When his wife asked him to move out of the family home in 2008, Virgil Herd Jr. took up residence in his horse trailer. He made some improvements on the 20x6, 1997 Wrangler Gooseneck to stay warm, got permission from the owner of the property where the trailer was parked for access to use an electrical outlet, and set up a barrel and pump for water. He used his friend’s address to receive mail. Herd also used the trailer to haul horses owned by him and by his girlfriend from time to time.

Herd filed for bankruptcy in 2010 and he listed the horse trailer as personal property with a value of $3,000. He called it a "camping trailer." In a Chapter 7 proceeding, most of the debtor’s assets (including things like horse trailers) are sold by the bankruptcy trustee and the proceeds are distributed among the creditors. The purpose of bankruptcy is to extinguish debts and give the debtor a fresh start.

A problem arose when Herd also included the trailer on a schedule of exemptions allowed under Missouri law for "any mobile home used as the principle residence but not on or attached to real property in which the debtor has a fee interest not to exceed five thousand dollars in value." "Homestead exemptions," such as the one claimed by Herd, are allowed so the debtor’s home is not sold out from under him.

The bankruptcy trustee objected to the homestead exemption for the horse trailer. He argued that Herd had not used the trailer for his principle residence prior to filing the bankruptcy petition and that the trailer did not qualify as either a "mobile home" or as a "manufactured home" under Missouri law. The bankruptcy court disagreed and allowed the horse trailer exemption. The court explained that while the trailer had not been manufactured as a dwelling it had been modified for that purpose, that Herd lived there at least part of the time, and that he had no other place to live.

The trustee appealed and the Eighth Circuit Court of Appeals took up the issue of whether Herd’s horse trailer could satisfy the legal requirements for a homestead exemption in bankruptcy.

The appellate court first noted that Herd was spending more than half of his time at his girlfriend’s house and that he was served with legal papers at her address, both of which raised the question of whether the trailer actually was his principle residence. In the end, it didn’t matter. The real issue for the court was whether Herd’s horse trailer even qualified as a "mobile home" under Missouri law.

It did not.

State statutes in Missouri do not define "mobile home" with any specificity, but a "manufactured home" must contain a minimum of 320 square feet or be at least eight feet wide and forty feet long. The Eighth Circuit determined that the horse trailer failed to satisfy either requirement for a manufactured home, and by analogy also failed as a mobile home. Although Herd did not claim that the trailer was a "dwelling house" eligible for a different exemption, the court added somewhat helpfully that a "plain reading of the term ‘dwelling house’ suggests that it does not include a trailer designed and constructed to move horses from one place to another."

Virgil Herd’s dilemma is an extreme example of what can go wrong in a bankruptcy proceeding. A more common concern involves the debtor’s horses. Are the horses simply more personal property that can be sold over the owner’s objection to help satisfy debts, or should horses receive special consideration in a bankruptcy?