Chapter 13 Bankruptcy Attorney in Louisville, KY: Save Your Home from Foreclosure and Reorganize Your Debt

Facing a foreclosure or overwhelming debt in Louisville, Jefferson County, or surrounding Kentucky counties can feel hopeless. At Nick C Thompson Bankruptcy Attorney, we focus on providing a strategic bankruptcy process. Nick Thompson is a former tax prosecutor and Bullitt County Assistant Attorney.  Nick has practiced bankruptcy, tax, and foreclosure defense in the Louisville area since 1988. We represent clients across Jefferson, Oldham, Spencer, Bullitt, Nelson, Hardin, and Meade counties, specializing in complex Chapter 13 reorganization cases. If you need bankruptcy relief or want to discuss your options, contact us today.

Chapter 13 bankruptcy filings are often the easiest, cheapest, and most effective financial defense, for Louisville consumers with significant home equity who are battling foreclosure. It is a path to debt reorganization that lets you stop foreclosure, catch up on missed payments, and manage debts such as tax liens. Chapter 7 does not manage, and protect your valuable assets. Litigation under state law takes time, money, and rarely fixes or provides the fresh start needed. Explaining your circumstances with phone calls doesn’t prevent repossessions in the real world. But you can become debt free and, with a little hard work on finances, have a better future and stop garnishments, repossessions, and foreclosures.

🔑 Key Takeaways for Louisville Debtors Considering Chapter 13

• Immediate Protection: Filing Chapter 13 immediately triggers the Automatic Stay, halting a foreclosure sale, creditor calls, bank attachments, and wage garnishments.
• Cure Arrears: Chapter 13 allows you to catch up on missed mortgage payments (arrears) over a three-to-five-year repayment plan while maintaining your home.
• Protect Home Equity: If you have non-exempt equity that you would lose in a Chapter 7 liquidation, Chapter 13 enables you to keep your property.
• Address Priority Debts: Chapter 13 is mandatory for high-income filers, but it is also the ideal tool for handling non-dischargeable debts like tax liabilities and student loans over time.
• Lien Stripping: Homeowners may be able to completely remove (strip off) a junior mortgage or a home equity line of credit (HELOC) if the home is worth less than the balance of the first mortgage. You can also often remove a judicial lien. However, you must let your bankruptcy attorney know you need a judicial lien stripped, or it will often be overlooked. The bankruptcy attorney typically does not perform a title check and may not be aware of the lien.

What is Chapter 13 Bankruptcy? (The Wage Earner’s Plan)

Chapter 13 is a form of debt reorganization under the U.S. Bankruptcy Code, often called a “wage earner’s plan.” It allows individuals with regular incomes to propose a repayment plan to their creditors lasting three to five years. The debtor makes one consolidated monthly payment to the court-appointed Chapter 13 Trustee, who then distributes the funds to creditors.

Unlike Chapter 7, which involves liquidating non-exempt assets, Chapter 13 is used by individuals who:

• Need the tools of a Chapter 13 that a Chapter 7 does not have to manage foreclosures, tax debts, and student loans that can’t be managed by a Chapter 7.
• Have an income above the Kentucky state median and fail the Means Test, making them ineligible for Chapter 7.
• Have filed a Chapter 7 within the last 8 years.
• Have significant assets—such as substantial equity in their Louisville Kentucky home—that they wish to protect from a Jefferson County Commissioner’s sale.
• Need a legal mechanism to cure mortgage arrears or address tax debt which may or may not be non dischargeable.

Filing Chapter 13 to Save Your Louisville Home from Foreclosure (Foreclosure Attorney KY)

When a Louisville homeowner defaults on their mortgage, the lender initiates a judicial foreclosure process in the Kentucky Circuit Court (e.g., Jefferson Circuit Court). Filing for Chapter 13 bankruptcy is the most effective legal defense to stop this process. Fighting a foreclosure in state court may delay the process and give you time to find another home or to sell the home, but it increases the court costs and mortgage debt you will owe.

The Automatic Stay and Curing the Default

The moment your bankruptcy petition is filed in the Western District of Kentucky Bankruptcy Court, an Automatic Stay (11 U.S.C. § 362) goes into effect. This is a powerful federal injunction that immediately prohibits the mortgage lender from continuing the foreclosure lawsuit, scheduling a sale, or even contacting you.

Your Chapter 13 plan is then used to cure the default. You will propose a plan to:

• Pay the regular ongoing mortgage payment (or “conduit payment”) on time, starting the month of filing.
• Paying the total amount of past-due payments (arrears), plus interest, in equal installments over the life of your 36-to-60-month plan is usually paid through the plan. These plan payments also start the month of filing.

This process essentially forces the lender to accept a repayment schedule, allowing you to reinstate your original mortgage agreement and keep your home.

The Key Strategy of Junior Lien Stripping in WD Ky.

For a homeowner with

• substantial mortgage or lien debts
• or a home that has declined in value,

Chapter 13 provides a unique tool called lien stripping (11 U.S.C. § 506) and lien avoidance. This strategy is vital in the Western District of Kentucky, particularly for those with a second mortgage or a HELOC (Home Equity Line of Credit).

If the current market value of your home is less than the outstanding balance of your first mortgage, the second mortgage is considered “wholly unsecured.” Chapter 13 allows you to “strip off” this junior lien, reclassifying it as general unsecured debt. Once the Chapter 13 plan is completed, this debt is treated as any other unsecured debt and is discharged, permanently removing the second mortgage lien from your property.

This is accomplished by filing a Motion and Order to Strip Off a Junior Lien (Local Form M) with the Western District of Kentucky Bankruptcy Court. This can only be done in Chapter 13 for a second mortgage, but it can be done for both a seven or a 13 for a judicial lien. Judicial liens normally happen when you have been sued and the creditor has attached the home.

Chapter 13 vs. Chapter 7: Protecting Your Substantial Home Equity and Assets

For the Louisville consumer with significant home equity, a Chapter 7 liquidation is often ill-advised. If your home equity exceeds the value of your mortgages, liens, and exemptions, it can lead to the sale of the home.

Feature

Chapter 13 (Reorganization)

Chapter 7 (Liquidation)

Asset Protection

Keep All Assets. Allows the debtor to keep all non-exempt property, including a home with substantial equity that exceeds the Kentucky exemption limits.

Non-Exempt Assets Sold. A Trustee may sell any assets (including home equity) that are not protected by Kentucky’s exemption laws.  In bankruptcy, Kentucky uses the federal exemptions, and you can keep far more than the Kentucky exemption limits.

Mortgage Arrears

Cure/Pay Over Time. Allows you to stop foreclosure and catch up on missed mortgage payments over 3-5 years.

No Cure. Only provides a temporary halt (Automatic Stay). You must either negotiate a loan modification or pay the arrears within a few months; otherwise, the lender will lift the stay and proceed with foreclosure.

Plan Duration

3 to 5 years (Repayment Plan).

3 to 6 months (Quick Discharge).

For a debtor with assets (home equity or auto) exceeding the Kentucky Homestead Exemption ($31,575 per individual as of 2025 for the Federal exemptions), Chapter 13 is the only way to avoid forced liquidation.

Why Chapter 13 is the Better Choice for Debtors with Tax, Foreclosure, or Private Student Loan Issues

Many consumers prefer the faster, cheaper discharge of Chapter 7.  But, Chapter 13 offers strategic advantages for complex financial issues, particularly those involving tax student loans and foreclosure.  .

• Tax Debts (Priority Claims): Most income tax liabilities are considered Priority Unsecured Claims (meaning they are non-dischargeable in Chapter 7 unless they meet complex, narrow exceptions). Chapter 13 requires you to pay these claims in full, but it allows you to pay them back penalty and interest-free.  You can take 3-to-5-years to repay life of the plan. This can save thousands of dollars and is a key benefit often utilized in the Western District of Kentucky.  Our Louisville court has specific rules regarding tax obligations when a small business or consumer bankruptcy requests financial tax relief. (U.S. Bankr. Ct. Rules W.D. Ky., L.B.R. 6070-1).
• Private Student Loans: Though generally non-dischargeable in both chapters, Chapter 13 allows you to consolidate these payments into your repayment plan, essentially forcing a temporary interest-free repayment schedule, which can alleviate short-term payment stress and allow other debts to be paid down.
• Foreclosure: As noted above, Chapter 13 is the mechanism designed to cure and save a primary residence from foreclosure; Chapter 7 is not.

Chapter 13 Eligibility and the WD Ky. Process

To qualify for Chapter 13 relief, a debtor must have regular income.  Their noncontingent, liquidated, unsecured debts must be less than $526,700, and secured debts must be less than $1,580,125 (adjusted as of April 1, 2025, per 11 U.S.C. § 109(e)).

• Filing the Petition: Your attorney will file the petition and supporting schedules with the Western District of Kentucky Bankruptcy Court in Louisville.
• The Automatic Stay: Immediately takes effect.
• The Means Test and Commitment Period: The court determines your “Applicable Commitment Period” 3 years if your income is below the state median, or 5 years if it is above. This period determines the minimum length of your plan.
• The 341 Meeting of Creditors: You will attend a brief meeting with the Chapter 13 Trustee in Louisville, where you will verify the accuracy of your petition and plan. Most creditors do not attend.
• Plan Confirmation: The court formally approves your repayment plan.
• Plan Completion and Discharge: Upon making the final payment (usually 36 to 60 months) and completing the required financial management course, the court grants a Chapter 13 Discharge, eliminating the remaining balance of dischargeable debts.

Calculating Chapter 13 Payment for your Louisville, Kentucky Chapter 13

Three things will increase and determine the amount of your Chapter 13 plan payment.

• Your income. A consumer in a Kentucky Chapter 13 must pay all of his disposable income into a Chapter 13. This includes your best efforts to repay. If you have no disposable income, you probably don’t have a Chapter 13. A step plan can be proposed with increasing payments.
• Your assets. Chapter 13 must repay what a Chapter 7 liquidation would have repaid. If your home would have sold and repaid creditors $20,000, your Chapter 13 must repay $ 20,000 over 5 years. You don’t have to lose your home in a Chapter 7 if you have $10,000 too much equity, but your Chapter 13 will have to repay at least $10,000.
• Your priority and secured debts. Priority debt (income taxes less than 3 years old) must be paid during the plan. Secured debts (mortgages and car loans) must be caught up, not paid off.