Bankruptcy is a federal law that allows the honest but unfortunate debtor to get a fresh start. Since it is a federal law, one might expect that filing bankruptcy would be the same anywhere in the country. Oddly, this is not true because the Bankruptcy Code allows each state to apply some of its own rules. One area where the State can impact the Bankruptcy laws is in the exemption of property.
Exempting property is simply applying the law to protect property. In the Bankruptcy Code, each state is allowed to protect or exempt the property it deems reasonable. This can create a vast difference on the property that a person can successful retain when going through the bankruptcy process. This is especially true in the Kansas City area because Kansas and Missouri have very different laws on what is exempt.
That difference may be most notable when it comes to a person’s home. Kansas has a homestead exemption that protects 160 acres of farming land, or one acre of land within city limits for the resident of the property. That is a powerful and broad protection especially when compared to Missouri homestead exemption law. Missouri law allows a resident to protect $15,000.00 of equity in their home. Any amount of equity above $15,000.00 is submit to collection in a Missouri bankruptcy case. The difference can have a huge effect on what can be accomplished in a bankruptcy case.
The homestead exemption isn’t the only difference. Kansas allows for the protection of a $20,000.00 vehicle while Missouri only exempts $3,000.00 of equity in a car. This difference comes into play often and must be considered prior to a bankruptcy case being filed. Now, Missouri isn’t always on the short side of the exemption law. Cash on hand is also another area where there is a stark difference between the 2 states. Missouri has a wildcard exemption which can protect $600.00 in cash and other exemptions that protect another $1,250.00 in certain circumstances. Kansas has no corresponding exemption for cash. Which means filing bankruptcy in Kansas could result any funds held on the date of filing being turned over.
There are other differences between the two states, and more differences if you look at the other 48 states. The result is that there can be a great variance in the application and usefulness of the bankruptcy law across the country. Whether that is good or bad depends on what you are trying to protect.
by Addam Fera, W M Law Attorney