Many Kentucky residents file for bankruptcy protection each year under Chapter 13 of the Bankruptcy Code. Under Chapter 13, a filer's debts are reorganized and repaid pursuant to a plan that lasts from three to five years and which is subject to court approval.

A case that was decided in Kansas may shed some light on how courts may treat what are known as fee-only Chapter 13 cases. In the case, an elderly couple who were living off of their Social Security retirement benefits in the amount of $3,461 per month had credit card debts of more than $50,000 and a mortgage balance of $96,000. The couple's social security benefits were exempt from being included in the calculation of their income.

Unable to afford their attorney's flat $2,000 fee for a Chapter 7 bankruptcy petition, the couple filed for Chapter 13, proposing a fee-only bankruptcy petition. They proposed that they would pay their attorney's $3,350 fee for Chapter 13 bankruptcy, the associated filing fees and court costs and a total of $480 to their unsecured creditors over the life of the bankruptcy repayment plan. The trustee objected, but the court approved their plan. The court found that they had acted in good faith, that they had special circumstances and that the administrative burden placed on the trustee did not warrant denying the plan.

People who are overwhelmed by their debts may want to discuss potentially filing for bankruptcy with a bankruptcy attorney. Legal counsel can outline the eligibility requirements of each chapter and determine which approach might work best so that the clients may have a fresh financial start.