Lexington, KY Bankruptcy: Chapter 7 or 13, Exemptions, Filing

Filing bankruptcy in Lexington, KY begins at the U.S. Bankruptcy Court for the Eastern District of Kentucky at 100 East Vine Street, Suite 200. Before you walk in the door, you need to choose between Chapter 7 and Chapter 13, finish a credit counseling course from an approved agency, pull together your financial records, and pay a court filing fee of $338 for Chapter 7 or $313 for Chapter 13.1United States Courts. Bankruptcy Court Miscellaneous Fee Schedule The decisions you make early — especially which set of exemptions to claim — determine whether you keep your home and your car.

Chapter 7 or Chapter 13

Most Lexington filers end up in one of two chapters. Chapter 7 wipes out qualifying debts by liquidating any property that exemptions don’t cover, and the case usually closes in about four months.2United States Courts. Discharge in Bankruptcy If your income is modest and your valuable assets fit within the exemptions, it’s the fastest path to a clean slate.

Chapter 13 keeps your property in your hands and lets you repay some or all of what you owe through a court-approved plan that runs three to five years.3United States Courts. Chapter 13 – Bankruptcy Basics People reach for Chapter 13 when they’ve fallen behind on a mortgage or car loan and need breathing room to catch up without losing the collateral. You need regular income to qualify, and statutory caps limit how much debt you can carry into a Chapter 13 case.4Office of the Law Revision Counsel. 11 USC 109 – Who May Be a Debtor

Do You Qualify for Chapter 7 in Kentucky

You can’t simply pick Chapter 7 because you prefer it. Federal law uses a means test that compares your household’s average monthly gross income over the six months before filing to the Kentucky median income for a household your size.5United States Department of Justice. Means Testing Fall below the median and you pass automatically. No trustee or creditor can challenge your Chapter 7 filing on means-test grounds.6Office of the Law Revision Counsel. 11 USC 707 – Dismissal of a Case or Conversion

The current Kentucky median income thresholds published by the U.S. Trustee Program are:7United States Department of Justice. Median Family Income Table

  • 1 person: $60,071
  • 2 people: $71,998
  • 3 people: $83,027
  • 4 people: $106,637
  • Each additional person: add $11,100

Earn more than the median and you aren’t automatically shut out. You run a longer calculation that subtracts allowable living expenses, and only if enough disposable income is left after those deductions does the court presume Chapter 7 would be an abuse.

What to Do Before You File

Credit Counseling

Every individual filer has to complete a credit counseling course from a U.S. Trustee-approved agency within 180 days before filing the petition, and the certificate of completion goes in with your paperwork.8United States Department of Justice. Credit Counseling and Debtor Education Information Most approved providers offer it online or by phone, and it runs about an hour. Skip it and the court will dismiss your case.

Pull Together Your Records

Your petition requires detailed financial disclosures backed by documentation. Gather these before you start drafting or sit down with an attorney:

  • Pay stubs for the last six months and tax returns for the last two to four years
  • Statements for every bank account covering the last six months
  • Statements for credit cards, medical bills, car loans, student loans, and any court judgments against you
  • Your home deed, vehicle titles, mortgage statements, and retirement account statements
  • Proof of Social Security, disability, or veterans benefits if you receive them

The trustee will compare what you report on the petition to what the documents show, and gaps between the two create problems you can avoid by gathering everything first.

Filing Fees

The court charges $338 to open a Chapter 7 case and $313 for Chapter 13.1United States Courts. Bankruptcy Court Miscellaneous Fee Schedule If you can’t pay the Chapter 7 fee upfront, you can ask the court to let you pay in installments, or request a full waiver if your household income is below 150 percent of the federal poverty line and installments are also out of reach. Chapter 13 filers aren’t eligible for fee waivers.

Beyond the court fee, expect to pay $20 to $50 for each of the two required education courses, plus attorney fees. A straightforward Chapter 7 in the Lexington area typically costs considerably less in attorney fees than a Chapter 13 case, where the attorney’s fee is usually built into the repayment plan.

Where You File

Lexington sits in the Eastern District of Kentucky, and the courthouse is in the Community Trust Building at 100 East Vine Street, Suite 200, Lexington, KY 40507.9United States Bankruptcy Court for the Eastern District of Kentucky. United States Bankruptcy Court for the Eastern District of Kentucky You can file here if Lexington has been your home for the majority of the 180 days before you file, or if your principal assets have been in this district for that stretch.10Office of the Law Revision Counsel. 28 USC 1408 – Venue of Cases Under Title 11 Filing the complete package with the clerk opens your case, generates a case number, and triggers appointment of a trustee.

Protecting Your Home, Car, and Belongings

Exemptions decide what you keep. In Chapter 7, any property outside an exemption can be sold to pay creditors. In Chapter 13, exemptions set the floor for how much your repayment plan has to pay unsecured creditors. Kentucky lets you pick between the state exemption system and the federal exemption system, but you have to pick one. No mixing allowed.11Justia Law. Kentucky Revised Statutes 427.170 – Federal Bankruptcy Code Exemptions Applicable in Kentucky

Kentucky State Exemptions

Kentucky’s figures are modest:

Federal Exemptions

For most Lexington filers, the federal exemptions protect far more. The federal homestead exemption shields up to $31,575 in home equity, more than six times the Kentucky amount.15Office of the Law Revision Counsel. 11 USC 522 – Exemptions The federal motor vehicle exemption covers up to $5,025. The federal wildcard runs $1,675 plus up to $15,800 of any unused homestead exemption, so a renter or someone with little home equity can protect more than $17,000 in other property.

These federal numbers apply to cases filed between April 1, 2025, and March 31, 2028, and married couples filing jointly can double them.15Office of the Law Revision Counsel. 11 USC 522 – Exemptions Kentucky’s state system makes sense in narrow situations, such as debtors with farmland or livestock covered by state-specific protections. If you own a home in Lexington with more than $5,000 in equity, the federal set is almost always the better choice.

After You File

The Automatic Stay Stops Collection

The moment your petition is filed, a federal court order called the automatic stay takes effect. Creditors have to stop collection activity immediately: no calls, no lawsuits, no wage garnishments, no foreclosure proceedings.16Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay The stay runs until the case is closed, dismissed, or the debt discharged, and creditors who violate it can face sanctions. If you filed and dismissed a bankruptcy case within the past year, the stay may last only 30 days or may not apply at all, so a repeat filing needs extra planning.

The 341 Meeting of Creditors

Between 20 and 40 days after you file, you’ll attend a short hearing called the meeting of creditors, or 341 meeting. Creditors rarely attend. The trustee runs the meeting, verifies your identity with a photo ID and Social Security card, and asks questions under oath about your finances and the accuracy of your petition.17United States Department of Justice. Section 341 Meeting of Creditors No judge is present. When the paperwork is in order, most meetings wrap up in about ten minutes.

The Second Course and Your Discharge

Before the court will issue your discharge, you have to complete a second education course focused on budgeting and personal financial management. This debtor education course is separate from the pre-filing counseling.18United States Courts. Credit Counseling and Debtor Education Courses Miss it and you’ll have filed the case without getting the debt relief at the end.

In Chapter 7, the discharge order usually arrives about four months after the petition date.2United States Courts. Discharge in Bankruptcy Chapter 13 filers receive their discharge after they finish the three-to-five-year repayment plan.

Debts That Survive Bankruptcy

Not everything is wiped out. Federal law carves out categories of debt that survive regardless of which chapter you file:19Office of the Law Revision Counsel. 11 USC 523 – Exceptions to Discharge

  • Child support and alimony are never dischargeable.
  • Recent income taxes and any taxes tied to fraud or unfiled returns survive. Older tax debts may qualify if the returns were filed on time and the taxes were assessed more than 240 days before the petition.
  • Student loans are dischargeable only if you prove repayment would cause undue hardship, which requires a separate lawsuit within your bankruptcy case and is hard to win.
  • Debts from fraud, false financial statements, or intentional injury to another person or their property.
  • Criminal restitution ordered by a court.

If most of what you owe sits in one of these categories, bankruptcy may not deliver the relief you’re looking for. Work out which of your debts qualify before you file.

Credit Impact and Filing Again Later

A bankruptcy filing can remain on your credit report for up to ten years from the date the case is filed, the legal maximum under the Fair Credit Reporting Act for both Chapter 7 and Chapter 13.20Office of the Law Revision Counsel. 15 USC 1681c – Requirements Relating to Information Contained in Consumer Reports The major credit bureaus voluntarily remove completed Chapter 13 cases after seven years.21Central District of California, United States Bankruptcy Court. Credit Report, How Do I Get a Bankruptcy Removed From My Report By the time most people file, their credit is already damaged from missed payments and collections, and scores often start recovering within a year or two of discharge.

Federal law also limits how often you can get a discharge:

  • Chapter 7 after Chapter 7: eight years must pass between filing dates.22Office of the Law Revision Counsel. 11 USC 727 – Discharge
  • Chapter 13 after Chapter 7: four years from the date you filed the earlier Chapter 7.23Office of the Law Revision Counsel. 11 USC 1328 – Discharge
  • Chapter 13 after Chapter 13: two years from the earlier filing date.23Office of the Law Revision Counsel. 11 USC 1328 – Discharge

You can file a new petition before these periods expire, but the court won’t grant a discharge. Some people file anyway for the automatic stay’s short-term protection during a crisis, but without the discharge, the main benefit of bankruptcy isn’t on the table.