Kentucky Bankruptcy Law

Counsel with Care

Federal versus Kentucky exemptions

It has only been a handful of years that Kentucky residents entering bankruptcy could choose to use the federal law exemptions of 11 U.S.C. Sec. 522 instead of the Kentucky exemptions (many, but not all Kentucky exemptions are in Chapter 427 of the Kentucky Revised Statutes). Most debtors in Kentucky choose to apply the federal exemptions because of the much more generous homestead and general (a.k.a. “wild card”) exemptions. However, it is important that your bankruptcy practitioner is aware of the Kentucky exemptions because your situation may be the exception to that general rule.

An example of where this would matter is if you have used whole life or cash value life insurance policies as an investment strategy. Instead of retirement accounts that are 100% exempt under the federal or Kentucky exemptions, you have $50,000.00 in cash value accrued in whole life insurance policies. Under the federal exemption, you will only be able to cover $11,525.00 of that $50,000.00 (unless you have some wild card exemption left over). If it is a qualifying insurance company, that entire $50,000.00 would be exempt under KRS Sec. 427.110. Your bankruptcy attorney should be able to recognize those exceptions and determine which set of exemptions will help your retain the most assets.

Advertisements

March 16, 2011 - Posted by | Bankruptcy, Exemptions | , , , ,

2 Comments »

  1. […] Debtors want to keep their stuff. As George Carlin has noted at some length, our stuff is important to us and drafters of the bankruptcy code felt the same way. The avenue to retaining possessions is through the use of exemptions. The overly simplified explanation of exemptions is that you can exchange the exemption that the code provides to you for the property you want to keep. Everyone is afforded certain exemptions. In many state, such as Kentucky, you can elect to use the federal exemptions under 11 U.S.C. Sect. 522(2) or state law exemptions under 11 U.S.C. Sect. 522(3). I touched on this choice briefly in an article about the importance of knowing state law exemptions as well as the federal. […]

    Pingback by Keeping your property through bankruptcy: How exemptions work « Kentucky Bankruptcy Law | March 18, 2011 | Reply

  2. […] Debtors want to keep their stuff. As George Carlin has noted at some length, our stuff is important to us and drafters of the bankruptcy code felt the same way. The avenue to retaining possessions is through the use of exemptions. The overly simplified explanation of exemptions is that you can exchange the exemption that the code provides to you for the property you want to keep. Everyone is afforded certain exemptions. In many state, such as Kentucky, you can elect to use the federal exemptions under 11 U.S.C. Sect. 522(2) or state law exemptions under 11 U.S.C. Sect. 522(3). I touched on this choice briefly in an article about the importance of knowing state law exemptions as well as the federal. […]

    Pingback by Troutman & Napier, PLLC | Keeping your property through bankruptcy: How exemptions work | December 8, 2014 | Reply


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: