The homestead exemption in Missouri can be the key to saving your home if you file bankruptcy in Missouri. While Missouri's homestead exemption is not particularly generous compared with the homestead exemptions in some other states, such as Texas, it may be enough to allow you to avoid liquidation of your home in Chapter 7 bankruptcy. If you file Chapter 13, you can protect a home of any value, regardless of the Missouri exemption level.
The Missouri homestead exemption is one of a series of bankruptcy exemptions offered by states. Exemptions exist so that debtors do not end up surrendering all of their possessions to creditors or the courts. As a result, all debtors should have at least some property to help them rebuild their financial lives after bankruptcy. The particulars of bankruptcy exemptions are different in each state, but most offer at least some type of exemption for homes, retirement plans and personal belongings.
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Missouri Homestead Exemption
The Missouri homestead exemption protects a certain amount of net equity in your home if you are a Missouri debtor. Specifically, this exemption allows you to protect a home or any type of real property up to a net equity value of $15,000. If you have a mobile home, that limit drops to $5,000. Unlike in some states, these amounts do not double if you are filing a joint bankruptcy with your spouse. As a result of this exemption, if you own a home in Missouri worth $250,000 but you owe $240,000 on your mortgage, you can protect your home from liquidation by the bankruptcy trustee. However, if your home is completely paid off and worth $50,000, you may have to sell it or otherwise provide $35,000, or the excess amount over the $15,000 exemption, to the trustee.
Chapter 7 Bankruptcy in Missouri
The trustee's job in a Missouri Chapter 7 is to seize any assets you cannot protect using Missouri's bankruptcy exemptions and sell them to raise cash for your creditors. If your home has a net value above the $15,000 Missouri exemption, your home is susceptible to liquidation. In practice, many trustees will let you pay off the amount by which your home exceeds the exemption level, but if you are filing bankruptcy, you may not have the cash to make such a payment.
While the Missouri homestead exemption may prevent your bankruptcy trustee from selling your home, it has little to do with whether or not your mortgage lender will foreclose on you. Foreclosure is an event that happens outside of bankruptcy. If you are behind in your mortgage payments, a lender can still foreclose even if your home is exempt from court seizure. Filing Chapter 13 instead of Chapter 7 may allow you to work out a payment plan in which you keep your home and get additional time to make up your late or missing mortgage payments.