When filing for bankruptcy, one of the biggest concerns for homeowners is whether they can keep their home. The ability to keep your house largely depends on the exemptions allowed in your state, the amount of equity you have in the property, and the type of bankruptcy you file.

Exempt Property vs. Non-Exempt Property

In a bankruptcy case, property is classified as either exempt or non-exempt:

  • Exempt property: This property is protected and cannot be taken by the bankruptcy trustee to pay your creditors. If your home qualifies as exempt, you can generally keep it.
  • Non-exempt property: This property can be sold by the trustee to pay off your creditors. If your home’s equity exceeds the exemption limit, it may be at risk of being sold.

Each state has its own set of exemptions, and this is where the distinction between Kansas and Missouri comes in.

Kansas Homestead Exemption

Kansas offers one of the most generous homestead exemptions in the country. Here are the key points about Kansas’s homestead exemption:

  1. No Monetary Limit (Under Specific Conditions):
    • If you meet certain requirements, you can keep your home without any monetary cap on its value.
    • The property must be located within Kansas and meet the size criteria.
      • If within city limits: the home must be located on one acre or less.
      • If outside city limits: it must be 160 acres or less.
  2. Time Restriction:
    • The home must have been purchased at least 3 years and 3 months before filing your bankruptcy case.
    • If you transferred equity from a previous Kansas home within this period, you may still be able to claim the exemption, but it’s subject to restrictions.
  3. Limitations for Recent Purchases:
    • If you purchased your home within 3 years and 3 months before filing, the exemption may be limited to $146,450.
  4. What Qualifies as Homestead:
    • A homestead can include a house, manufactured home, and mobile home.
    • Vacation homes and rental properties do not qualify.

Missouri Homestead Exemption

Missouri’s homestead exemption is less generous compared to Kansas, with specific monetary limits:

  1. Monetary Limits:
    • $15,000 exemption for a home (or a mobile home).
    • $5,000 exemption for a mobile home (if it’s used as your primary residence).
  2. Limit for Joint Filers:
    • Unlike Kansas, Missouri’s homestead exemptions cannot be doubled by joint filers, so married couples are still limited to the $15,000 (or $5,000 for mobile homes) exemption.
  3. What Qualifies as Homestead:
    • The home must be occupied by the debtor at the time of filing the bankruptcy.
    • Vacation homes and rental properties are excluded from the exemption.

Will I Lose My Home in Bankruptcy?

Whether you will lose your home in bankruptcy largely depends on your equity and how it compares to the exemption limits in your state.

  • In Kansas, if your home qualifies under the homestead exemption criteria and you’ve owned it long enough, you may be able to keep it even if it has substantial value.
  • In Missouri, if the equity in your home exceeds the exemption limits, the bankruptcy trustee could sell it to pay creditors, but there may be ways to negotiate or protect your home, especially if you file Chapter 13.

Chapter 7 vs. Chapter 13 and Your Home

  • Chapter 7 Bankruptcy: If you file Chapter 7, the trustee may liquidate non-exempt assets to pay creditors. However, if your home qualifies for the exemption, you can usually keep it.
  • Chapter 13 Bankruptcy: In Chapter 13, you will enter a repayment plan to pay creditors over 3-5 years. If you’re behind on mortgage payments, this chapter provides an opportunity to catch up and keep your home. You can also pay the non-exempt value of your home to creditors during your plan allowing you keep your home.

Get Professional Advice

Bankruptcy laws and exemptions can be complex, and the outcome depends heavily on your specific situation. Scheduling a free consultation with an experienced bankruptcy attorney can help you understand how exemptions apply to your case and ensure that you protect your home and other assets as fully as possible.

Do you own a home and want to know how bankruptcy may affect it? Reach out for a free consultation to understand your options!