Chapter 13 bankruptcy, often called the “wage earner’s plan,” allows individuals with regular income to create a court-approved repayment plan lasting three to five years. Rather than liquidating assets, you make monthly payments to a trustee who distributes funds to your creditors.
📋 To qualify in Kentucky, you must have stable income and debts within specific limits. For cases filed between April 1, 2025, and March 31, 2028, secured debts cannot exceed $1,580,125 and unsecured debts must stay under $526,700. These limits adjust periodically, so verify current thresholds with a bankruptcy attorney before filing.
Chapter 13 differs from Chapter 7, which involves selling non-exempt property to pay creditors. The University of Kentucky College of Law provides resources explaining how federal bankruptcy law intersects with state-specific exemptions.
Thinking about protecting your assets? Contact a Kentucky bankruptcy lawyer for a free consultation today.
Pros of Filing Chapter 13 Bankruptcy
⚖️ Chapter 13 offers several compelling benefits for Kentucky residents struggling with debt.
- Keep your property while repaying debt: Unlike Chapter 7, you retain your home, vehicles, and other valuable assets while making payments through your repayment plan.
- Stop foreclosure and repossession immediately: The automatic stay halts all collection activities the moment you file, giving you breathing room to catch up on mortgage arrears or past-due car payments.
- Consolidated payments: Instead of juggling multiple creditors, you make a single monthly payment to the bankruptcy trustee.
- Protect co-signers: If family members or friends co-signed consumer loans for you, Chapter 13’s co-debtor stay prevents creditors from pursuing them while your case is active. This protection applies only to consumer debts (not tax obligations) and lasts only during your active case.
- Discharge certain unsecured debts: At the end of your repayment period, remaining eligible unsecured debts like credit cards and medical bills may be discharged entirely.
Kentucky allows filers to choose between state exemptions (with a $5,000 homestead limit) or federal exemptions (with a $27,900 homestead limit in 2025). The Kentucky Court of Justice provides information about exemption amounts.
Cons of Filing Chapter 13 Bankruptcy
🔍 While Chapter 13 provides valuable benefits, it also comes with challenges.
- Lengthy repayment commitment: Your plan spans three to five years. If your income is below Kentucky’s median, you may qualify for a three-year plan; above-median earners generally must commit to five years.
- Disposable income monitoring: The court calculates your payment based on disposable income after necessary expenses. Income increases during your plan may result in higher payments.
- Credit impact: A Chapter 13 bankruptcy remains on your credit report for seven years from the filing date.
- Dismissal risk: Missing payments or failing to meet plan requirements can result in case dismissal, allowing creditors to resume collection activities.
- Higher legal fees than Chapter 7: Chapter 13 involves ongoing plan administration, so attorney fees typically exceed Chapter 7 costs. However, these fees can often be included in your repayment plan.
Is Chapter 13 Right for You?
Chapter 13 works best for individuals who:
- Have regular income sufficient to fund a repayment plan
- Own property they want to keep, especially a home facing foreclosure
- Have co-signers they want to protect
- Earn too much to qualify for Chapter 7’s means test
You might consider Chapter 7 instead if:
- You have minimal assets and primarily unsecured debt
- Your income falls below Kentucky’s median
- You need faster debt relief without a multi-year commitment
Chapter 13 vs Chapter 7: Quick Comparison
| Feature | Chapter 13 | Chapter 7 |
|---|---|---|
| Income requirement | Must have regular income | Must pass means test |
| Asset protection | Keep most or all property | Non-exempt property may be sold |
| Debt discharge timeline | 3–5 years | Usually 3–6 months |
| Credit report impact | Remains 7 years | Remains 10 years |
| Foreclosure prevention | Can cure mortgage arrears | No mechanism to catch up |
| Co-signer protection | Yes, through co-debtor stay | No |
| Secured debt arrears | Can be paid through plan | Must be current or surrender |
Not sure Chapter 13 is the right move? Learn about bankruptcy pros and cons to explore other options.
Common Misconceptions About Chapter 13
- “It’s the same as Chapter 7”: These chapters serve different purposes. Chapter 7 liquidates assets for quick discharge while Chapter 13 reorganizes debt through a repayment plan.
- “I’ll lose everything”: Chapter 13 allows you to keep your property. If you choose federal exemptions, you and your spouse could protect up to $55,800 in home equity combined.
- “My credit is ruined forever”: While bankruptcy affects your credit initially, many filers see improvement within months. The Louisville Metro Government offers financial literacy resources that can help you rebuild credit after discharge.
- “I can’t get a loan ever again”: Most Chapter 13 filers qualify for market-rate home or car loans within two years of discharge, provided they manage credit responsibly.
Contact a Kentucky Bankruptcy Lawyer Today
Chapter 13 bankruptcy provides a powerful tool for reorganizing debt while protecting your property. A board-certified bankruptcy attorney can analyze your circumstances and help determine whether Chapter 13, Chapter 7, or another strategy best serves your needs.
When you work with O’Bryan Law Offices, you receive personalized attention from an attorney and two dedicated paralegals. We believe in transparent, flat-fee billing with no surprises.
Get the help you need from a local bankruptcy lawyer. Take the first step toward financial peace of mind by calling 502-219-3081 or filling out our online contact form to schedule your free consultation.
FAQs
How much does Chapter 13 bankruptcy cost in Kentucky?
The court filing fee is $313. Attorney fees in Kentucky typically range from $3,750 to $4,100, depending on whether you file in the Eastern or Western District. The Western District of Kentucky uses a “no-look” presumptive fee of approximately $4,100. Most Chapter 13 attorneys allow you to pay fees through your repayment plan rather than upfront.
Can I keep my house if I file Chapter 13 in Kentucky?
Yes. Chapter 13 is specifically designed to help homeowners catch up on missed mortgage payments over the life of the plan while continuing regular payments. Kentucky filers can choose federal bankruptcy exemptions, protecting up to $27,900 in home equity per person ($55,800 for married couples filing jointly).
How long does Chapter 13 take in Kentucky?
Your repayment plan lasts three to five years. If your household income falls below Kentucky’s median, you may qualify for a three-year plan. Those earning above the median typically must commit to five years. Your first payment is due 30 days after filing.
What debts can Chapter 13 discharge in Kentucky?
Chapter 13 can discharge credit card debt, medical bills, personal loans, and other unsecured debts remaining after you complete your plan. It cannot discharge child support, alimony, most student loans, recent tax debts, or debts from fraud or DUI-related injuries.
Which Kentucky bankruptcy court will handle my case?
Kentucky has two federal bankruptcy districts. The Western District (Louisville, Bowling Green, Paducah) and Eastern District (Lexington, Covington, Pikeville) each have their own trustees and local rules. Your residence determines which court handles your case.
Can I file Chapter 13 without a lawyer in Kentucky?
While legally permitted, filing without an attorney (pro se) is strongly discouraged. Chapter 13 involves complex calculations, strict deadlines, and court appearances over several years. Kentucky courts note that pro se filers have significantly higher dismissal rates.
What happens if I miss a Chapter 13 payment in Kentucky?
Missing payments can lead to case dismissal, which removes bankruptcy protection and allows creditors to resume collection. If you face temporary hardship, contact your attorney immediately—you may request a payment moratorium or plan modification before the trustee files a motion to dismiss.
Will Chapter 13 stop wage garnishment in Kentucky?
Yes. The automatic stay halts wage garnishments immediately upon filing. Kentucky law already protects 75% of disposable earnings or 30 times the federal minimum wage (whichever is greater), but Chapter 13 stops garnishment entirely while you complete your plan.