Kentucky Bankruptcy Laws

Complete exemption laws which protect a debtor’s property when personal bankruptcy is filed in the state of Kentucky.

427.060 Kentucky Homestead and burial plot exemptions — Exceptions. In addition to any exemption of personal property, an individual debtor’s aggregate interest, not to exceed five thousand dollars ($5,000) in value, in real or personal property that such debtor or a dependent of such debtor uses as a permanent residence in this state, or in a burial plot for such debtor or a dependent of such debtor is exempt from sale under execution, attachment or judgment, except to foreclose a mortgage given by the owner of a homestead or for purchase money due thereon. This exemption shall not apply if the debt or liability existed prior to the purchase of the property or the erection of the improvements thereon.

427.090 Payment of money in lieu of homestead exemption. If the defendant in the execution, attachment or other action owns property levied on or sought to be subjected to the payment of any debt or liability, which, in the opinion of the appraisers, is of greater value than five thousand dollars ($5,000) and not divisible without great diminution in value, the property shall be sold and five thousand dollars ($5,000) of the money arising from the sale paid to the defendant to enable him to purchase another homestead. The property shall not be sold for less than five thousand dollars ($5,000).

427.010 Exempt personal property and disposable earnings of individual debtors. (1) The following personal property of an individual debtor resident in this state is exempt from execution, attachment, garnishment, distress or fee-bill: All household furnishings, jewelry, personal clothing and ornaments not to exceed three thousand dollars ($3,000) in value; tools, equipment and livestock, including poultry, of a person engaged in farming, not exceeding three thousand dollars ($3,000) in value; one (1) motor vehicle and its necessary accessories, including one (1) spare tire, not exceeding in the aggregate two thousand five hundred dollars ($2,500) in value; professionally prescribed health aids for the debtor, or a dependent of the debtor. (2) Except as provided in subsection (3) of this section and KRS 427.050, the maximum part of the aggregate disposable earnings of an individual for any workweek which is subjected to garnishment may not exceed the lesser of either: (a) Twenty-five percent (25%) of his disposable earnings for that week, or (b) The amount by which his disposable earnings for that week exceed thirty (30) times the federal minimum hourly wage prescribed by Section 6(a)(1) of the Fair Labor Standards Act of 1938 in effect at the time the earnings are payable. In the case of earnings for any pay period other than a week, the multiple of the federal minimum hourly wage equivalent to that set forth in paragraph (b) of this subsection as prescribed by regulation by the federal secretary of labor shall apply. (3) The restrictions of subsection (2) of this section do not apply in the case of: (a) Any order of any court for the support of any person. (b) Any order of any court of bankruptcy under Chapter 13 of the Bankruptcy Code. (c) Any debt due for any state or federal tax. (4) Notwithstanding any other provision of law, no property upon which a debtor has voluntarily granted a lien shall, to the extent of the balance due on the debt secured thereby, be subject to the provisions of this chapter or be exempt from forced sale under process of law.

427.030 Debtor’s tools exempt. The tools, not exceeding three hundred dollars ($300) in value, of any individual debtor necessary in his trade are exempt from levy under execution, attachment, distress for rent or fee-bill. One (1) motor vehicle not exceeding two thousand five hundred dollars ($2,500) in value and its necessary accessories, including one (1) spare tire, of a mechanic or other skilled artisan primarily engaged in the replacement, repair, or emergency servicing of essential mechanical, electrical or other equipment in general use, is exempt from execution, attachment, garnishment, distress warrant or fee-bill.

427.040 Professional libraries and vehicle exempt. The professional library, office equipment, instruments and furnishings of a minister, attorney, physician, surgeon, chiropractor, veterinarian, or dentist, necessary in the practice of such profession, and not exceeding one thousand dollars ($1,000) in value shall be exempt from execution, attachment, garnishment, distress warrant or fee-bill. In addition to the above exemption one (1) motor vehicle not exceeding two thousand five hundred dollars ($2,500) in value with necessary accessories, including one (1) spare tire shall be exempted.

427.110 Insurance benefits — Exemptions. (1) Any money or other benefit to be paid or rendered by any assessment or cooperative life or casualty insurance company is exempt from execution or other process to subject such money or other benefit to the payment of any debt or liability of a policyholder. (2) Any money or other benefit to be paid or rendered by any fraternal benefit society is exempt from attachment, garnishment or other process to subject such money or other benefit to the payment of any debt or liability of a member or beneficiary, or any other person who may have a right thereunder, either before or after payment.

427.120 Police and firefighters’ pension fund in cities of the first, second, and third classes. — Exempt from process in some cases. No part of any police or firefighters’ pension fund established in a city of the first, second, or third class shall, before or after its order for distribution to any person entitled thereto, be seized or levied upon by any writ or decree for the payment of any debt, claim, or judgment against the beneficiary of the fund, except for the payment of court or administratively ordered current child support, or child support owed, or to be owed.

427.125 Police and firefighters’ pension fund in cities of fourth class Exempt from process in some cases. No portion of a pension fund created under KRS 95.761 to 95.785 shall, before or after its order for distribution by the board of trustees to the persons entitled thereto, be held, seized, taken, subjected to or detained or levied upon by virtue of any attachments, execution, injunction, writ, interlocutory, or other order, or decree, or any process or proceeding whatever issued out of or by any court of this state for the payment or satisfaction, in whole or in part, of any debt, damage, claim, demand, or judgment against the beneficiary of said fund, except for court or administratively ordered child support, or owed or to-be-owed child support, but said fund shall be held and distributed for the purpose of KRS 95.761 to 95.785, and for no other purpose whatever.

427.150 Property totally or partially exempt. (1) To the extent reasonably necessary for the support of an individual and his dependents in addition to property totally exempt under subsection (2) of this section, that individual shall be entitled to exemption of money or property received and rights to receive money or property for alimony, support, or separate maintenance. (2) An individual shall be entitled to exemption of the following property: (a) An award under a crime victim’s reparation law; (b) A payment on account of the wrongful death of an individual of whom the debtor was a dependent, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor; (c) A payment, not to exceed seven thousand five hundred dollars ($7,500), on account of personal bodily injury, not including pain and suffering or compensation for actual pecuniary loss, of the debtor or an individual of whom the debtor is a dependent; (d) A payment in compensation of loss of future earnings of the debtor or an individual of whom the debtor is or was a dependent, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor; (e) Assets held, payments made and amounts payable under pensions exempt pursuant to KRS 61.690, 161.700, 427.120 and 427.125; or (f) The right or interest of a person in an individual retirement account or annuity, deferred compensation account, tax sheltered annuity, simplified employee pension, pension, profit-sharing, stock bonus, or other retirement plan described in the Internal Revenue Code of 1986, or Section 408 or 408A of the Internal Revenue Code, as amended which qualifies for the deferral of income tax until the date benefits are distributed. This exemption shall also apply to the operation of the Federal Bankruptcy Code, as permitted by 11 U.S.C. sec. 522. This exemption shall not apply to any amounts contributed to an individual retirement account or annuity, deferred compensation account, a pension, profit-sharing, stock bonus, or other qualified retirement plan or annuity if the contribution occurs within one hundred twenty (120) days before the debtor files for bankruptcy. This exemption shall not apply to the right or interest of a person in an individual retirement account or annuity, deferred compensation account, pension, profit-sharing, stock bonus, or other retirement plan to the extent that that right or interest is subject to any of the following: 1. An order of a court for payment of maintenance; 2. An order of a court for payment of child support.

61.690 Exemption of retirement allowances (State Employees) — Taxability after December 31, 1997 — Domestic relations and child support orders. (1) All retirement allowances and other benefits accrued or accruing to any person under the provisions of KRS 61.510 to 61.705, 16.505 to 16.652, and 78.510 to 78.852, and the accumulated contributions and cash securities in the funds created under KRS 61.510 to 61.705, 16.505 to 16.652, and 78.510 to 78.852, are hereby exempt from any state, county, or municipal tax, and shall not be subject to execution, attachment, garnishment, or any other process, and an assignment thereof shall not be enforceable in any court. Except retirement benefits accrued or accruing to any person under the provisions of KRS 61.510 to 61.705, 16.505 to 16.652, and 78.510 to 78.852 on or after January 1, 1998, shall be subject to the tax imposed by KRS 141.020, to the extent provided in KRS 141.010 and 141.0215. (2) Child support orders for current, owed, or to-be-owed child support, issued by a court or administrative agency shall be honored by the retirement systems if the orders are in compliance with the regulation adopted by the board pursuant to KRS 61.645(9)(g).

67A.350 Exemption of retirement allowances (Urban County Government Employees) — Taxability after December 31, 1997. All retirement allowances and other benefits accrued or accruing to any person under the provisions of KRS 67A.220 to 67A.340 and accumulated contributions and cash securities in the fund created under KRS 67A.220 to 67A.340 are hereby exempted from any state tax, and shall not be subject to execution, attachment, garnishment, or any other process whatsoever, nor shall any assignment thereof be enforceable in any court. Except retirement benefits accrued or accruing to any person under the provisions of KRS 67A.220 to 67A.340 on or after January 1, 1998, shall be subject to the tax imposed by KRS 141.020, to the extent provided in KRS 141.010 and 141.0215.

67A.620 Benefits nonassignable (Firefighters) — Not to be attached except for child support. The right to a retirement annuity, disability annuity, survivor’s annuity or benefit, death benefit, or any other benefit under the provision hereof, by whatever name called, or refund, is personal with the recipient thereof, and the assignment, garnishment, execution, or transfer of such benefit or any part thereof shall be void, except as herein provided. Any such annuity, benefit, or refund shall not answer for debts contracted by the person receiving the same, and it is the intention of this section that they shall not be attached or affected by any judicial proceeding, except for court or administratively ordered current child support, or owed child support, or to-be-owed child support.

95.878 Benefits nonassignable (Police and Firefighters) — May not be attached — Exception. Except for court or administratively ordered current child support, owed child support, or to-be-owed child support, the right to a retirement annuity, disability annuity, survivor’s annuity or benefit, death benefit, or any other benefit under the provision hereof, by whatever name called, or refund, is personal with the recipient thereof, and the assignment or transfer of such benefit or any part thereof shall be void, except as herein provided. Any such annuity, benefit, or refund shall not answer for debts contracted by the person receiving the same, and it is the intention of this section that they shall not be attached or affected by any judicial proceeding.

161.700 Funds exempt from taxation and process (Teachers) — Taxability after December 31, 1997 — Benefits not considered marital property. (1) The right of a member to a retirement allowance and to the return of contributions, any benefit or right accrued or accruing to any person under the retirement system, and the money in the various funds of the retirement system are exempt from any state or municipal tax, are not subject to execution, garnishment, attachment, or other process, and are unassignable except as provided in this chapter, and except for court or administratively ordered current child support, owed child support, or to-be-owed child support. Except retirement benefits accrued or accruing to any person under this retirement system on or after January 1, 1998, shall be subject to the tax imposed by KRS 141.020, to the extent provided in KRS 141.010 and 141.0215. (2) Retirement allowance, disability allowance, accumulated contributions, or any other benefit under the retirement system shall not be classified as marital property pursuant to KRS 403.190(1). Retirement allowance, disability allowance, accumulated contributions, or any other benefit under the retirement system shall not be considered as an economic circumstance during the division of marital property in an action for dissolution of marriage pursuant to KRS 403.190(1)(d).

164A.707 Prepaid tuition contracts. (3) A prepaid tuition account shall not be subject to attachment, levy, or execution by any creditor of a purchaser or qualified beneficiary. Prepaid tuition accounts shall be exempt from all state and local taxes including, but not limited to, intangible personal property tax levied under KRS 132.020, individual income tax levied under KRS 141.020, and the inheritance tax levied under KRS Chapter 140. Payments from a prepaid tuition account used to pay qualified postsecondary education expenses, or disbursed due to the death or disability of the beneficiary, or receipt of a scholarship by the beneficiary shall be exempt from tax liabilities.

205.220 Payments, to whom made — Accounting — Exemption from assignment, levy or execution. (1) Payments of public assistance grants for eligible individuals shall be made at the time and in the manner prescribed by regulation to: (a) The needy aged or needy blind or needy permanently and totally disabled person or recipient; or (b) The parent or relative with whom a needy child lives; or (c) The parent or legal guardian of a blind minor; or (d) The legal guardian of (a) or (b) above; or (e) Such other persons on behalf of an eligible person as may be prescribed by regulation; or (f) Committees appointed by the court and approved for payment purposes by the secretary according to prescribed regulations. (2) Any person who is receiving and disbursing public assistance grants on behalf of another individual eligible under this chapter shall upon request make an accounting of such funds to the cabinet in accordance with regulations. If a public assistance grant made on behalf of a needy individual is not used for the benefit of such individual, such payment shall be suspended pending reasonable assurance that future grants will benefit the individual on whose behalf such payments are made. (3) Public assistance shall not be assignable and shall be exempt from levy or execution. Furthermore, no assignment, pledge or encumbrance of any right to benefits due or payable under this chapter shall be valid. Public assistance benefits, as long as they are not mingled with other funds of the recipient, shall be exempt from any remedy for the collection of all debts, liens and encumbrances. No waiver of any exemption provided for in this subsection shall be valid.

304.14-300 Exemptions of proceeds, life insurance. (1) If a policy of insurance whether heretofore or hereafter issued, is effected by any person on his own life, or on another life, in favor of a person other than himself, or, except in cases of transfer with intent to defraud creditors, if a policy of life insurance is assigned or in any way made payable to any such person, the lawful beneficiary or assignee thereof, other than the insured or the person so effecting such insurance or executors or administrators of such insured or the person so effecting such insurance, shall be entitled to its proceeds and avails against the creditors and representatives of the insured and of the person effecting the same, whether or not the right to change the beneficiary is reserved or permitted and whether or not the policy is made payable to the person whose life is insured if the beneficiary or assignee shall predecease such person, and such proceeds and avails shall be exempt from all liability for any debt of the beneficiary existing at the time the policy is made available for his use: provided, that subject to the statute of limitations, the amount of any premiums for such insurance paid with intent to defraud creditors, with interest thereon, shall inure to their benefit from the proceeds of the policy; but the insurer issuing the policy shall be discharged of all liability thereon by payment of its proceeds in accordance with its terms, unless, before such payment, the insurer shall have received written notice at its principal office, by or in behalf of a creditor, of a claim to recover for transfer made or premiums paid with intent to defraud creditors, with specification of the amount claimed. (2) For the purposes of subsection (1) of this section, a policy shall also be deemed to be payable to a person other than the insured if and to the extent that a facility-of- payment clause or similar clause in the policy permits the insurer to discharge its obligation after the death of the individual insured by paying the death benefits to a person as permitted by such clause.

304.14-320 Exemption of proceeds, group insurance. (1) A policy of group life insurance or group health insurance or the proceeds thereof payable to the individual insured or to the beneficiary thereunder, shall not be liable, either before or after payment, to be applied by any legal or equitable process to pay any debt or liability of such insured individual or his beneficiary or of any other person having a right under the policy. The proceeds thereof, when made payable to a named beneficiary or to a third person pursuant to a facility-of-payment clause, shall not constitute a part of the estate of the individual insured for the payment of his debts. (2) This section shall not apply to group insurance issued pursuant to this code to a creditor covering his debtors, to the extent that such proceeds are applied to payment of the obligation for the purpose of which the insurance was so issued.

304.14-330 Exemption of proceeds, annuity contracts — Assignability of rights. . (1) The benefits, rights, privileges and options which under any annuity contract heretofore or hereafter issued are due or prospectively due the annuitant, shall not be subject to execution nor shall the annuitant be compelled to exercise any such rights, powers, or options, nor shall creditors be allowed to interfere with or terminate the contract, except: (a) As to amounts paid for or as premium on any such annuity with intent to defraud creditors, with interest thereon, and of which the creditor has given the insurer written notice at its principal office prior to the making of the payment to the annuitant out of which the creditor seeks to recover. Any such notice shall specify the amount claimed or such facts as will enable the insurer to ascertain such amount, and shall set forth such facts as will enable the insurer to ascertain the annuity contract, the annuitant and the payment sought to be avoided on the ground of fraud. (b) The total exemption of benefits presently due and payable to any annuitant periodically or at stated times under all annuity contracts under which he is an annuitant, shall not at any time exceed $350 per month for the length of time represented by such installments, and that such periodic payments in excess of $350 per month shall be subject to garnishee execution to the same extent as are wages and salaries. (c) If the total benefits presently due and payable to any annuitant under all annuity contracts under which he is an annuitant, shall at any time exceed payment at the rate of $350 per month, then the court may order such annuitant to pay to a judgment creditor or apply on the judgment, in installments, such portion of such excess benefits as to the court may appear just and proper, after due regard for the reasonable requirements of the judgment debtor and his family, if dependent upon him, as well as any payments required to be made by the annuitant to other creditors under prior court orders. (2) If the contract so provides, the benefits, rights, privileges or options accruing under such contract to a beneficiary or assignee shall not be transferable nor subject to commutation, and if the benefits are payable periodically or at stated times, the same exemptions and exceptions contained herein for the annuitant, shall apply with respect to such beneficiary or assignee. (3) An annuity contract within the meaning of this section shall be any obligation to pay sums at stated times, during life or lives, or for a specified term or terms, issued for a valuable consideration, regardless of whether or not such sums are payable to one (1) or more persons, jointly or otherwise, but does not include payments under life insurance contracts at stated times during life or lives, or for a specified term or terms.

304.14-340 Rights of married women in life insurance. (1) Every life insurance policy made payable to or for the benefit of or duly assigned or transferred to a married woman, or to any person in trust for her, shall inure to her separate use and benefit and that of her children, independently of her husband or his creditors or any other person effecting or transferring the policy, or his creditors. (2) A married woman may, without consent of her husband, contract, pay for, take out and hold a policy on the life or health of her husband or children, or against loss by his or their disablement by accident. The premiums paid on the policy shall be held to have been her separate estate, and the policy shall inure to her separate use and benefit and that of her children, free from any claim of her husband or others. (3) If the premium on any such policy is paid by any person with intent to defraud his creditors, an amount equal to the premium so paid, with interest thereon, shall inure to the benefit of the creditors, subject to the statute of limitations.

304.14-350 Retention of proceeds of policy by company. (1) Any life insurer shall have power to hold the proceeds of any life or endowment insurance or annuity contract issued by it: (a) Upon such terms and restrictions as to revocation by the insured and control by beneficiaries, (b) With such exemptions from legal process and the claims of creditors of beneficiaries, other than the insured, and (c) Upon such other terms and conditions, irrespective of the time and manner of payment of proceeds, as shall have been agreed to in writing by the insurer and the insured or beneficiary. The insurer shall not be required to segregate funds so held but may hold them as a part of its general corporate assets. (2) The provisions of this section shall not impair or affect any rights of creditors under KRS 304.14-300 and 304.14-330.

304.39-260 Exemption of benefits (Medical expenses under motor vehicle reparations law). (1) Basic or added reparation benefits for medical expense are exempt from garnishment, attachment, execution, and any other process or claim, except upon a claim of a creditor who has provided products, services, or accommodations. (2) Basic reparation benefits other than those for medical expense are exempt from garnishment, attachment, execution, and any other process or claim.

341.470 Protection of rights and benefits (Unemployment Compensation). (4) No assignment, pledge, or encumbrance of any right to benefits due or payable under this chapter shall be valid; and such rights to benefits shall be exempt from levy, execution, attachment, or any other remedy for the collection of debt. Benefits received by any worker, as long as they are not mingled with other funds of the recipient, shall be exempt from any remedy for the collection of all debts except debts incurred for necessaries furnished to such worker or his spouse or dependents during the time such worker was unemployed. No waiver of any exemption provided for in this subsection shall be valid.

342.180 Compensation claim not assignable (Workers’ Compensation) — Exempt from debts — Exception. No claim for compensation under this chapter shall be assignable, except court or administratively-ordered child support pursuant to KRS 403.212. All compensation and claims therefor, except child support obligations, shall be exempt from all claims of creditors.

Note: While this reference information is current as of August 2010, it may not reflect the most up-to-date exemption figures on official state of Kentucky bankruptcy court statutes.

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