Filing for bankruptcy is a very difficult and emotional decision. With layoffs and unemployment skyrocketing in the past year thanks to the COVID-19 pandemic, growing numbers of individuals and families are facing the bleak reality of personal financial difficulties. Filing bankruptcy is different for each person, and we can help you determine what option is best for you and your unique situation. Here are some of the most common concerns and questions we hear about Kentucky bankruptcy rules so you can put your mind at ease before consulting with a lawyer.
Should I File Chapter 7 or Chapter 13 Bankruptcy in Kentucky?
Whether you file Chapter 7 or Chapter 13 bankruptcy depends on your personal situation.
Chapter 7 Bankruptcy
The most common type of bankruptcy, Chapter 7, is available to individuals, married couples, corporations and partnerships. It seeks to discharge unsecured debts, which means that creditors can no longer take action to collect those debts and you will not have to repay them. Chapter 7 is a liquidation proceeding, meaning any nonexempt assets are sold or liquidated by the trustee and distributed to creditors according to the federal Bankruptcy Code.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is a repayment plan available only to individuals. It is often used by people with higher incomes or more assets such as a home. There are income and debt restrictions on filing for Chapter 13 bankruptcy, and our personal bankruptcy lawyers can help navigate the Kentucky bankruptcy rules to decide if this is the right option for you. Thinking about filing bankruptcy? Call us at (859) 781-9100 for a free consultation. We are here to help you on this difficult journey.
Under Kentucky Bankruptcy Rules, Will My Creditors Stop Harassing Me When I File?
Yes, they will! By law, all actions against a debtor must cease once the bankruptcy documents are filed. Creditors cannot initiate or continue any lawsuits, wage garnishees, or even telephone calls demanding payments. Secured creditors, such as banks holding a lien on a car, will get the stay lifted if you cannot make payments.
If I File Bankruptcy Will My Friends and Family Find Out?
This is a common question, because obviously a decision to file bankruptcy is difficult. Under Kentucky bankruptcy rules, bankruptcy filings are public documents, but in order to access them a person must have a pacer account, which would be uncommon for anyone who is not a lawyer. Many people are familiar with the Community Newspapers running police reports, criminal and civil court cases. This is not the case in bankruptcy. If you are in Boone, Kenton, Campbell, Grant, Pendleton, Bracken or Gallatin County and want to learn how bankruptcy may help you, give us a call at (859) 781-9100 for a free consultation.
When Will I Be Discharged from Bankruptcy?
One of the major purposes of bankruptcy legislation is to afford the opportunity to a person hopelessly burdened with debt to erase his or her debt and thereby get a fresh financial start. According to Kentucky bankruptcy rules, a bankrupt’s debt is erased when he or she is discharged. The debtor is discharged 3 to 5 months after bankruptcy is filed. At that time all debts (with some exceptions) are written off. Exceptions include:
- Fraudulently obtained debts
- Alimony, maintenance and child support
- Debts for willful or malicious injury to another person or property
- Government educational loans
- Debts from death or personal injury caused by drunk driving
- Debts incurred post-bankruptcy
Do Kentucky Bankruptcy Rules Allow Me to Lower My House Payment?
Sometimes. In the event you have a second mortgage that exceeds the fair market value of your home, you may be able to strip off the lien in a Chapter 13. For example, if you have a $100,000 home, with a $100,000 first mortgage and $50,000 second mortgage, the second mortgage may be able to be stripped off.
Can I Receive a Home Loan Modification While Filing Bankruptcy?
Unfortunately, most lenders are not properly administering Federal and/or State programs for which they were given money by the government during the bank bailout. In other words, banks are providing their customers inaccurate information.
This is a scenario that our firm witnesses time and time again when we help people file for bankruptcy:
- The bank tells the homeowner they must be on late payments to receive a loan modification.
- The homeowner feels obligated to miss payments to begin the process of seeking modification.
- The homeowner then faces an unending string of obstacles: the bank claims not enough information was sent in, the information needs updated, and so on.
- The customer then falls so far behind in payments that their home is in foreclosure. They receive letters advising the modification cannot be given and/or there is simply not enough time to process.
- In the meantime the person’s home is ready to be sold at the courthouse steps.
How can this situation be avoided? Unfortunately, the only way to ensure you will not lose your home in this manner is to file a Chapter 13 bankruptcy, but you will have to pay all back payments on your home during the Chapter 13 plan period. It is paid back interest-free.Waiting too long, while being told their loan is in review, often leaves the homeowner with such a large hole they cannot make the Chapter 13 payments while maintaining their current loan payments. There is nothing that prohibits a person from continuing to seek a loan modification while in bankruptcy. Your personal bankruptcy lawyer will advise the court and seek approval if you are granted a modification. The important thing is to not get too far behind to where financially the problem cannot be fixed.