Chapter 13 Bankruptcy in Louisville, Kentucky
Chapter 13 bankruptcy is a court-supervised repayment plan that lasts 3 to 5 years. For Louisville filers in the Western District of Kentucky, it does what Chapter 7 cannot. It stops a foreclosure mid-process. It catches up a past-due mortgage, repays priority tax debt over time, and protects a cosigner. It also lets you keep property that has too much equity to clear in Chapter 7. Nick Thompson has filed these cases in Kentucky since 1991, and he personally prepares every petition at the firm’s Stone Creek Parkway office in Louisville.
How Chapter 13 Works in Louisville
A Chapter 13 plan runs 3 years if your household income is below the Kentucky median, and 5 years if it is above. The plan payment is set by your disposable income, which is what’s left after reasonable and necessary expenses are paid.
The Chapter 13 Trustee for the Western District of Kentucky is William W. Lawrence. His staff attorney often runs the 341 meeting on his behalf. Cases are filed at the Gene Snyder Courthouse, 601 W. Broadway, Louisville.
After the case is filed, the automatic stay stops most collection activity, including foreclosure sales, wage garnishments, repossession, and creditor calls. Your 341 Meeting of Creditors follows about a month later. (More on the 341 meeting and confirmation below.)
See the Western District of Kentucky Chapter 13 rules for the full procedural breakdown.
When Chapter 13 Is the Right Choice Over Chapter 7
Chapter 13 isn’t always the goal. But for certain situations, it’s the only option that solves the problem. These are the most common reasons clients at the firm file Chapter 13 instead of Chapter 7:
- You’re behind on a mortgage and want to keep the house. Chapter 13 catches up the arrearage over the plan. The foreclosure stops the day the case is filed.
- You owe priority tax debt. Recent income taxes can be repaid through the plan instead of being collected by the IRS or the Kentucky Department of Revenue.
- You have non-exempt equity worth protecting. Property that would be sold in Chapter 7 is often kept in Chapter 13. The plan must repay unsecured creditors at least what they would have received in a Chapter 7 case.
- A friend or family member cosigned for a debt. A plan that pays 100% of a cosigned debt protects the comaker from collection.
- You filed Chapter 7 within the last 8 years. Chapter 13 is the only option until the 8-year wait passes.
Tools Chapter 13 Gives You That Chapter 7 Does Not
Chapter 13 has tools built into the bankruptcy code that simply don’t exist in Chapter 7. Some are well known. Others are missed by attorneys who don’t file many of these cases.
Stripping a second mortgage with no equity
If the home is worth less than what’s owed on the first mortgage, a second mortgage with no equity behind it can be stripped off in Chapter 13. The second-mortgage debt is reclassified as unsecured and paid at the same rate as credit cards in the plan. Once the case is completed, the lien is released.
The 910-day rule on auto loans
If you bought a car for personal use and have paid the loan for more than 910 days (about 2 years, 6 months), the claim can be split. The secured portion equals the car’s current value. The rest, the negative equity, becomes unsecured and is paid pennies on the dollar. Cars financed for business use, or loans that refinanced an older vehicle, may qualify for a cramdown sooner.
Lower interest rates on secured debts
Interest rates on a car loan can be lowered through the plan, and the loan term can be stretched out. The result is usually a lower monthly payment.
The “Chapter 20” strategy
This is a Chapter 7 filed first to wipe out unsecured debt, followed by a Chapter 13 to handle the remaining secured arrears or priority taxes. No discharge is available in the second case, but the structure works to manage debts a single chapter can’t reach.
Private student loans
Private student loans work like credit cards in collection. You can’t discharge them without proving undue hardship. But filing Chapter 13 adds 3 to 5 years of non-payment to the loan. If the loan is in default and no judgment has been entered, the lender rarely files or refiles a lawsuit during your case. Once you exit Chapter 13, the 6-year Kentucky statute of limitations for negotiable instruments (KRS 355.3-118) often bars further collection. Time spent in Chapter 13 does not count toward that statute.
Read more about Student Loan Hardship Discharge.
Stopping wage garnishments
Wage garnishments stop the day the case is filed. Even garnishments for non-dischargeable debt like student loans are paused for the life of the plan. Learn more about how to stop wage garnishment in Louisville.
Dismissing the case voluntarily
Chapter 13 is voluntary. You can dismiss the case if your circumstances change. Chapter 7 does not give you that option. Once the trustee accepts the case, you can’t walk away.
What a Louisville Chapter 13 Plan Looks Like
The plan payment is based on your disposable income, and the court allows reasonable and necessary expenses first. Secured debts (such as mortgage arrears and car loans you want to keep) and priority debts (such as recent taxes and child support) are paid in full through the plan. Unsecured creditors usually receive only a fraction of what they’re owed. That includes credit cards, medical bills, and personal loans. Many plans here pay between 0 and 10 percent to unsecured creditors.
The Western District of Kentucky has historically used informal auto-approval thresholds. Plans that pay above a certain percentage to unsecured creditors are often confirmed without a detailed review from the bench. Plans below that level get closer scrutiny. Most filers fall below it. That isn’t a problem. It just means the judge looks more closely at the disposable income calculation and the budget.
The 341 Meeting and Plan Confirmation
The 341 Meeting of Creditors is held by Zoom. The Western District has been Zoom-only since the pandemic, and the U.S. Trustee Program made virtual 341 meetings permanent. The Chapter 13 Trustee, or more often his staff attorney, runs the meeting, and it usually lasts 5 to 10 minutes.
The 341 meeting is typically set about 30 to 45 days after you file. The plan confirmation hearing follows, and in the Western District the two are sometimes combined into a single appearance. See Chapter 13 confirmation hearing details for what to expect.
Tax Debt and Chapter 13
Income tax debt more than 3 years old can be discharged through bankruptcy. The return must have been filed on time, and the assessment must be at least 240 days old. Recent income tax debt and trust taxes (sales tax and withholding tax) cannot be discharged. But recent income taxes can be repaid through a Chapter 13 plan over 3 to 5 years. That is often a better option than being collected by the IRS or the Kentucky Department of Revenue. Nick Thompson reviews tax discharge eligibility for every client during the free consultation.
Read more about Kentucky income tax bankruptcy.
Frequently Asked Questions
Q: How long does Chapter 13 take in Louisville? Most filers here complete the plan in 5 years. A 3-year plan is only an option if your household income is below the Kentucky median. The case ends when you make the final payment and finish the post-filing debtor education course.
Q: Will my employer find out if I file Chapter 13? Usually no. Employers are not notified unless the court orders wage deduction for plan payments, and that is optional. Some filers choose wage deduction because it makes payments automatic. Others pay the trustee directly. The decision is yours during the free consultation.
Q: Can the Chapter 13 Trustee take my tax refund? In the Western District of Kentucky, if your plan pays less than 100 percent to unsecured creditors, you must turn over your federal tax refund each year under Local Rule 6070-1. A copy of the return goes to the trustee by May 15. You may keep the Earned Income Credit portion and reasonable tax-preparation fees. The Child Tax Credit portion is typically turned over.
Q: Can Chapter 13 stop a repossession or get my car back? Filing Chapter 13 stops a repossession before it happens. The automatic stay takes effect the day you file, so the lender can’t take the car. If the car was already repossessed but not yet sold, you can usually get it back, though that may take a motion asking the court to order its return. From there, Chapter 13 lets you catch up the missed payments over the plan. If you have paid on the loan more than 910 days, the balance may even be reduced to the car’s current value. Call 502-625-0905 to act fast, because timing matters once a car is taken.
Q: What if I miss a Chapter 13 plan payment? A single missed payment is usually fixable. Most can be cured with a short catch-up over the next month or two, so contact the office as soon as you know. If your income has dropped for the longer term, see the next question about changing your plan.
Q: What if I lose my job or can’t afford my Chapter 13 payment? Tell your attorney right away. A Chapter 13 plan is not locked in for the full term. If your income drops from a job loss, illness, or divorce, the court can change the plan. You can lower the monthly payment, stretch the remaining balance over more time within the 5-year limit, or pause payments for a few months while you recover. In some cases you can convert to Chapter 7 or ask for a hardship discharge if the setback is permanent and beyond your control. The worst move is to go silent, because that is what leads to a dismissal. Call 502-625-0905 before you miss a payment.
Q: What counties do you serve for Chapter 13? The office files cases in the Western District of Kentucky for clients in Jefferson, Oldham, Bullitt, Spencer, Nelson, and Meade counties. Eastern District counties, including Shelby and Henry, are not part of this office’s filing area.
Schedule Your Free Chapter 13 Consultation
Nick Thompson personally meets with every potential Chapter 13 client at the Stone Creek Parkway office in Louisville. The consultation usually lasts 1 to 2 hours, and there is no pressure to file. Same-day and next-day appointments are often available. Call 502-625-0905 or request a free consultation online.
Looking for a broader overview? Read about a Louisville bankruptcy attorney or compare with Chapter 7 bankruptcy in Louisville. For mortgage-specific help, see how to stop a Louisville mortgage foreclosure.
For a plain-language summary from the federal courts, see the federal Chapter 13 overview.