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How long must you be a resident of a state to claim bankruptcy exemptions?
Question:
In order to claim state bankruptcy exemptions you have to have been a resident for at least two years prior to filing bankruptcy. Bankruptcy law is a complex, sometimes confusing mixture of federal and state laws. The subject of exemptions is where this confusion can be the greatest.
Federal vs. State Exemptions
The federal bankruptcy code allows for certain exemptions to be granted to individuals and married couples who are seeking bankruptcy protection. These exemptions are different items (such as your home, car, or household goods) that you are allowed to exclude from your bankruptcy. Each item is given a maximum value by law to be used as an exemption.
The federal bankruptcy code also allows each state to create their own separate list of exemptions and to decide whether or not they are going to allow their residents to choose the federal exemptions or the state exemptions, or if they are only going to allow their residents to use state exemptions.
Exemptions Vary
Exemptions can vary quite a bit from state to state, so Congress enacted residency requirements designed to keep people from moving just to declare bankruptcy and be able to keep more of their assets. If you have not lived in your current state for two years, then this is how you figure out what state's exemptions you are allowed to use:
- Count back two years from the date you filed (or think you will file) bankruptcy.
- Then, count back six months (180 days) before that.
The state that you lived in for the greater portion of that six month period of time is the state that you will use for your exemptions, unless that state is one that prohibits non-current residents from using their exemptions. If that happens to you, then you have two choices:
- Use the federal exemptions.
-
Wait to file bankruptcy until you meet the two year residency requirement for your current state.
Talk to an Attorney
What you can keep in bankruptcy is extremely important. Meet with a local attorney who can explain how the exemptions work in your state and what assets you should be allowed to keep if you file bankruptcy.
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In order to claim state bankruptcy exemptions you have to have been a resident for at least two years prior to filing bankruptcy. Bankruptcy law is a complex, sometimes confusing mixture of federal and state laws. The subject of exemptions is where this confusion can be the greatest.
Federal vs. State Exemptions
The federal bankruptcy code allows for certain exemptions to be granted to individuals and married couples who are seeking bankruptcy protection. These exemptions are different items (such as your home, car, or household goods) that you are allowed to exclude from your bankruptcy. Each item is given a maximum value by law to be used as an exemption.
The federal bankruptcy code also allows each state to create their own separate list of exemptions and to decide whether or not they are going to allow their residents to choose the federal exemptions or the state exemptions, or if they are only going to allow their residents to use state exemptions.
Exemptions Vary
Exemptions can vary quite a bit from state to state, so Congress enacted residency requirements designed to keep people from moving just to declare bankruptcy and be able to keep more of their assets. If you have not lived in your current state for two years, then this is how you figure out what state's exemptions you are allowed to use:
The state that you lived in for the greater portion of that six month period of time is the state that you will use for your exemptions, unless that state is one that prohibits non-current residents from using their exemptions. If that happens to you, then you have two choices:
Wait to file bankruptcy until you meet the two year residency requirement for your current state.
Talk to an Attorney
What you can keep in bankruptcy is extremely important. Meet with a local attorney who can explain how the exemptions work in your state and what assets you should be allowed to keep if you file bankruptcy.
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