If you file for bankruptcy in Missouri, Missouri's motor vehicle exemption allows individuals to protect up to $3,000 in motor vehicle equity. Read on to learn more about using Missouri's exemptions to protect car equity, including increased exemption amounts for married couples, covering additional equity with Missouri's wildcard exemption, and more.
(For more information about exemptions, including how they work and which ones you can use, see our Bankruptcy Exemptions area. For information specific to the motor vehicle exemption, see our Motor Vehicle Exemption in Bankruptcy area.)
Missouri’s motor vehicle exemption plays a large role in determining whether or not the bankruptcy trustee can take your vehicle to repay your unsecured creditors. If the equity in your car is less than Missouri's car exemption, then the trustee cannot sell it. If the equity in your car is significantly more than the applicable exemption amount, the trustee is likely to sell your car to repay your unsecured creditors. For details, see The Motor Vehicle Exemption: Can You Keep Your Car in Chapter 7 Bankruptcy?
Keep in mind that even if your car is safe from the bankruptcy trustee, the lender may be able to repossess your car during or after bankruptcy. To learn more, see Your Car in Chapter 7 Bankruptcy and If You Are Behind on Your Car Payments, Can Chapter 7 Help?
Vehicle equity is the fair market value minus the amount of money owed on the vehicle. For instance, if your car is worth $5,000 and your loan on that vehicle is $4,000, your equity is $1,000.
Your equity may be reduced by judgment liens or by co-owners. For example, if you and your mother own a vehicle jointly that has $2,000 in total equity, your share of the vehicle’s equity is only $1,000.
In Missouri, you can protect up to $3,000 in vehicle equity during bankruptcy. Missouri has “opted-out” of the federal bankruptcy exemptions, which means that its residents may only use the Missouri motor vehicle exemption during bankruptcy and cannot select the federal motor vehicle exemption.
If you and your spouse are filing a joint bankruptcy petition and both of you own one motor vehicle, you can each use your individual Missouri motor vehicle exemption to protect the vehicle’s equity. That means that as a couple, you can protect up to $6,000 of vehicle equity.
(To learn about the advantages and disadvantages of joint bankruptcy filings, see Nolo's section on Bankruptcy Options for Married Couples).
If your equity exceeds your motor vehicle exemption, you can apply your Missouri “wildcard” exemption to protect excess equity. The Missouri wildcard exemption is $600 and can be used to protect any property.
If you are the head of your family, Missouri allows you to exempt $1,250 of any property plus an additional $350 per child. (Learn more in The Missouri Wildcard Exemption in Bankruptcy.)
In Missouri, you can protect up to $3,000 of equity in “tools of the trade.” Missouri and the Eighth Circuit Court of Appeals have stated that the test to determine whether a vehicle is a tool of the trade is whether the item is reasonably necessary to the debtor’s trade or business. A truck used daily to haul items for your business is protected as a tool of the trade. A truck used to commute to and from work will likely not qualify the vehicle as a tool of the trade.
There is no limit as to the number of vehicles you can keep during bankruptcy. You can split up the exemption and apply it to different vehicles: $1,000 to three different vehicles, or $3,000 to one vehicle, and so on. You can split up your wildcard exemption as well, and apply it between vehicles.
According to the Missouri bankruptcy courts, a qualifying motor vehicle is a self propelled vehicle designed primarily for use on highways. That should cover most cars, trucks, and motorcycles. Missouri law does not consider certain devices to be “vehicles” such as motorized bicycles, vehicles drawn by horses or human power, vehicles used exclusively on fixed rails or tracks, motorized wheelchairs, and trailers. Watercraft, like wave runners and boats, are also not motor vehicles.
You can find Missouri’s motor vehicle exemption at Mo. Rev. Stat. 513.530(5)
The exemption laws in Missouri change periodically. Check the Missouri State Legislature website at www.moga.mo.gov/ for updated amounts.