.R. 525 (Bankr. W.Dl. Ky. 2001)
Unemployment compensation. Ky. Rev. Stat. Ann. § 341.470(4)
Workers' compensation. Ky. Rev. Stat. Ann. § 342.180
Tools of the Trade
Up to $300 worth of tools that you use in your trade and up to $2,500 of value in one motor vehicle and accessories, including one spare tire, if you are a mechanic or other skilled tradesperson who repairs or services mechanical, electrical, or other equipment. Ky. Rev. Stat. Ann § 427.030
Up to $1,000 of value in a professional library, office equipment, instruments, or furnishings that are necessary to the practice of an attorney, minister, physician, veterinarian, or dentist and up to $2,500 of value in one motor vehicle and one spare tire. Ky. Rev. Stat. Ann § 427.040
Proceeds or benefits paid or to be paid by a cooperative life or casualty insurance company. Ky. Rev. Stat. Ann § 427.110
Life insurance proceeds if clause prohibits proceeds from being used to pay beneficiary's creditors. Ky. Rev. Stat. Ann. § 304.14-350
Life insurance proceeds or cash value if beneficiary is someone other than insured. Ky. Rev. Stat. Ann. § 304.14-300
Group life insurance proceeds. Ky. Rev. Stat. Ann. § 304.14-320
Up to $1,000 of value in any real or personal property. Ky. Rev. Stat. Ann § 427.160. (To learn more, see The Kentucky Wildcard Exemption.)
Confirming the Kentucky Bankruptcy Exemptions
This list includes some of the more commonly used Kentucky bankruptcy exemptions, but there are numerous other exemptions available to protect specific property. You can verify the current exemption amounts at the website of the Kentucky Legislature or by checking the statutes yourself. (To learn how to do this, see Nolo’s Legal Research Center).