Honest answers to the questions we hear most from families in Pike, Floyd, Knott, Letcher, Magoffin, and Martin counties.
Bankruptcy is a federal legal process that gives individuals and families a way to deal with debt they cannot repay. When you file, a federal court issues an automatic stay — a legal order that immediately stops most collection actions. Depending on which chapter you file, your debts are either eliminated (Chapter 7) or reorganized into a payment plan (Chapter 13).
Bankruptcy is a right under federal law. It exists specifically to give people a fresh start when debt becomes unmanageable.
In most cases, no. Kentucky's homestead exemption protects up to $5,000 in home equity per person ($10,000 per couple) in Chapter 7. If your equity is within that limit — which is true for most Eastern Kentucky homeowners — your home is protected.
If you have more equity than the exemption covers, Chapter 13 lets you keep your home by repaying the non-exempt amount through a 3 to 5 year plan. And if you are behind on your mortgage, Chapter 13 can actually stop a foreclosure and give you time to catch up.
Usually not. Kentucky's motor vehicle exemption protects up to $2,500 in equity. If you owe more on your car than it is worth — which is common — you have no equity to protect and you keep the car as long as you keep making payments.
If you are behind on car payments, Chapter 13 can allow you to catch up over the plan period. In some Chapter 13 cases, we can also reduce the interest rate on your car loan.
There are two costs: the court filing fee and attorney fees.
We discuss all costs completely during your free consultation — no surprises, no hidden fees.
Chapter 7 stays on your credit report for 10 years. Chapter 13 stays for 7 years. However, many people find their credit score begins improving within 12 to 18 months after filing because the debt-to-income picture looks better.
The impact of bankruptcy on your credit should be weighed against the impact of ongoing missed payments, collections, and judgments — which also damage your credit and may never resolve on their own.
Yes, but there are waiting periods between filings:
Yes — immediately. The moment you file for bankruptcy, a federal automatic stay goes into effect. Your employer is legally required to stop the garnishment on the next paycheck after being notified. In most cases, we notify your employer the same day you file.
Any wages garnished within 90 days before you filed may also be recoverable as a preferential transfer, depending on the circumstances.
Yes. The automatic stay prohibits creditors from calling you, sending collection letters, filing lawsuits, or taking any collection action. Any creditor that contacts you after you file is violating federal law and may be subject to sanctions.
Once your case is closed and debts are discharged, the discharge injunction permanently prevents those creditors from ever collecting on those debts again.
Yes. In most cases, a Chapter 7 discharge eliminates the underlying debt even after a judgment has been entered. If the creditor has placed a lien on your property through that judgment, we may be able to avoid (remove) that lien as well, depending on your equity in the property.
Yes. Filing bankruptcy — particularly Chapter 13 — triggers the automatic stay, which stops a foreclosure sale immediately. This is true even if the sale is scheduled for the same day.
Chapter 13 then allows you to cure your mortgage arrears over the life of your plan (3 to 5 years) while making your regular monthly mortgage payments going forward. As long as you follow the plan, you keep your home.
Not necessarily — it depends on the full picture. If you are behind on your mortgage but otherwise managing your finances, there may be other options, including loan modification or forbearance agreements with your lender.
However, if you also have significant other debts — credit cards, medical bills, payday loans — that are preventing you from catching up, Chapter 13 can eliminate those debts while also addressing the mortgage arrears in one plan. A free consultation will help clarify which approach makes the most sense.
Credit recovery after bankruptcy is very achievable. Many clients reach a 680–720 FICO score within 12 to 24 months of filing by using a structured credit rebuilding approach.
Stanley Bankruptcy Law partners with a credit rebuilding program that provides a comprehensive, step-by-step recovery plan. Our clients receive an exclusive discount — $50 versus the typical cost of $1,000 — for this program. Ask about it during your consultation.
General steps that help: open a secured credit card, make small purchases and pay them off in full each month, keep balances low, and let time do the rest. The bankruptcy itself improves your debt-to-income ratio immediately, which is actually a positive signal to future lenders.
Chapter 7 can eliminate most unsecured debts, including:
Some debts survive bankruptcy, including:
Yes. Medical debt is one of the most common debts discharged in bankruptcy. It is treated as unsecured debt, meaning it can be completely eliminated in Chapter 7 regardless of the amount — whether it is $5,000 or $500,000. This includes hospital bills, emergency room bills, ambulance charges, and bills from doctors and specialists.
Yes. Payday loans are unsecured debts and are dischargeable in bankruptcy. Even if the payday lender has your banking information or has threatened you, the automatic stay stops all collection once you file. This includes electronic debits from your bank account.
A free 30-minute consultation with Attorney Stanley will answer your specific questions and give you a clear picture of your options.