As I have suggested in other posts, there is a significant intersection between family law and bankruptcy law. One example of this link comes in the form of the homestead exemption. Kentucky now allows for debtors seeking bankruptcy to use the Federal exemptions. This greatly increased the homestead exemption from the low and static Kentucky exemption of $5,000.00 to the Federal exemption that is tied to inflation. Currently, an individual can claim over $21,625.00 of the equity of their residence as exempt property. For a married couple, that means they can claim over $43,250.00 equity in their residence as exempt. In other words, if you are married, have a home that is valued at $200,000.00 dollars and you owe $160,000.00 on the home that is secured by a mortgage, then you can reaffirm the debt of $160,00.00 and still keep your home in a Chapter 7 bankruptcy. This knowledge is priceless if you are either contemplating divorce or in the midst of a divorce action.
Saving a home in the face of a bankruptcy can benefit your family regardless of whether the divorce occurs or not (though hopefully, as I stated in my last post, the divorce could be avoided). Knowing the exemption and interplay of bankruptcy and family law can allow for wise planning on the timing of the filing or bankruptcy, how marital assets are divided, and where monies might come from to satisfy domestic obligations.