If you are considering filing a Kentucky bankruptcy you may be concerned that all of your property will be liquidated or you will lose your home or car. Recently on our bankruptcy forum a user asked, “If I am filing a Chapter 7 Kentucky bankruptcy can I keep my house and car?”
Bankruptcy law protects many assets. For instance, if you file a Kentucky Chapter 7 bankruptcy you will be able to keep property which is considered exempted. How do you know what is exempt or protected? There are both federal and state bankruptcy exemptions lists, and in the state of Kentucky bankruptcy filers may choose to use either list (but not both).
Kentucky bankruptcy what property is protected?
Common Kentucky bankruptcy exemptions include a homestead exemption for real or personal property used as residence up to $5,000; insurance exemptions for annuity contract proceeds up to $350 per month; certain health insurance and disability benefit exemptions; group life insurance benefit exemptions; alimony; and child support payments and pension exemptions. Other exemptions also exist. Talk to a lawyer if you have questions about your options.
Keeping my home in a Kentucky bankruptcy
So what happens to your house when you file bankruptcy in Kentucky? If you decide to file Chapter 7 bankruptcy in Kentucky you can lose your home in two ways. First, if you file bankruptcy and stop making your mortgage payments it will not matter that you filed bankruptcy. Although the bankruptcy may stop the foreclosure process until the Chapter 7 bankruptcy is completed, which is generally three months, eventually the mortgage company will start foreclosure proceedings and sell your home. The foreclosure could also proceed before the completion of your bankruptcy if the creditor asks the court to lift the automatic stay.
Another way you can lose your house in a Kentucky bankruptcy is if you have too much equity in your home. The state of Kentucky only provides a $5,000 homestead exemption (which can be doubled for a couple filing jointly). This, however, is not much protection so it is not unusual for debtors to choose to use the federal exemption list which allows a homestead exemption of $21,625.
If you choose to file a Kentucky bankruptcy the trustee appointed to your case will evaluate how much equity you have in your house and how much could be made if it was sold and the mortgage was paid off.
Under Chapter 7 bankruptcy laws if you have more equity than what is protected by the homestead exemption the trustee will liquidate or sell the house and pay the excess to your creditors. Many homes are protected in Chapter 7 bankruptcy, however, because many debtors who file Chapter 7 do not have much equity, and if they were to sell their home there would be no profit.
Kentucky bankruptcy what about my car?
If you have a car you would like to keep and you are filing a Kentucky Chapter 7 bankruptcy the process works similar to the process for your home. For example, a car valued at $6,000 with a loan of $5500 has an equity value of $500. If you are current on the payments and the exemption for the car covers the equity, you can keep the car. If you have more equity in the car than is covered, however, it is likely the trustee will sell the car and distribute the proceeds from the car to your creditors.
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