Home ownership is often considered an integral part of the American dream. Being in control of your home is a great asset that lends itself to feeling successful and accomplished. However, that can come crashing down quickly when the cloud of bankruptcy looms overhead. But, the first thing you should understand is that if you file for bankruptcy you can keep your home.
Yes, you read that correctly, you can keep your home when filing for bankruptcy if you fall within the exemption guidelines.
Not every bankruptcy case is the same, but here are some basic principles of bankruptcy exemptions in Kentucky.
Exemptions are specific laws that allow you to protect certain property from your creditors.
When filing Chapter 7 bankruptcy, exemptions are what you can keep and when filing Chapter 13, they play a role in how much is repaid through your payment plan.
In the state of Kentucky, the federal bankruptcy exemption is $22,975 and can be used for homes, condos, co-ops, and mobile homes. If you’re married, this exemption doubles for a total of $45,950.
This stands in stark contrast to the state homestead exemption of $5,500 per filer. Doubled, that gives you only $11,000 to claim.
To use an example, let’s assume your home is worth $100,000. You owe the mortgage lender $60,000 because you are little more than halfway through your mortgage. Under the federal homestead exemption, your house and its equity are exempt from the trustee’s bankruptcy estate and from recovery.
Keep in mind, this is in reference to a permanent residence, and may not apply to second homes.
If you live in Tennessee however, the homestead exemption gets much murkier, and deserves a topic all its own. Join us next time as we tackle that specific topic.
In Kentucky, call (270) 388-9951, or for our Tennessee office call (931) 647-9976. You can also like our Facebook page, or shoot us an e-mail! We would be happy to assist you.
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