If you’re considering filing for bankruptcy, one of the most pressing concerns is often whether you’ll lose everything you own. The good news is that certain assets are protected during bankruptcy proceedings, allowing you to retain essentials for daily living and rebuild your financial stability.
At Checkett, Pauly, Bay & Morgan, LLC, we know how overwhelming the bankruptcy process can feel for individuals and families. Our Missouri attorneys have years of experience guiding clients through bankruptcy cases, making sure they understand which assets are safeguarded under the law.
Whether you’re worried about your home, car, or retirement accounts, it’s important to know what exemptions may apply to your situation, how bankruptcy protects specific assets, and what you can expect during this process.
Exempt vs. Non-Exempt Assets
When filing for bankruptcy, understanding the distinction between exempt and non-exempt assets is crucial. Exempt assets are those you’re allowed to keep, as they’re deemed necessary for maintaining a basic standard of living. Non-exempt assets, however, may be sold by the bankruptcy trustee to repay creditors.
Exempt assets typically include necessities like your primary residence, a vehicle, and certain personal belongings. These exemptions vary by state, so it’s essential to know how Missouri’s laws impact your case.
On the other hand, non-exempt assets may include luxury items or high-value property beyond what’s protected under state or federal exemptions. The type of bankruptcy you file also influences how assets are handled, making it critical to evaluate your options carefully.
Homestead Exemptions
Your home is often one of your most significant assets, and Missouri offers strong protections through homestead exemptions. These exemptions allow you to protect equity in your primary residence during bankruptcy proceedings, preventing the loss of your home.
In Missouri, the homestead exemption provides up to $15,000 in equity protection for most filers. If you’re over 60 or disabled, this exemption increases to $30,000, offering additional security for vulnerable homeowners. However, it’s important to note that these exemptions only apply to your primary residence, not investment properties or vacation homes.
For those facing financial difficulties, knowing your home is safeguarded under the homestead exemption provides peace of mind. From here, we can explore how other essential assets, such as vehicles and retirement accounts, are protected during bankruptcy.
Protecting Your Vehicle
For many individuals, a reliable vehicle is essential for getting to work, running errands, and maintaining daily responsibilities. Fortunately, bankruptcy laws in Missouri provide specific exemptions for motor vehicles, allowing you to keep a car valued up to $3,000.
This exemption covers the equity in your vehicle, which is calculated by subtracting any outstanding loan balance from the car’s current market value.
For instance, if your car is worth $10,000 and you owe $7,000, your equity is $3,000 and would fall within Missouri’s exemption limits. If your equity exceeds the limit, you may still have options to retain your car, such as negotiating with creditors or reaffirming the loan.
Understanding how vehicle exemptions apply can help you protect your transportation and focus on rebuilding your financial future.
Safeguarding Retirement Accounts
Retirement accounts are among the most protected assets in bankruptcy proceedings. Both federal and Missouri state laws provide significant exemptions for retirement savings, recognizing their importance for long-term financial stability.
Some key protections for retirement accounts include:
401(k) plans: These accounts are generally fully exempt under federal law, safeguarding your contributions and any matching funds from creditors.
IRAs and Roth IRAs: Up to $1,512,350 is protected per person for these accounts, making sure your retirement savings remain intact.
Pensions: Most pensions are fully exempt, offering additional security for public employees, teachers, and other eligible workers.
By protecting your retirement accounts, bankruptcy laws allow you to secure your future while addressing immediate financial challenges. From here, let’s discuss how personal belongings are handled in bankruptcy.
Personal Property Exemptions
Personal property includes items such as clothing, furniture, appliances, and other household goods. These assets are often essential to maintaining your daily life, and bankruptcy laws provide exemptions to protect them.
Missouri allows filers to exempt up to $3,000 in household goods and furniture, making sure you can keep the necessities. Additionally, tools of the trade—such as equipment or supplies needed for your profession—are protected up to $3,000. This exemption is particularly important for self-employed individuals or those working in skilled trades.
For many, knowing that personal property exemptions cover basic living needs offers relief during bankruptcy proceedings. Next, let’s explore how exemptions apply to life insurance policies and other financial assets.
Life Insurance and Financial Assets
Certain types of life insurance policies and financial assets are also protected during bankruptcy. These exemptions provide additional financial security for filers and their families.
Missouri allows exemptions for life insurance policies with a cash value of up to $5,000. This protection helps verify that policyholders can retain their coverage and provide for loved ones. Additionally, health savings accounts (HSAs) and disability benefits are often fully exempt, safeguarding these critical resources during bankruptcy.
Some key factors to keep in mind when considering financial asset exemptions include:
Health savings accounts (HSAs): These are generally protected to assure access to funds for medical expenses.
Disability benefits: Most disability payments are exempt, offering support for individuals unable to work.
Unemployment compensation: Benefits received through unemployment programs are fully protected under bankruptcy law.
With these protections in place, you can focus on moving forward without worrying about losing essential financial resources.
Wages and Income Protections
For individuals facing bankruptcy, preserving wages and income is critical to maintaining stability. Missouri law protects a portion of your earned but unpaid wages, preventing creditors from seizing everything you’ve worked hard for.
Under Missouri exemptions, up to 75% of your earned wages are protected, or 30 times the federal minimum wage, whichever is greater. This safeguard assures that filers can meet basic living expenses, such as rent, utilities, and groceries while addressing their debts.
By protecting wages, bankruptcy laws provide a foundation for recovery and allow individuals to rebuild their financial lives. Now, let’s discuss the differences between Chapter 7 and Chapter 13 bankruptcy and how they impact asset protection.
Comparing Chapter 7 and Chapter 13 Bankruptcy
The type of bankruptcy you file, whether Chapter 7 or Chapter 13, plays a significant role in determining which assets are protected and how your debts are addressed. Each option offers unique benefits, depending on your financial situation and goals.
Chapter 7 bankruptcy, also known as liquidation bankruptcy, involves selling non-exempt assets to repay creditors. However, Missouri’s exemptions allow most filers to keep essential assets, such as their home, vehicle, and retirement accounts. Chapter 7 is typically faster and better suited for those with limited income and few non-exempt assets.
Chapter 13 bankruptcy, on the other hand, focuses on creating a repayment plan to pay back debts over three to five years. This option allows you to retain more assets while catching up on overdue payments for secured debts, such as a mortgage or car loan.
By understanding the differences between these options, you can choose the one that aligns with your financial needs and priorities.
Contact Checkett, Pauly, Bay & Morgan, LLC
At Checkett, Pauly, Bay & Morgan, LLC, we’re committed to helping clients in Carthage, Missouri, and Nevada, Missouri, protect their assets during bankruptcy proceedings. Attorney Kevin Checkett and our experienced law firm are here to guide you through every step of the process. Contact us today to learn how we can help you secure a fresh financial start.
