Kentucky residents who file for bankruptcy may not be eligible for a discharge when they attempt to move property out of their estate. The deciding factor is a section of the Bankruptcy Code that requires these transfers to occur at least one year before a filing. In 2016, the U.S. Court of Appeals for the 9th Circuit made a decision about this rule that could have major significance for those who pursue bankruptcy in Kentucky and other states.

When a dentist was successfully sued for malpractice by one of his patients, he filed for Chapter 13 bankruptcy. Shortly afterwards, he transferred some real estate that he owned into a trust. His Chapter 13 filing was dismissed, but he later successfully filed under Chapter 7. The patient sought to bar the filing from taking full effect because he assumed that the property was transferred in order to hamper valid collection efforts.

The patient made the claim that the one-year time period should be subject to equitable tolling, a practice that lets people who seek remedies like court judgments work around the statute of limitations if they've filed in good faith. The court, however, held that the one-year time limit for the transfer didn't actually amount to a statute of limitations, making it ineligible for equitable tolling.

Filing for bankruptcy may become more difficult in the presence of other ongoing cases, such as civil lawsuits. When creditors believe that they have legal grounds for pursuing injunctions against debtors, they can potentially compromise the success of filings under Chapter 7 or Chapter 13. Such filings may not completely protect debtors, and thus legal advice may be important.