When financial hardship strikes, many Missouri families face the difficult choice between eliminating overwhelming debt and keeping their homes. The fear of losing your house often prevents people from seeking the debt relief they need. However, filing for bankruptcy doesn’t automatically mean losing your home. Missouri law provides specific protections that allow many homeowners to keep their houses while getting relief from crushing debt.
The Reality About Bankruptcy and Your Home
Most people assume that filing for bankruptcy means automatically losing their home. This common misconception keeps many Missouri families from getting the financial relief they need. The truth is that the majority of people who file bankruptcy in Missouri keep their homes, especially when they work with an experienced attorney who can properly structure their case.
Whether you can keep your house during bankruptcy depends on several factors: the type of bankruptcy you choose, how much equity you have in your home, and whether you can continue making mortgage payments. Missouri provides homeowners with valuable protections through its homestead exemption laws, which we’ll examine in detail.
Missouri Homestead Exemption as Your First Line of Defense
Missouri law protects homeowners through what’s called the homestead exemption. Under Missouri Revised Statutes Section 513.475, this exemption shields up to $15,000 of equity in your primary residence. The protection covers your house, any connected structures like garages or sheds, and the land your home sits on.
Here’s how it works: The exemption protects your home equity, which is the difference between your home’s current market value and what you owe on mortgages or liens. Let’s say your home is worth $200,000 and you owe $190,000 on your mortgage. Your equity would be $10,000. Since this falls within Missouri’s $15,000 exemption limit, your home equity receives full protection.
One important limitation: if multiple people own the same property, they can’t each claim the full $15,000 exemption. The law caps the total exemption at $15,000 per homestead, regardless of how many owners there are. This means married couples can’t double up on the exemption for jointly owned property.
Keeping Your Home in Chapter 7 Bankruptcy
Chapter 7 bankruptcy, sometimes called “liquidation bankruptcy,” doesn’t automatically result in losing your home. If you file Chapter 7, you can use the homestead exemption to protect your equity. The bankruptcy trustee won’t sell your home if you meet the necessary requirements.
Your ability to keep your house in Chapter 7 depends on three main factors:
Home Equity Amount
If your home equity is $15,000 or less, Missouri’s homestead exemption provides complete protection. The bankruptcy trustee has no financial reason to sell your home because there wouldn’t be any proceeds available for creditors after paying off your mortgage and accounting for your exemption.
Ability to Make Mortgage Payments
Even with exemption protection, you must continue making mortgage payments. Bankruptcy doesn’t eliminate your mortgage obligation if you want to keep the house. You’ll need to show that you can afford these payments going forward.
Mortgage Payment Options
In Chapter 7, you have several options for handling your mortgage. You can reaffirm the debt (agreeing to remain personally liable), surrender the property, or continue making payments without reaffirming (called “ride-through”). Many Missouri homeowners choose the ride-through option, staying current on payments without formal reaffirmation.
Using Chapter 13 Bankruptcy to Protect Your Home
Chapter 13 bankruptcy offers unique advantages for homeowners who want to keep their houses. Unlike Chapter 7, Chapter 13 allows you to catch up on missed mortgage payments over time through a court-approved repayment plan.
In Chapter 13, you can:
- Gradually catch up on missed mortgage payments
- Keep your home even if you’re currently behind on payments
- Potentially reduce other debts to make your mortgage more manageable
- Stop foreclosure proceedings immediately upon filing
Chapter 13 works by reorganizing your debts rather than liquidating your assets. This makes it particularly attractive for homeowners who have fallen behind on payments but have regular income. You create a three-to-five-year repayment plan that addresses your missed payments while allowing you to keep your home.
When Your Home Equity Exceeds the Exemption
If your home equity exceeds Missouri’s $15,000 homestead exemption, you face more complex decisions. The bankruptcy trustee might want to sell your home to pay creditors, but you still have several options:
Buy Back Your Non-Exempt Equity
You can pay the trustee the amount of your home equity that exceeds the exemption. For instance, if you have $25,000 in equity, you’d need to pay the trustee $10,000 to keep your home.
Choose Chapter 13 Instead
Chapter 13 bankruptcy might be more appropriate if you have significant home equity. In Chapter 13, you keep your property but must pay creditors at least as much as they would have received in Chapter 7.
Consider Missouri’s Wildcard Exemption
Missouri provides a wildcard exemption of $600 that can protect any property of your choosing. If you’re the head of your family, you get an additional $1,250 plus $350 for each child. This wildcard exemption could potentially protect additional home equity beyond the $15,000 homestead exemption.
Additional Protections for Married Couples
If you’re married and own your home as “tenancy by the entirety,” you may have additional protection if only one spouse files for bankruptcy. This form of joint ownership provides extra safeguards that can help protect your home from creditors. However, this strategy requires careful legal planning and isn’t appropriate for all situations.
Situations Where You Might Lose Your Home
While many people keep their homes in bankruptcy, certain situations make home loss more likely:
- Significant Equity Above the Exemption. If you have substantial equity beyond the $15,000 exemption and can’t afford to buy it back, the trustee may decide to sell your home.
- Inability to Make Future Payments. Even with bankruptcy protection, you must continue making mortgage payments. If you can’t afford these payments, foreclosure remains a possibility.
- Fraudulent Transfers or Preference Payments. If you made large payments to certain creditors or transferred property before filing, the trustee might reverse these transactions, potentially affecting your home.
- Multiple Mortgages or Liens. Second mortgages, home equity lines of credit, and other liens can complicate your situation and might make keeping your home more difficult.
The key is honest assessment of your financial situation and working with an attorney who can help you choose the right strategy.
How Missouri’s Bankruptcy Exemptions Protect You
Missouri Revised Statutes Section 513.427 allows bankruptcy filers to use state exemptions to protect property from creditors. To use Missouri exemptions, you must have lived in Missouri for at least 730 days before filing.
Missouri’s exemption system includes several protections beyond the homestead exemption:
- Household goods up to $3,000
- Motor vehicles up to $3,000
- Tools of the trade up to $3,000
- Wildcard exemption of $600 (or $1,250 for head of family plus $350 per child)
- Personal injury awards
- Retirement accounts and pensions
These exemptions work together to help you maintain a basic standard of living while getting debt relief. The goal is to give you a fresh start, not to strip away everything you own.
Protecting Your Home: A Step-by-Step Approach
If you’re considering bankruptcy but want to keep your house, here’s what you should do:
- Calculate Your Home Equity. Get a current market valuation and subtract all mortgage balances and liens to determine your exact equity amount.
- Review Your Budget Carefully. Make sure you can continue making mortgage payments after bankruptcy. Don’t forget to include property taxes, insurance, and maintenance costs.
- Consider Your Bankruptcy Options. Chapter 7 might work if you have low equity and can afford payments. Chapter 13 might be better if you’re behind on payments or have higher equity.
- Gather All Documentation. Collect mortgage statements, property tax records, and proof of property value. These documents are essential for protecting your exemption.
- Plan Your Timing. You must live in Missouri for at least 730 days before filing to use Missouri exemptions. Make sure you meet this requirement before proceeding.
Working with an experienced bankruptcy attorney can help you choose the right strategy and avoid costly mistakes.
Common Myths About Bankruptcy and Homeownership
Myth: Bankruptcy Always Means Losing Your Home.Â
Reality: Most people keep their homes in bankruptcy, especially when they receive proper legal guidance and planning.
Myth: You Can’t Buy a House After Bankruptcy.
Reality: While bankruptcy affects your credit, many people successfully purchase homes within a few years after receiving their discharge.
Myth: All Home Equity is Lost in Bankruptcy.Â
Reality: Missouri’s homestead exemption specifically protects up to $15,000 of home equity, and additional protections may apply.
Myth: You Must Choose Between Debt Relief and Your Home.Â
Reality: Bankruptcy often provides the debt relief needed to make homeownership sustainable for the long term.
These misconceptions prevent many Missouri families from getting the help they need. The reality is that bankruptcy law is designed to give you a fresh start while protecting your basic necessities, including your home.
Key Takeaways
- Missouri’s homestead exemption protects up to $15,000 of home equity in bankruptcy
- Most people who file bankruptcy keep their homes, especially with proper planning
- Chapter 7 and Chapter 13 offer different advantages for homeowners
- You must continue making mortgage payments to keep your house
- Living in Missouri for 730 days is required to use state exemptions
- Professional legal guidance significantly improves your chances of keeping your home
Frequently Asked Questions
Can I keep my house if I’m behind on mortgage payments?Â
Chapter 13 bankruptcy allows you to catch up on missed payments through your repayment plan. Chapter 7 typically requires you to be current on payments or bring them current through reaffirmation.
What happens if my home is worth less than I owe?Â
If you’re “underwater” on your mortgage, you have no equity to protect. The trustee has no interest in the property, making it easier to keep your home if you can afford the payments.
Can I sell my house after filing bankruptcy?
 In Chapter 7, you need court approval to sell major assets. In Chapter 13, you typically need court approval as well. Both processes are manageable with proper legal guidance.
Does bankruptcy affect my mortgage interest rate?
Your existing mortgage terms generally remain unchanged. However, bankruptcy will affect your credit score, which could impact future lending opportunities.
Can I use federal bankruptcy exemptions instead of Missouri exemptions?Â
No. Missouri has “opted out” of the federal exemption system, meaning you must use Missouri state exemptions in bankruptcy.
What if I own a mobile home instead of a traditional house?
Mobile homes have their own exemption under Missouri law. You can protect up to $5,000 in equity in a mobile home, which is separate from the $15,000 homestead exemption for traditional real estate.
Can married couples get additional protection?
If you’re married and own property as tenancy by the entirety, you may have additional protection if only one spouse files for bankruptcy. This requires careful legal planning and consultation with an attorney.
What if I own multiple properties?Â
The homestead exemption only applies to your primary residence. Investment properties or vacation homes don’t qualify for this protection.
Do I have to reaffirm my mortgage in Chapter 7?
No, reaffirmation is optional. Many Missouri homeowners choose the “ride-through” option, where they continue making mortgage payments without formally reaffirming the debt. This allows you to keep your home while avoiding personal liability if you later can’t make payments.
How long does the homestead exemption protection last?
The exemption protects your home equity throughout the bankruptcy process. Once you receive your discharge, normal property rights resume.
Take Action to Protect Your Home
Don’t let fear of losing your home prevent you from getting the debt relief you need. At Doyel Law, we’ve helped countless Missouri families keep their homes while eliminating overwhelming debt through bankruptcy. Our team combines thorough knowledge of Missouri bankruptcy law with personalized attention to your unique situation.
We offer initial consultations to help you understand your financial options and how bankruptcy may apply to your situation. During this meeting, we’ll calculate your home equity, review your budget, and recommend the most suitable bankruptcy chapter for your needs. We’ll also explain how Missouri’s homestead exemption works in your case and outline steps you can take to protect your home.
The bankruptcy process becomes much more manageable when you have experienced guidance. Contact Doyel Law today to schedule your free consultation and take the first step toward financial freedom while keeping the home you love. Your fresh start is within reach.