Can I Keep My House if I File Chapter 7 Bankruptcy?

When you file bankruptcy, there are exemptions that help protect your property, which means if the property is exempt, you will be able to keep that property. If the property is non-exempt, that property could be liquidated for the benefit of your creditors. The exemption statutes in Kansas and Missouri are wildly different and complex and if you are contemplating filing bankruptcy, you should seek the advice of an experienced bankruptcy attorney.

Kansas Chapter 7 Bankruptcy

In Kansas, the homestead exemption is typically unlimited (meaning all of your equity is protected), subject to certain limitations

• Property must be less than one acre within city limits, or
• Less than 160 contiguous acres if outside city limes.

If you purchased your home less than 3 years ago, there will be further limitations on the amount of equity that will be protected.

Missouri Chapter 7 Bankruptcy

Unfortunately, the homestead exemption in Missouri is not as favorable.

• The exemption for a house is only $15,000.00
• The exemption for a mobile home is only $5,000.00

If you are contemplating filing bankruptcy, it is important to consult with an experienced bankruptcy attorney to understand how your filing will impact your home.

Whether you keep your home after filing a chapter 7 bankruptcy depends on several factors – do you want to keep it, are you current on the payments, and do you have any equity?

First, you need to decide whether you want to keep the house. If you owe far more than it’s worth, your interest rates are too high, or if it needs more work than you can afford to put into it, you might be better off letting it go and buying again in a few years.

Second, if you file for bankruptcy when you’re behind on the mortgage, your lender may either demand that you get caught up right away or ask the court for permission to start the foreclosure process. This creates some risk and is better not left to the discretion of the mortgager. If you’re behind it would be wise to talk to an experienced bankruptcy attorney to discuss either getting caught up on payments prior to filing the chapter 7, or to consider a chapter 13 bankruptcy, which allows you time to repay the arrears, typically over a three or five year period.

Finally, the bankruptcy trustee will be interested in whether you have any equity in the home. That is, is the house worth more than you owe on it? If so, do you have more equity than is protected under your state’s exemption statute (the law that determines what you get to keep in a bankruptcy)? If you don’t have any non-exempt equity, the trustee is not going to be interested in your home. If you do have non-exempt equity, there are steps you can take to minimize it which should be discussed with a knowledgeable bankruptcy attorney.