Keeping Your Home in a St. Louis Chapter 7

Keeping your home in a St. Louis Chapter 7 bankruptcy depends on a number of factors. These factors would include how much you still owe on the house, what kind of equity there is (if any), and whether or not you wish to surrender the asset. Figuring out the answers to these questions will help determine what the best course of action is for you.

When you file a Missouri or Illinois Chapter 7, the court requires that you disclose all assets that you own. This would include real estate, cars, bank accounts, stock options, and all your personal property (including clothes, appliances, and furniture). Once this disclosure is made, you may then apply certain governmental exemptions to the property in question. The government allows for these exemptions so that you can protect your assets from being liquidated. But if the exemption does not fully cover the value of the property in question, and equity therefore exists, it is possible that the Bankruptcy Trustee may seek to either liquidate the asset or require that you guarantee its value to your unsecured creditors.

For example, let’s say you own a house, and the balance of the mortgage loan is $150,000. Based on your research of other recent home sales in your area, you determine that the fair market value of your home is $125,000. In this situation, there is no equity in the property (indeed, you owe more than the house is actually worth), and the Trustee would abandon his/her interest in the property. But let’s change the facts and assume that the same house has a market value of $160,000. On paper, your home now has equity of $10,000 (160,000 – 150,000=10,000). However, the government gives you a Homestead Exemption of $15,000 to apply towards any equity that exists in your home. This $15,000 exemption is more than enough to cover the $10,000 amount of equity. In this type of scenario, you would simply continue to make your regular monthly mortgage payments to the bank (because again, there would be nothing the Trustee could do with your home).

But what about a situation in which there is in fact a great deal of equity left over (even after your exemption is applied)? Let’s say that you owe a balance of $150,000 on the mortgage loan. But the fair market value of the house is $175,000. For this set of circumstances, you have $25,000 worth of equity. And even after you apply the governmental exemption of $15,000, there is still $10,000 of equity left over (175,000 – 150,000=25,000; 25,000 – 15,000=10,000). In this scenario, there is a good chance that the Trustee is going to signal his/her interest in the property. At this point, there is one of two options:

1. You can simply surrender the home to the Trustee so that he/she can liquidate the asset; or
2. You can work out some kind of settlement, in which you would buy out the equity that exists in the home

If option two (2) is chosen, it often becomes a matter of negotiating skills between your attorney and the Trustee.

The affordable St. Louis bankruptcy lawyers at The Bankruptcy Company have been making sure our client’s assets are protected for years. All of our attorneys have at one time or another actually worked for a Chapter 7 Trustee, and therefore we understand how to properly negotiate a settlement so that you can keep the assets you want to retain. In the end, our goal is to put you on the road towards financial freedom, and get you the fresh start / clean slate you deserve.

Call us at (314) 932-1067 or contact us through our website The Bankruptcy Company to set up your free consultation with our experienced St. Louis bankruptcy attorneys.