Kentucky Bankruptcy Law

Counsel with Care

Tips for Tough Times #1

It is human nature: we often wait until the last possible moment (or later) to seek help we need. This goes for medical issues, retirement planning, home repair, etc. It is doubly true for legal matters. This is unfortunate because lawyers can be so much more effective (and less expensive) acting preemptively rather than reacting to a crisis. Consulting an attorney practicing in bankruptcy law can benefit one whether filing is imminent or a distant possibility.

One example of the benefit of a proactive use of an attorney is evident during tough financial times. Many people are still experiencing layoffs in our present economy even though the employment numbers show improvement. During these times, it is tempting to dip into retirement savings despite tax penalties or deplete one’s home of any remaining equity. While these offer lower initial costs compared to higher interest credit cards, they may be incredibly costly in the long run.

An individual in Kentucky can claim up a little over $22,600 in a homestead exemption and a married couple can claim double that in a Chapter 7  or Chapter 13 bankruptcy. So, if you have considerably more than that exempt amount in equity in your home, it is smart to obtain a loan secured on your property to make ends meet while searching for work. However, if possible, you do not want to borrow past that exemption threshold so that you can maximize post-bankruptcy resources to re-bound if it comes to that course of action.

To make sure this is kept in perspective though, you must be able to afford the payments on the loans secured by your house subsequent to a Chapter 7 filing for this to work. You also do not want to run up debts on luxury or fluff items – this strategy is for the necessities of food, clothing, shelter, and medical care.

Of course, this is a strategy for temporary events beyond your control, such as being laid off or suffering a major injury, where you expect things to turn around in a matter of several months. Because of all these complexities, the general suggestions I am offering need to be applied to your specific situation. The facts in your situation may call for a very different strategy so it is worthwhile to invest in preventive legal counsel.

All of this comes together for my point: when economic difficulties begin, seek the counsel of an attorney early to plan well.

March 11, 2013 Posted by | Bankruptcy, Exemptions, Planning, Pre-filing planning | , , , , , | 1 Comment