So which state’s bankruptcy exemptions do you use if you’ve recently moved away?
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) changed the residency requirements for bankruptcy exemptions. To discourage individuals from moving to a state with more advantageous bankruptcy exemptions right before filing, BAPCPA established a lengthier residency requirement for using a state’s exemptions. While the information below provides a brief overview of these residency requirements, if you are thinking about filing bankruptcy, you should consult an experienced Kansas City bankruptcy attorney to learn about your rights under state law and the U.S. Bankruptcy Code and to determine which assets you can protect.
BAPCPA Residency Rules for State Exemptions
The first step in determining the applicable state for bankruptcy exemptions is to look at where the debtor lived during the 730 days (two years) right before he or she filed for bankruptcy. If the debtor lived in his or her current state of residence for two or more years before filing, then the debtor can use that state’s exemptions. However, if the debtor lived in more than one state during those two years, then the 180-day period immediately preceding those two years becomes the relevant period, and whatever state the debtor lived in for the greater part of those 180 days is the applicable exemption state.
For example, if you moved to Kansas City, Missouri, 11 months ago from Dallas, Texas, where you lived for six years, then you are not eligible to use Missouri exemptions, because you have not yet lived in the state for two years. In this case, because you lived in two states during the 730 days before filing, you must look at the 180 days immediately preceding that two-year period. Therefore, Texas is the applicable state for bankruptcy exemptions, because you lived in Texas for the entire 180 days.
While it may seem like a simple formula, determining bankruptcy exemptions is not so cut and dry. For example, what if during the relevant 180-day period you lived in two different states for an equal amount of time? Or, what if the applicable exemption state is your former state of residence, but that state does not let non-residents use its exemptions? A qualified Kansas City bankruptcy lawyer can answer questions like these and help you protect your assets.
State Versus Federal Exemptions
Debtors also have to decide between state exemptions and the federal exemptions outlined in the Bankruptcy Code. Some states do not allow debtors to use federal exemptions – these are known as opt-out states and include both Missouri and Kansas. Several states around the country, however, allow debtors to choose federal exemptions if those exemptions better protect their assets. A knowledgeable Kansas City bankruptcy attorney can determine whether you are eligible to choose federal exemptions as well as whether state or federal exemptions will better protect your assets.
To ensure you protect your assets to the fullest extent possible and do not make any costly mistakes when filing Chapter 7 or Chapter 13 bankruptcy, contact an experienced Kansas City bankruptcy lawyer at The Sader Law Firm today!