Prospect does not look like a place where people file bankruptcy. Median household income here runs above $160,000. The median age is 54.
That brings its own problems. High income shuts the door on Chapter 7 for many households. Retirement changes what income even means. Nick Thompson is a Prospect bankruptcy attorney and works with both. He does that work as a Louisville bankruptcy and foreclosure attorney.
Call 502-625-0905 for a free consultation.
Earning too much for Chapter 7
Filing personal bankruptcy in Kentucky under Chapter 7 requires passing a means test against the state median for your household size. Plenty of Prospect households sit well above it.
That is not the end of it. The Chapter 7 means test lets you subtract real costs. Mortgage and car payments come off the top. So do taxes, health insurance, and childcare. Some households that look too rich on paper pass once the form is done right.
If you still do not pass, Chapter 13 is open to you at any income. You pay what you can afford over three to five years. The rest of the qualifying debt is wiped out at the end.
Retired, and living on savings
Social Security benefits are excluded from the means test calculation. That surprises people.
Pension and retirement withdrawals are treated another way. So is investment income. Two retirees with the same bank balance can land in different chapters. Where the money comes from is what counts.
Retirement accounts stay protected in bankruptcy. IRAs are safe up to $1,711,975 under Section 522(n). That cap runs through March 31, 2028. Cashing out a protected account to pay credit cards is often the worst move you can make.
Talk to someone before you liquidate anything.
Storm repairs that turned into debt
On April 2, 2024, the National Weather Service confirmed an EF2 tornado with 120 mile-per-hour winds in the Beechland Beach area of Prospect. Roofs came off. Trees came down on houses.
Insurance rarely covers the whole repair. People fill the gap with credit cards, contractor financing, or a home equity line. Two years on, that balance is still there. It is expensive.
Repair debt on a credit card can be wiped out. A recorded contractor lien cannot, and it has to be handled on its own. Bring every document, including the ones you would rather not look at.
Business debt and personal guarantees
Owners often sign in their own name for a business loan, a lease, or an equipment line. When the business struggles, that signature follows you home.
There is one useful rule here. If more than half your debt is business debt, the means test does not apply at all. Income stops being the gate.
We look at why each debt was taken on, not at whose name is on the account. That is the core of small business bankruptcy work.
Protecting home equity
Kentucky filers may choose the federal exemption list instead of the Kentucky bankruptcy exemptions. The federal homestead exemption protects $31,575, and $63,150 for a married couple filing together.
Many Prospect homes carry more equity than that. When they do, a Chapter 13 repayment plan keeps the house. You pay creditors from income instead, and nothing gets sold.
Filing from Prospect
Prospect straddles the Jefferson and Oldham county line. Either way, your case goes to the Louisville Division of the U.S. Bankruptcy Court for the Western District of Kentucky, at 601 West Broadway.
Your 341 meeting of creditors is held by Zoom video. You attend from home rather than driving US 42 downtown.
Serving Prospect
Prospect had 4,592 residents at the 2020 census and incorporated in 1974. The city runs from the Ohio River down to Harrods Creek, with US 42 along its southwest edge.
We take cases from across the 40059 ZIP code, including the Hunting Creek area.
Who handles your case
Nick Thompson has practiced law since 1988 and in Kentucky since 1991. He holds U.S. Tax Court License #51. He was once an attorney for the West Virginia state tax department. That helps when income tax debt is part of the picture.
He prepares each petition himself. Call 502-625-0905 for a free consultation.
Frequently Asked Questions
I earn too much for Chapter 7. Do I have any options?
Does Social Security count in the means test?
Do you serve Prospect and the 40059 area?
Can I discharge storm repair debt?
What are your office hours?
Talk to a Bankruptcy Attorney
Call 502-625-0905 or visit the office at 800 Stone Creek Parkway, Suite 6, Louisville, KY 40223.