Exemptions

BASIC INFORMATION

In the bankruptcy context, exempt property is property owned by the Debtor which is not subject to seizure and sale by the bankruptcy Trustee.  In a Chapter 7 proceeding, the Trustee can sell non-exempt property of the Debtor to pay the Debtor’s creditors.  The Trustee cannot sell exempt assets; they remain property of the debtor. 

The state law that is determinative of what exemptions apply is the state law where the Debtor resided in the two year period preceding his bankruptcy.  In the event the Debtor has not lived in the same state for that entire period, then the state law where he lived in for the majority of the 180 day period preceding that two year period is determinative, i.e. the period between 2 years and 2.5 years before his bankruptcy.   

KENTUCKY EXEMPTIONS

People who have lived in Kentucky for the entire two year period preceding their bankruptcy can use either Kentucky exemptions or the federal exemptions.  Since the federal exemptions are substantially more generous than the Kentucky exemptions, debtors almost always use the Federal exemptions which are found in Section 522(d) of the Bankruptcy Code.  Exemptions under that section include the following for each individual: 

1. A homestead exemption of $20,200;
2. An automobile exemption of $3,225;
3. Household furnishings exemptions of $525 for each item subject to a $10,775 aggregate limit, which applies to household goods, wearing apparel, appliances, musical instruments held primarily for personal, family or household use.;
4. Exemption for jewelry in the amount of $1,350;
5. A general or wildcard in the amount of $1,075 plus up to $10,125 of any unused household exemption;
6. An exemption of $2,025 for implements, professional books and tools of the trade of the Debtor;
7. Alimony, support and maintenance to the extent reasonably necessary for the support of the Debtor and dependents of the Debtor;
8. A payment up to $20,000 on account of personal bodily injury, not including pain and suffering, for the actual pecuniary loss of Debtor or dependent of the Debtor;
9. Retirement funds to the extent the funds are exempt from taxation under sections 401, 403, 408, 408A, 414, 457 or 501(a) of the Internal Revenue Code; and
10. Social security benefits, unemployment compensation, or a local public assistance benefit.

For most people who file bankruptcy, the above exemptions covers all of their property; and therefore they keep it all while the Trustee gets nothing.

Individuals who have not lived in Kentucky for the two year period preceding the filing of the bankruptcy would use the exemption laws of the state where they lived for the largest portion of the 180 day period preceding that two year period. 

INDIANA EXEMPTIONS

People who have lived in Indiana the entire two year period preceding the filing of their bankruptcy cannot use the federal exemptions and must use the Indiana exemptions which are found in Indiana Code.  Those exemptions include:

1. Up to $7,500 of real estate or personal property constituting the personal or family residence of the debtor;
2. Up to $4,000 of other real estate or personal property of the debtor;
3. Up to $100 intangible personal property (provided that these first three classes does not exceed $10,000);
4. Real estate held as tenants by the entireties;
5. Professionally prescribe health aids; and
6. Most retirement plans.

Individuals who have not lived in Indiana for the two year period preceding the filing of the bankruptcy would use the exemption laws of the state where they lived for the largest portion of the 180 day period preceding that two year period.