Most people probably do not understand that 90% of the time when someone files a Chapter 7 bankruptcy they do not lose any of their property. This is because in a bankruptcy, you can keep all property which the law says is “exempt” from the claims of creditors. Exemptions can be determined under your state law or under federal law. In Kansas and Missouri, the exemptions are determined under State law. However, to claim the exemptions of Kansas or Missouri, you must have lived in the state in which you are filing for the two years prior to filing bankruptcy. If you have not lived in the state in which you currently live for two years, the answer to what you may exempt or keep becomes more complicated, and may even result in using Federal exemptions.
Missouri exemptions include:
- $15,000 in equity in your home, whether you file with your spouse or not you are limited to the $15,000, although as a practical matter you can also usually deduct a 7% cost of sale and the amount owed on mortgages or liens to determine the actual equity available;
- $3,000 in equity for each Debtor in vehicles with that Debtor’s name on the title;
- $3,000 for each Debtor in household goods, clothing, animals and musical instruments;
- $7,500 in things you need for your job (tools, books, etc.);
- Your right to receive certain benefits such as social security, unemployment compensation, or public assistance benefits such as earned income credits, veteran’s benefits, alimony and child support up to $750 a month, pensions and most retirement accounts;
- $500 in jewelry and $1500 in wedding rings for each spouse;
- Term Life insurance policies if unmatured; whole life insurance up to $150,000 cash value if policy purchased more than one year prior to filing;
- $3,000 of professional books or tools of the trade;
- Wildcard exemption of $600 for each spouse that can used to protect any property;
- Additional wildcard for Head of Households of $1,250 and $350 for each dependent child under 21.
Missouri also has a doctrine called Tenancy by the Entireties, that protects property owned by both a Husband and Wife from being taken to pay a debt owed only by the person who files bankruptcy.
In determining whether property is exempt, you must keep a few things in mind. The value of property is not the amount you paid for it, but what it is worth now. Especially for furniture, appliances and cars, this may be a lot less than what you paid or what it would cost to buy a replacement.
You also only need to look at your equity in property. This means that you count your exemptions against the full value minus any money that you owe on mortgages or liens. For example, if you own a $25,000 car with a $5,000 car loan, you count your exemptions against the $20,000 which is your equity if you sell it.
While your exemptions allow you to keep property even in a chapter 7 case, your exemptions do not make any difference to the right of a mortgage holder or car loan creditor to take the property to cover the debt if you are behind. In a chapter 13 case, you can keep all ofyour property if your plan meets the requirements of the bankruptcy law. Sometimes a Chapter 13 is a good way to keep property you might have lost in a Chapter 7. In most cases you will have to pay the mortgages or liens as you would if you didn’t file bankruptcy.
So, if you have more debt than you feel you can afford that is causing you stress and bringing you down, you should talk to a bankruptcy attorney to learn whether you may be able to get relief from your debt without losing any of your property as you obtain a fresh economic start.