A host of major calamities that affect personal economics – whether from family members suffering unexpected medical emergencies or, as has happened to so many Kentucky residents over the past year, unexpected lay offs and business slow downs resulting from the larger financial troubles affecting most of the United States – has lead many Kentucky consumers inexorably to the bankruptcy court. Somewhat reasonably, beset by phone calls from collection agents and overwhelmed by bills and threatening letters, Kentucky borrowers too often push the growing debt loads from their minds, and, after they’re unable to attain further credit and unable to make the minimum payments (even by taking money out of different cards), they too quickly decide that bankruptcy would be the final option. Admittedly, for ordinary Kentucky borrowers that cannot easily devise any legal and practical method to satisfy their collected unsecured creditors – leaving aside the secured loans such as home mortgages that they may reasonably consider to be investments – bankruptcy protection certainly might appear to be the obvious next step. However, recent alterations to the United States bankruptcy code have muddied the former simplicity of Chapter 7 debt elimination, and, for a tragically significant portion of Kentucky consumers, such protections may no longer apply. Of course, when making any decision about Chapter 7 or Chapter 13 bankruptcies, there’s any number of variables to be considered, but more than a few important lessons about bankruptcy should be completely understood before any Kentucky borrower takes such a potentially disastrous step.
Chapter 7 bankruptcy, even for the most desperate and debt ridden Kentucky resident, was always considered a dangerous action to be expressly reserved for those consumers without any other hope of restoring household financial permanence. The consequences regarding credit ratings are at least somewhat known by all residents of Kentucky, but there are other, far more pernicious repercussions now lingering past declaration . Even those borrowers who never imagined that they would one day encounter personal experience with the program vaguely comprehended that the FICO credit scores of consumers filing for bankruptcy would be severely diminished, and, of course, everyone has at least witnessed the court auctions of property confiscated by the bankruptcy courts. Still, over the past two decades, fewer and fewer of the debts held by borrowers were allowed liquidation through the bankruptcy process. Most income and property taxes were always set apart from governmental assistance, of course, and alimony or child support or fiduciary recompense from criminal trials would never have been part of bankruptcy proceedings. However, educational loans – including those burdens that were borrowed from private lenders – have also been shielded from bankruptcy protection without care to what may have happened to the Kentucky students and their family co signers since the loans were first taken out. Credit card bills, collection accounts, and, the fastest growing segments of Chapter 7 debt elimination petitions, medical debts (which, should elements of congress have their way, are next on the list to be denied liquidation) still face elimination should the declaration of bankruptcy be approved by the Kentucky court trustee. Unfortunately, as the bankruptcy laws are currently set, that court approval is far from guaranteed.
As of October 17, 2005, the demonstrable need of the Kentucky household was largely rendered irrelevant from judicial consideration after legislation pushed through the United States House Of Representatives decided that Kentucky consumers’ Chapter 7 bankruptcy eligibility would no longer be determined by the amount of money owed to unsecured lenders but instead by the amount of money that the individuals or couples filing had earned over much of the last year. Examining Kentucky debtors’ suitability for the bankruptcy program by purely looking at one aspect of their economic narrative makes as little sense as appraising a house by skimming title deeds, but, as repercussions from another unnecessary meddling of statutes within the national bankruptcy code, the judicial trustee appointed by the Kentucky court system now has far less liberty in the dispensation of advice and sympathy for borrowers whose income – no matter the amount – couldn’t possibly cover their debt holdings. According to the most recent census data (which changes regularly, of course, prospective filers for bankruptcy should make certain that they have ascertained current information from the government websites), the median earnings of a single Kentucky resident was just over thirty seven thousand dollars. It’s said to be forty three thousand dollars for a household with two members, fifty two thousand for a household with three members, and sixty one thousand for four members – plan for another seven thousand dollars for each additional member.
There’s an additional step that debtors who’ve been officially judged too wealthy for bankruptcy despite the sad realities of their everyday existence could attempt to employ for Chapter 7 bankruptcy. This means test, as it’s called, asks the trustee to calculate the Kentucky filer’s monthly obligations, educational expenditures, secured loans, governmentally imposed debts, and ordinary household expenses over the past six months, and, once the prior income’s added alongside, the Kentucky court official shall make a ruling about whether or not the family petitioning for debt elimination would be likely to afford one hundred dollars every month for the next five years. Unfortunately, much as this means test would seem to redress some of the essential inequities currently built into the modern bankruptcy code, the expenses that the trustee shall be forced to incorporate during the process of deliberation were put together by the Internal Revenue Service to create a figure approximating the day to day operating costs of the average Kentucky family, and, as should be assumed, these estimations couldn’t be further from the genuine budgetary constraints of households throughout our state. It should seem common sense, really. The costs of living for areas of Louisville could be more than double the household expenses of rural Kentuckians, and the specific requirements of every family vary so greatly. Nevertheless, the congressionally enforced bankruptcy code strictures and fantastically undervalued Kentucky expenses as directed by the IRS have dramatically reduced the opportunities for average borrowers to employ Chapter 7 debt liquidation when attempting to better their family’s financial condition.
Still and all, even for those Kentucky residents who manage to break through the ever greater restrictions preventing ordinary borrowers from attempting the liquidation of their unsecured obligations through Chapter 7 debt liquidation, the greatest threat may yet be still to come. Most bankruptcy cases were once judged to be ‘no asset’ proceedings because the resale value of ordinary Kentucky household goods simply wouldn’t be considered worth the cost of reclamation and borrowers whose financial failings necessitated the Chapter 7 petition wouldn’t be likely to still hold liquid assets of much significance (and, the property of middle class Kentucky families that held obvious value like automobiles or primary residences could almost always be presumed to be essentially owned by the mortgage lender or loan official). Since the formal bankruptcy petition now asks Kentucky borrowers to list each and every one of their household possessions according to the potential replacement value of the items, the process of Chapter 7 bankruptcy declaration has become much more treacherous for even those Kentucky households that consider themselves of ordinary means. The national regulations have been forcibly winnowed to vouchsafe only the bare necessities for family life, and, should the filers’ property fall on the wrong side of these guidelines, the government would have every legal authority to enter their homes and seize family heirlooms or objects of little actual worth to any auction crowd that yet contain sentimental value beyond words for the Kentucky household that had no idea their tangible family history could be so easily ripped away from then just because they attempted to settle their debts in a historically validated manner.
While the new bankruptcy statutes have unfairly dispossessed borrowers across the nation, much to the surprise of the citizens who had filed for Chapter 7 debt elimination before properly researching the new practicalities of bankruptcy protection, residents of Kentucky are guaranteed decidedly greater shelter from the worst excesses of the 2005 legislation. Each state provides their own property exemptions that consumers filing bankruptcy within their state could utilize to safeguard their possessions and benefits as a separate (and virtually always superior) corollary to the minimal exemptions which the national government grudgingly provides. The state legislature of Kentucky, in particular, has been exceptionally gracious in the protections that they provide consumers who could demonstrate legal proof of residence, and, while a complete list of all of the miscellaneous line item exemptions Kentucky grants its citizens could fill pages upon pages, your authors would like to use the space provided for a brief illustration of what would and would not be considered safe from the bankruptcy courts. In terms of the homestead exemption and all real property owned by Kentucky residents, borrowers are only technically allowed to maintain five thousand dollars equity in any specific asset. This may seem an unexpected dividend to the larger economic collapse crippling our nation since a borrower’s home equity will depend upon the property’s recent appraisal value as calculated against the dollar amount owed to the secured lender, but, even before the real estate market in Kentucky and the entire south bottomed out (and the foreclosure court proceedings entered into such a ridiculous log jam), the creditors were loathe to actually spend the time and money upon recovering real property. Except in the most unusual of circumstances, Kentucky court trustees shall merely force borrowers and lenders to re-negotiate their mortgages to more comfortable terms that the home owners could more easily repay.
With household goods, the exemptions are a bit more difficult to explain under Kentucky statutes (though, again, they are far more beneficial for debtors fortunate enough to claim Kentucky residency than what has been allowed other American citizens left to the mercy of the negligible national safeguards), but there are some specific boundaries that consumers within our state should understand. Household furnishings, for instance, are exempted to a limit of three thousand dollars, but, above and beyond furniture, linens, and essential appliances, the loop hole can also involve clothing for the Kentucky family as well as jewelry. As with so many aspects of Chapter 7 bankruptcy declaration in the modern age, this is yet another reason why borrowers determined to try their hand at bankruptcy protection should do whatever necessary to afford of the trained expertise of law firms schooled in both the rigid guidelines imposed by the United States bankruptcy code and the rather more malleable local exemptions which skillful attorneys can tweak to the Kentucky household’s best advantage. Any medical aids are ignored by the Kentucky court trustee, of course, but, from there, things may grow more complex. Medical benefits that resulted from court reparations following motor vehicle accidents or wrongful death law suits are thoroughly guarded no matter the amount, but other personal injury benefits would be garnished after seventy five hundred dollars payment. Motor vehicles themselves could have no more than twenty five hundred dollars value once the owner’s current loan value had been deducted from the blue book value: which, given the rate of automobile depreciation, shouldn’t be much of an issue for Kentucky residents genuinely having trouble facing their consumer debt barrage.
Again, there’s a decently sized book to be written purely elaborating the myriad exemptions that the state of Kentucky reserves purely for their residents declaring Chapter 7 debt elimination bankruptcy. Burial plots and funds specifically reserved for funeral proceedings have a five thousand dollar exemption. Life insurance policy benefits within Kentucky are exempted without limit provided that the signature beneficiary’s a married woman and, as well, if the policy was part of a group or cooperative effort; otherwise, the benefits may be split up among lenders unless the life insurance agent made sure to include a clause within the original contract legally binding the proceeds from being attached by lenders. Compensation for worker’s injury, unemployment insurance, and monetary rewards awarded from criminal trials are all above seizure. Pensions, 401ks, disability assistance, alimony, child support, and all duly earned public benefits shall be similarly exempted. Income that was earned prior to the filing of the official petition but not yet paid to the head or heads of household declaring bankruptcy in Kentucky could be diminished by as much as a quarter of what has been owed, but, in this alone, the judicial magistrate serving as court trustee shall be legally allowed some degree of leniency based upon their understanding of the particular situation. As we have hopefully illustrated, ordinary borrowers in Kentucky this millennium yet weighing the advantages of bankruptcy protection essentially demand the carefully deliberated opinions of attorneys who’ve spent no small amount of time parsing the various conflicting Kentucky and federal statutes to effectively guard the best interests of the clients and their households.
Kentucky regulations concerning bankruptcy have, owing to various interests plumping up the attentions of the local legislature, grown so intricate that the effects of Chapter 7 bankruptcy declaration within our state shall depend as much as anything upon the career choice of the Kentucky debtor filling out the bankruptcy petition. The tools of trade (including livestock and mechanical equipment) of a farmer are exempted to the tune of three thousand dollars. Lawyers, religious officials, and most doctors – there’s a listing within the Kentucky statute both weirdly specific and seemingly misguided; surgeons, dentists, and physicians are granted precisely the same exemptions as chiropractors and veterinarians – are permitted tools of trade (in this case, instruments, office furnishings, professional library, and so on) up to only twenty five hundred dollars: plus the additional thousand dollars of ‘mad money’ given to every filer. All those other Kentucky consumers searching out Chapter 7 debt elimination bankruptcy assistance who yet maintain careers that depend considerably upon their supposed assets, from architects to mathematicians, may find their particular vocation troublingly unmentioned within the state charter. Despite the calcified Chapter 7 regulations and the federal code’s seeming opposition to bending any rules upon the local county levels, however, attorneys experienced in both the theory and the practice of Kentucky bankruptcy law have exhibited great success in juggling the system’s labyrinthine minutiae to force protection for the benefit of their clients.
As every Kentucky consumer should already understand, effective legal navigation through the institutionally erected penalties of Chapter 7 bankruptcy protection won’t come for cheap. Actually, weird as this may sound to Kentucky borrowers who hadn’t any reason to previously investigate the program, bankruptcy costs quite a bit of money. Debtors within our state considering governmental protection should remember to budget the hundreds of dollars demanded by the Kentucky courts for administrative expenses that must be submitted alongside the formal petition: the county clerk doesn’t take checks and offering credit cards would be rather poor taste. Before a Kentucky consumer’s declaration paperwork would even be accepted, for that matter, the potential filer would have to show the de facto diploma from one of the consumer counseling classes that the federal government, according to the 2005 regulations, demands each new filer must pass. These course aren’t cheap (nor, for, Kentucky residents in more rural area, shall they be easy to attend), and, as with all of the additional hurdles newly associated with the Chapter 7 debt elimination bankruptcy procedure, the debt relief course requirements were expressly imposed by the national legislature to persuade ordinary borrowers in Kentucky and the rest of the United States to avoid the program. To a point, the corporate political action groups have done what they set out to do. Kentucky borrowers with enough income to afford proper legal counsel and sufficient time and capacity to meet course requirements would not probably be admitted to the Chapter 7 program.
As more and more middle class households in Kentucky and the rest of America began to realize the new limitations that congress had willfully placed upon the bankruptcy protection designed by our forefathers, several other private entities attempted different means of debt relief. While the debt consolidation equity loan has largely disappeared alongside the sub prime mortgage industry that first propagated such an intrinsically destructive solution (tying credit card debts to the family shelter should’ve seemed foolish even before the Kentucky real estate market’s free fall tore equity from most every primary residence), other avenues still exist. If anything, the elimination of unsecured consumer debt has become something of a boom market throughout America, and Kentucky borrowers that recognize the potential pitfalls bankruptcy protection represents would be well advised to examine all possibilities. Debt settlement negotiation, for instance, utilizes the threat of Chapter 7 bankruptcy protection against the creditors to force reductions of the balances owed in exchange for a promise of partial payment. The debt settlement professionals don’t offer much more than experienced, skilled, and nationally certified negotiation techniques which have been proven to effectively cut the credit accounts of their Kentucky clients by more than half without undue FICO score distress and with an identifiable, reasonably met date for the satisfaction of all loans. Once many Kentucky borrowers seriously examine the impact of that last sentence – efficient debt settlement negotiation does focus upon eliminating all unsecured loans within five years of signing – they’ll realize that the settlement program won’t meet every household need. Even the wealthiest and most disciplined of Kentucky debtors may simply hold financial burdens that are of the wrong sort or which belong to the wrong lender. Above all else, though, much as the Kentucky debtors would do their loved ones a disservice by entering bankruptcy protection without fully understanding the limitations of the program as it currently stands, they would be just as lazy and short sighted in turning away a free consultation with debt settlement negotiation providers before they were absolutely certain the settlement solution would not be a possibility.
The decision to reach out for help with your debt is not one that's easy to make. You were raised to "do the right thing", but now it’s nearly unbearable. You struggle along while your creditors are turning up the heat. And now you’re at the point where the late fees, penalties and interest expense make it impossible to keep your head above water.
Ask yourself this. If you could eliminate your debt without permanently damaging your credit, why wouldn't you?
