Although people may fear that they’ll lose much of their property if they file for bankruptcy, the reality is that debtors who opt for this remedy usually keep most of their assets. That’s because federal and state laws allow debtors to claim exemptions — namely, categories of property that are shielded from creditors. However, the exemptions available may depend on the debtor’s state of residence when filing. For that reason, the bankruptcy case can be affected when the debtor moves to a different state.
Debtors must file their bankruptcy petition in their state of domicile. That means the state in which a person primarily lives, as opposed to a temporary work location or vacation home. The bankruptcy code requires that debtors, in order to file their petition in a state, must have resided there for more than 90 days. The residency requirement is meant to prevent “forum shopping” — moving to another state with more debtor-friendly laws.
Another residency rule is aimed at debtors who move to take advantage of more generous bankruptcy exemptions in other states. The 730-day rule mandates that the debtor live in a state for at least two years preceding the filing in order to use the state’s exemptions. This rule does not prevent the debtor from filing for bankruptcy in the new state. It only prevents using the new state’s exemptions.
Debtors who do not satisfy the 730-day rule can use the exemptions available in their prior state as long as they had their residence in that state for the majority of the 180 days prior to the two-year period preceding the bankruptcy filing. That is, they must have lived in that state most of the time between two years and two and a half years before filing.
A debtor who fails both the 730-day rule and the 180-day rule is barred from using state exemptions in either state, and they must use the federal law’s exemptions instead. A qualified consumer bankruptcy attorney can analyze your situation and determine the most advantageous set of exemptions for which you are eligible.
What happens if a debtor moves to another state after filing for bankruptcy? This is common as people in financial crisis often look elsewhere for employment opportunities and for more economical places to live. In most situations, an existing bankruptcy case will not be affected by moving so long as the debtor provides the proper notices to the court and trustee. The court in the place of filing has the power to transfer a pending case to a court in another jurisdiction. In such cases, the debtor can continue to use the exemptions available under the law of the state of filing.
Jeff Field & Associates is one of the most active bankruptcy and debt relief law firms in the Atlanta region, with offices in neighboring areas of Georgia. If you are struggling with consumer debt, feel free to contact us online or call 404-381-1278 for an initial consultation.
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