One of the most important questions in a Chapter 7 bankruptcy proceeding is whether and to what extent a struggling family in Louisville might be able to claim their property as exempt from collection.
To understand what exemptions are, on first has to remember the basic idea of a Chapter 7 bankruptcy. Basically, a Chapter 7 involves a kind of agreement between the family and its creditors, and the court, that in exchange for eliminating debt, the family will surrender some of its property to creditors through a court officer called the bankruptcy trustee. The trustee will sell this property and pay creditors with it.
However, Kentucky law allows families to exempt some of their property from sale during a bankruptcy or, for that matter, even outside of a bankruptcy in a collection matter. The idea behind these rules is that while a debtor should pay back his or her debts, the family really can’t get a fresh financial start if they have lost all of the property in the process of getting their debts discharged. The state does not want to leave people penniless after financial troubles.
The exemptions in Kentucky cover many different types of property; moreover, in a bankruptcy, some exemptions allowed under federal law may be available to Kentucky debtors. While these exemptions may not always be for as much as one would hope, such is in the case of the only $10,000 in home equity which a married couple can claim, they all help debtors to some extent since they can keep their necessary property and their income-producing tools.
What sort of property is or is not exempt in a Chapter 7 can be a complicated question best answered by a qualified Louisville bankruptcy attorney.