Will I Lose My House If I File For Chapter 7 Bankruptcy?

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When people consider bankruptcy, particularly Chapter 7, one of the most pressing concerns is the fate of their homes. Many harbor the fear, “Will I lose my house?” Thankfully, the reality is that the vast majority of individuals who file for Chapter 7 bankruptcy do not end up losing their homes. But why is this the case?

The 2008 Housing Market Crash Context

In the wake of the 2008 housing market crash, the dynamics around homeownership changed dramatically. During this turbulent period, some individuals actually wanted to lose their real estate properties due to plummeting values. For those people, Chapter 7 provided an avenue to legally surrender their houses, illustrating that not all cases of losing homes are against the owner’s wishes.

Kansas vs. Missouri: Understanding Homestead Exemptions

Bankruptcy regulations and exemptions can vary significantly from state to state. Knowing the rules applicable to your location can give a clearer picture of what to expect.

The Unlimited Homestead Exemption in Kansas

For Kansas residents worried about losing their house, there’s some good news. Kansas has what’s termed an unlimited homestead exemption. This means that, in the context of Chapter 7 bankruptcy, a person’s home is always safe from a trustee’s reach. Put simply, the unlimited homestead exemption protects homeowners from having their houses taken away in bankruptcy proceedings.

Missouri’s Homestead Exemptions

Things are a bit more complicated for homeowners in Missouri. Unlike Kansas, Missouri doesn’t offer an unlimited homestead exemption. However, this doesn’t automatically put every debtor’s house at risk. Even if the equity in a home poses potential problems in a Chapter 7 case, there are still ways to protect the property.

In situations where the equity in a house becomes an issue, homeowners can often negotiate with a Chapter 7 trustee to buy back the equity. This ensures that they can keep their homes even after filing for bankruptcy. And in more challenging situations, converting the case to Chapter 13 is always an option.

Conclusion: Rarely is a Home at Risk in Chapter 7

With all this information at hand, it’s clear that the fear of losing one’s home in Chapter 7 bankruptcy is largely unfounded. While each individual’s situation may vary, and there are certain nuances between states like Kansas and Missouri, homeowners can find solace in the fact that there are multiple avenues to protect their homes.

For anyone considering bankruptcy, it’s crucial to understand your state’s regulations, consult with a knowledgeable attorney, and remember that in most cases, the answer to the question “Will I lose my house?” is a reassuring “No.”

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Author picture

Jeffrey L. Wagoner

President

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