When you file for bankruptcy, you’ll need to answer two questions to help you figure out where to file your bankruptcy petition:
By contrast, to determine the state law that you’ll use to protect (exempt) your property, you’ll look to where you’ve lived during the prior three years. This rule prevents you from shopping around for the state that’s most advantageous to you.
The first test helps you decide if you have the right to file for Chapter 7 or Chapter 13 in a particular state. Here are the bankruptcy code rules that limit where you can file (you must meet one of the tests).
You’ll need to look at:
During the 180 days before Troy filed bankruptcy, he lived in New York for 100 days, then Pennsylvania for 80 days. For ten years, he has owned a vacation home at the Jersey Shore and a consulting business with an office in Connecticut. Applying the rules in the bankruptcy code, Troy could file in Connecticut, where his business is located, in New Jersey where he owns property, or in New York, where he lived for most of the previous 180 days. Of all those locations, the only place he can’t file is Pennsylvania, where he currently lives (unless he is willing to wait a few more weeks).
Bear in mind that this test doesn’t determine the exemptions you’ll be entitled to use to protect your property—only the actual location of your filing.
In every bankruptcy case, the debtor (the person who’s filing for bankruptcy) can protect property needed to get a fresh start using laws called exemptions. A typical exemption list will include basic household goods, clothing, tools of the trade (items you need in your profession), necessary medical equipment, a car, real estate, and other types of property.
You’ll find federal bankruptcy exemptions in the bankruptcy code. Each state also has a list of exemptions. The state determines whether its residents can use the state list, the federal list, or make a choice between the two.
Although state and federal exemptions often cover similar types of property, the values of particular exemptions can vary widely between schemes. For instance, in one state you might be able to exempt $100,000 in equity in a home, while the neighboring state allows only an exemption of $5,000.
Which scheme you’ll be entitled to use will depend on where you lived during the 730 days before filing for bankruptcy.
After living in California for six years, Camden filed a bankruptcy case. Because she lived in Nebraska for the entire 730-day period before filing the case, Camden will use the California bankruptcy exemptions.
Austin lived in Georgia for five years. He moved to Florida on May 1, 2018. On August 29, 2018 (120 days later) he filed for bankruptcy. Because he lived in two different places during the 730 days before he filed bankruptcy, Austin has to look back another 180 days. From March 3, 2016, to August 30, 2016 (the 180-day period) Austin lived in Georgia. Therefore, he will use the exemptions allowed under Georgia law, even though he now lives in Florida (and will file his case in Florida).
Dakota moves around a lot. During the 730-day period, she lived in California, Nevada, and Utah, but during the preceding 180 days, she lived in Texas for 91 days and Washington for 89 days. Dakota will use the Texas bankruptcy exemptions.
Devon was stationed in multiple states during the 730-day period before filing for bankruptcy. He was stationed overseas during the prior 180 days. Devon will use the federal exemption scheme.
For an easy way of learning about bankruptcy law, try reviewing answers to frequently asked bankruptcy questions.
Many answers address specific questions using examples that will help you understand the concepts more readily.
