Bankruptcy Law and Moving out of State

One of the leading causes of having to file for bankruptcy protection is the loss of income within your family. If you cannot replace the income, you often realize it doesn’t take long in getting way behind on your bills. In looking for a new job, many today are finding out what they have been qualified to do is no longer available where they currently reside, so they are moving out of state in order find work that they are qualified to do. How does moving out of state affect bankruptcy law?

Notice of closure attached to the door of a co...

Business Bankrupt and Moving? (Photo credit: Wikipedia)

The good news, if there is any in a situation where you have to file for bankruptcy protection, is that bankruptcy law is based on federal laws. States supplement federal bankruptcy law with states laws that effect the use of exemptions when filing bankruptcy.

If you are in a situation where you have to move out of state to get a job, complications concerning your state exemptions can arise based on the type of bankruptcy you file. For individuals, filing a chapter 7, the liquidation bankruptcy, provides the most complications when moving out of state because of how the state and federal bankruptcy exemptions come into play.

In passing the 2005 revisions to the bankruptcy law, Congress created new residency requirements in filing bankruptcy because they wanted to discourage people from moving to states with more liberal exemptions for the sole purpose of filing for bankruptcy protection.

Here are some of the tenants of the new residency requirements in bankruptcy law you need to take a look at if you plan on filing and/or moving to another state:

  • You must have lived in a state for two years before you can use that state’s exemptions. If you move to a state and have lived in that state for less than 2 years, you can take the exemptions of the state you lived in the greater amount of time you lived the 180 days prior to the 24 month of your filing date. For example, if you lived in Texas 27 months ago before your filing date for at least 3 months of the 180 days and two years prior to that, you can use Texas exemptions in a bankruptcy you file in the new state you live.

  • Some states will not allow you to use their exemptions if you do not currently live in that state. When this happens, you will have to use the federal exemptions to file in the new state.

  • You can file in a state before you leave the state, use what exemptions are allowed for that state, either state or federal, and then continue the bankruptcy from another state. You will still be required to attend the 341 creditor’s meeting at the bankruptcy court you filed. It has been reported some bankruptcy courts will allow you to attend the meeting through telephone conference, but you will need to check with your local bankruptcy attorney to know if that part of bankruptcy law is allowed in your bankruptcy district.

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