Your State Of Bankruptcy: What To Know
Many bankruptcy filers know that chapter 7 is a federal situation. All bankruptcies must be filed in federal court and follow federal guidelines. The bankruptcy code, is, in fact, a federal document. However, bankruptcy can also be affected by state residency. Read on and find out more.
Why the State of Residency Matters
You must follow the residency requirements of the state in which you wish to file. However, that is not the only state-related issue to be aware of when filing for bankruptcy. When consumers file chapter 7, those with a lot of property can lose it to the bankruptcy court. The court can seize property that is not protected by exemptions. An exemption can help consumers protect their homes, vehicles, and personal property when they file.
Exemptions, though, vary by state. Each state has its own collection of exemptions. For instance, one state might exempt a home entirely while another state might only allow several thousand dollars to be removed from the home's value. That is why filers would do well to understand how exemptions work in their state before they file. If the filer is using chapter 13 rather than 7, though, exemptions are not an issue because the filer's property is 100% protected if they keep up with the payment plans.
Can You File for Bankruptcy in Your State?
To file for bankruptcy, you must be a legal resident of your state. Those who have recently moved may need to check the residency rules in their state. In most cases, though, you must reside in a state for several months before you are considered a legal resident. However, that doesn't mean you are barred from filing, in some cases.
If you are recently domiciled in a new state, speak to a bankruptcy lawyer about your residency. In some states, you can file for bankruptcy in your new state, or you can file in your old state. The timing of this matter is crucial. Speak to a bankruptcy lawyer as soon as possible if you are considering filing. Your bankruptcy can be different depending on the state of filing.
Federal Exemptions
Even though each state has its own exemptions, there exist federal exemptions as well. In some states, you can choose whether to follow your state's exemptions or use the federal exemptions. You cannot, however, switch between state and federal. You should choose one and stick with it.
Learn more by speaking with a bankruptcy lawyer.