What Happens to My Home in Missouri if I File Chapter 7 Bankruptcy?
Can you keep your home and file for bankruptcy in Missouri? The answer will depend on home equity. Missouri bankruptcy laws allow debtors to protect up to $15,000 of equity in a home. Joint debtors may not double the exemption.
In chapter 7 bankruptcy, a debtor’s assets are basically divided into two piles: exempt and non-exempt property. The Missouri homestead exemption classifies homes with equity at $15,000 or below as exempt, meaning the bankruptcy trustee, or a judgment creditor, cannot force the sale of your home. As you may have guessed, homes with equity of greater than $15,000 are classified as non-exempt and are potentially subject to sale by the trustee. How can you calculate home equity? Subtract the amount of your mortgage (if any) from the appraised value of your home, the corresponding number is your home equity.
More than $15,000 of equity? Explore a cash settlement
In comparison to some other states, Missouri’s homestead exemption is fairly small. Having said that, even debtors with non-exempt home equity might be able to file for bankruptcy and keep their home if they are prepared to make a cash payment to the trustee. In most cases, trustees don’t really want to sell your stuff. It is their job to distribute non-exempt assets to your creditors while taking a small piece of the action for themselves. Debtors willing to pay cash to “buy-out” non-exempt equity make the trustee’s job easier because cash settlements don’t carry the same burden as selling a home. Remember, trustees are not exempt from realtor’s fees and closing costs. The expense of selling a home can be a deterrent to putting it on the market and counsel in favor of a cash settlement. If you are considering filing bankruptcy in Missouri, but are concerned about losing your home, talk to a bankruptcy attorney. Most offer free consultations and there is a piece of mind that comes with knowing your options.