Filing bankruptcy is the first step toward financial stability and a brighter economic future. First, you'll need to decide which type of bankruptcy is most appropriate for your financial situation. Chapter 7 and Chapter 13 are the two kinds of bankruptcy available to most consumers, and while each type provides a path out of unmanageable debt, they go about accomplishing this goal in different ways.

Chapter 7

When filing bankruptcy under Chapter 7, most unsecured debts are eliminated by the courts. These debts include credit card and medical bills, past-due rent and utility payments, and unsecured personal loans.

Like all states, Kentucky offers exemptions in Chapter 7 cases. Exemptions are specific types of personal property that cannot be sold off to repay debts in a bankruptcy case. Kentuckians can exempt a homestead, vehicle, and certain kinds of personal property, among other items.

Nonetheless, many still choose to liquidate these higher-value items to help repay creditors during the bankruptcy process. A Chapter 7 filing is well-suited to filers with little or no income, and the whole case can typically be completed in three to six months.

Chapter 13

A Chapter 13 filing does not eliminate debt but restructures it into a long-term repayment plan. This plan considers a filer's financial hardship and allows for manageable monthly payments that let you make good on your agreement to pay.

There is less need for exemptions in Chapter 13 because you are repaying your debts and do not need to offset them. A standard Chapter 13 repayment plan takes three to five years to complete. Filing bankruptcy under Chapter 13 makes the most sense for filers who have a steady monthly income source.

If a home is in foreclosure, Kentucky bankruptcy laws allow it as an exemption, but only if the owner has a specific amount of equity in it, at least $5,000 for a single filer. Chapter 13 lets a filer keep their home regardless of equity, so long as they can keep up on what is owed through the repayment plan and current monthly mortgage obligations.

If you're thinking about filing bankruptcy, explore your options in more detail with an attorney. The team at Lonneman & Associates, PLLC is here to help. Since 1981, they have been serving the Hardin, Larue, Nelson, Hart, and Grayson County areas of Kentucky. They offer representation in bankruptcies, family law cases, criminal defenses, and other legal issues. Call (270) 765-2190 or visit them online to schedule a free consultation.