Kentucky Bankruptcy Guide

Complete guide to filing bankruptcy in Kentucky, including current median income requirements, Kentucky's homestead exemption up to $5,000, choice between state and federal exemptions, bankruptcy court information for both Kentucky districts, and how to find qualified bankruptcy attorneys throughout Kentucky.

Kentucky Median Income for Bankruptcy (2026)

To qualify for Chapter 7 bankruptcy in Kentucky, your household income must be below these median income levels. If your income exceeds these amounts, you may still qualify through the means test or need to file Chapter 13 instead.

Household Size	Annual Median Income	Monthly Median Income
1 person	$51,129	$4,261
2 people	$63,943	$5,329
3 people	$70,451	$5,871
4 people	$84,992	$7,083
5 people	$93,992	$7,833
6 people	$102,992	$8,583

Note: For households larger than 4, add $9,000 per additional person. These figures are updated annually by the U.S. Trustee Program.

Calculate Your Kentucky Eligibility

Kentucky Bankruptcy Exemptions

Kentucky allows bankruptcy filers to choose between Kentucky state exemptions and the federal bankruptcy exemptions. This choice is particularly important in Kentucky because the state homestead exemption is very low ($5,000), making federal exemptions almost always the better choice for homeowners.

Kentucky Homestead Exemption

Up to $5,000.

Kentucky's state homestead exemption protects only $5,000 of equity in your primary residence. This is one of the lowest homestead exemptions in the entire country. The exemption applies to real property including houses, condominiums, mobile homes, and co-ops that serve as your principal residence.

The property must be your principal residence at the time of filing bankruptcy. Kentucky's extremely low homestead exemption means that very few homeowners can adequately protect their homes using state exemptions.

Federal Exemption Alternative: Kentucky filers can instead choose the federal homestead exemption of $27,900 ($55,800 for married couples filing jointly), which is more than five times higher than Kentucky's $5,000 state exemption. Nearly all Kentucky homeowners choose federal exemptions.

Kentucky Vehicle Exemption

Up to $2,500.

Kentucky allows you to protect up to $2,500 of equity in one motor vehicle under state exemptions. This is a relatively low vehicle exemption.

Federal Exemption Alternative: The federal vehicle exemption is $4,450, which is significantly higher than Kentucky's $2,500 state exemption. The federal exemptions also offer a wildcard that can be applied to vehicles. For vehicle protection, federal exemptions are substantially better.

Kentucky State Exemptions

Kentucky bankruptcy exemptions include:

• Homestead: $5,000
• Vehicle: $2,500
• Household Goods and Furnishings: $3,000
• Jewelry: $1,500
• Clothing and Other Wearing Apparel: All necessary wearing apparel
• Books and Family Portraits: No specific limit
• Burial Plot: $5,000
• Health Aids: All health aids
• Tools of Trade: $3,000 (or $10,000 for farmers)
• Lost Earnings Payments: Payments for lost earnings needed for support
• Wildcard: $1,000 of any property
• Wages: Certain percentages of earned wages

Federal Exemptions (Alternative Choice)

Kentucky filers may choose federal exemptions instead:

• Homestead: $27,900 ($55,800 for married couples)
• Vehicle: $4,450
• Household Goods: $700 per item, up to $14,875 total
• Jewelry: $1,875
• Tools of Trade: $2,800
• Wildcard: $1,475 general + up to $13,950 of unused homestead (total $15,425)

Which Exemptions Should You Choose?

Choose Kentucky state exemptions if:

• You're a farmer with significant tools and equipment (Kentucky allows $10,000 for farmers)
• You have essentially no assets and minimal home equity (rare situation)
• You have valuable burial plots (Kentucky allows $5,000)

Choose federal exemptions if:

• You own a home with ANY equity (federal $27,900/$55,800 vs Kentucky $5,000)
• You have more than $2,500 vehicle equity (federal allows $4,450)
• You have significant household goods (federal $14,875 vs Kentucky $3,000)
• You want a larger wildcard ($15,425 federal vs $1,000 Kentucky)
• You're basically any homeowner in Kentucky

In Kentucky, the vast majority of filers choose federal exemptions because Kentucky's state exemptions are extremely limited.

Other Protected Assets

• Retirement Accounts: Fully protected including 401(k), IRA, pension plans, and government retirement benefits under federal law
• Public Benefits: Social Security, unemployment, workers' compensation, veteran's benefits, disability benefits, public assistance, crime victim's compensation
• Life Insurance: Unmatured life insurance policies; life insurance proceeds if beneficiary is spouse, child, or dependent
• Health Aids: All health aids
• Education Savings: Kentucky 529 education savings plan (Kentucky Education Savings Plan Trust)
• Personal Injury Awards: Personal injury recoveries needed for support
• Wrongful Death Awards: Wrongful death recoveries

Filing Bankruptcy in Kentucky

Chapter 7 Bankruptcy in Kentucky

Chapter 7 bankruptcy is commonly filed throughout Kentucky. The process typically takes 3-4 months from filing to discharge and eliminates most unsecured debts including credit cards, medical bills, personal loans, and past-due utility bills.

To qualify for Chapter 7 in Kentucky, you must pass the means test by having income below the Kentucky median or by showing that after allowable expense deductions, you lack sufficient disposable income to fund a Chapter 13 repayment plan. You must also complete credit counseling from an approved agency within 180 days before filing.

Kentucky's choice between state and federal exemptions gives you flexibility, but nearly all Kentucky homeowners choose federal exemptions due to Kentucky's extremely low $5,000 homestead exemption. Work with a Kentucky bankruptcy attorney to determine the best exemption strategy.

Learn more about Chapter 7 bankruptcy →

Chapter 13 Bankruptcy in Kentucky

Chapter 13 bankruptcy allows Kentucky residents to keep property while repaying some or all debts through a court-approved 3-5 year payment plan. This option is particularly beneficial if you're behind on mortgage or car payments and want to catch up while stopping foreclosure or repossession.

Chapter 13 is especially useful in Kentucky if your income is too high to qualify for Chapter 7, if you have non-exempt assets you want to protect, or if you have priority debts like recent taxes or past-due child support. Your monthly payment is based on your disposable income after allowable living expenses.

Learn more about Chapter 13 bankruptcy →

Bankruptcy Courts in Kentucky

Kentucky is divided into two federal bankruptcy court districts:

Eastern District of Kentucky

Main Courthouses: Lexington, Ashland, Covington, London

Covers eastern Kentucky including Lexington, Covington (Northern Kentucky/Cincinnati area), Ashland, London, and the eastern portion of the state including Appalachia.

Court divisions: Lexington Division (central eastern Kentucky), Ashland Division (northeastern Kentucky), Covington Division (Northern Kentucky), and London Division (southeastern Kentucky).

Western District of Kentucky

Main Courthouses: Louisville, Bowling Green, Owensboro, Paducah

Covers western Kentucky including Louisville, Bowling Green, Owensboro, Paducah, and the western portion of the state.

Court divisions: Louisville Division (north-central Kentucky, largest metro area), Bowling Green Division (south-central Kentucky), Owensboro Division (northwestern Kentucky), and Paducah Division (far western Kentucky).

You must file in the district where you have lived for the greater part of the 180 days before filing. Visit the U.S. Courts website for specific court locations, filing procedures, and local rules for each Kentucky district.

Kentucky Residency Requirements

To use Kentucky bankruptcy exemptions (either state or federal), you must have been domiciled (legally residing) in Kentucky for at least 730 days (2 years) before filing. If you've lived in Kentucky for less than 2 years, you must use the exemptions from the state where you lived for the 180 days immediately before the 2-year period.

Kentucky allows you to choose between state and federal exemptions once you meet the residency requirement. This choice is made at the time of filing and cannot be changed later.

Find a Kentucky Bankruptcy Attorney

Most Kentucky bankruptcy attorneys offer free initial consultations. Given the complexity of bankruptcy law and Kentucky's choice between state and federal exemptions (with federal being strongly recommended for homeowners), consulting with an experienced Kentucky bankruptcy attorney is highly recommended.

What a Kentucky Bankruptcy Attorney Can Do

• Determine which bankruptcy chapter is right for your financial situation
• Compare Kentucky state vs. federal exemptions to maximize asset protection
• Calculate whether you qualify for Chapter 7 using the Kentucky means test
• Navigate Kentucky-specific bankruptcy procedures and local court rules
• Complete and file all required bankruptcy paperwork correctly
• Represent you at the 341 meeting of creditors
• Handle any objections from creditors or the bankruptcy trustee
• Guide you through the entire process from filing to discharge

Cost of Filing Bankruptcy in Kentucky

Chapter 7 bankruptcy attorney fees in Kentucky vary by location:

• Louisville metro area: $1,000 to $1,500 plus $338 filing fee
• Lexington area: $950 to $1,450 plus $338 filing fee
• Northern Kentucky (Covington, Florence): $950 to $1,450 plus $338 filing fee
• Bowling Green, Owensboro: $850 to $1,350 plus $338 filing fee
• Other Kentucky cities and rural areas: $750 to $1,250 plus $338 filing fee

Chapter 13 attorney fees typically range from $2,500 to $3,500 plus a $313 filing fee. In Chapter 13, attorney fees are usually paid through your repayment plan rather than upfront.

Many Kentucky attorneys offer payment plans for Chapter 7 to make bankruptcy more accessible.

Kentucky-Specific Bankruptcy FAQs

Can I keep my house in Kentucky bankruptcy?

Yes, if you use federal exemptions. Kentucky's state homestead exemption of only $5,000 is one of the lowest in the nation and protects almost no home equity. However, Kentucky allows you to choose federal exemptions, which protect $27,900 (single) or $55,800 (married filing jointly). Nearly all Kentucky homeowners choose federal exemptions. If your equity exceeds federal exemption limits, you may need Chapter 13.

Can I keep my car in Kentucky bankruptcy?

Yes, especially with federal exemptions. Kentucky state exemptions allow only $2,500 vehicle equity, but federal exemptions allow $4,450 plus potential wildcard. Most Kentucky residents choose federal exemptions and can keep their vehicles by continuing to make payments if equity is within federal limits.

Should I choose state or federal exemptions in Kentucky?

Almost all Kentucky filers should choose federal exemptions. Kentucky's $5,000 homestead is extremely low compared to federal $27,900/$55,800. Kentucky's $2,500 vehicle exemption is low compared to federal $4,450. The federal wildcard ($15,425) is far superior to Kentucky's $1,000. Only farmers with extensive equipment or filers with essentially no assets might consider Kentucky exemptions. Your attorney will almost certainly recommend federal exemptions.

Why is Kentucky's homestead exemption so low?

Kentucky's $5,000 homestead exemption is a legacy from older bankruptcy laws and has not been updated significantly in recent decades. The Kentucky legislature has not increased it to reflect modern property values. Fortunately, Kentucky allows filers to choose federal exemptions, which provide much better protection. This makes federal exemptions the practical choice for nearly all Kentucky homeowners.

Can I protect my thoroughbred horses in Kentucky bankruptcy?

Horses are personal property or business assets depending on their use. Recreational horses could be protected under personal property exemptions. Thoroughbred racing or breeding horses used in business would be considered business assets, potentially protected under tools of trade exemptions ($3,000 Kentucky or $2,800 federal) or livestock exemptions if applicable. Kentucky's horse industry creates unique bankruptcy considerations—consult a Kentucky attorney experienced with equine assets.

How does bankruptcy affect bourbon distillery workers in Kentucky?

Working in Kentucky's bourbon industry doesn't directly affect your bankruptcy, but industry-specific benefits matter. Retirement accounts from distilleries are fully protected under federal law. Wages are partially exempt. If you work in the bourbon industry and face financial difficulties, standard bankruptcy protections apply. Any bourbon collections you personally own would be personal property subject to exemption limits.

Related Resources